Subway Closes 356 Stores as U.S. Sales Struggle

Store Closed

Subway, the country’s most ubiquitous chain, saw its number of stores shrink for the first time ever in 2016. The company lost 356 domestic stores in 2016, the first time the company has ever had a net reduction. The closing of 356 U.S. restaurants represents a 1.3% drop in the company’s total store count.

Even with the closings, Subway, which is owned by Doctor’s Associates Inc, continues to have the most restaurants in the U.S., but trails McDonald’s Corporation (NYSE:MCD) when it comes to actual sales.

The privately held company said that U.S. sales totalled about $11.3 billion in 2016, down from $11.5 billion in 2015. Subway said it is coping with weaker sales in the U.S., the emergence of new fast-casual chains, and the industry’s increased use of discounts and promotions.

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The firm also said the decrease in U.S. revenue was due to a “focus on international growth,” where sales were up 3.7% in 2016 at $5.8 billion. “We will continue to relocate some shops to better locations and look for new sites — both traditional and non-traditional,” the company said. (Source: Ibid.)

U.S. restaurants are also facing weaker demand as more and more Americans choose to eat at home. Minimum wage hikes have also forced restaurant chains to pass on the increase to customers in the form of higher prices.

To combat lackluster U.S. performance, Subway, which is 100% franchise-owned, is attempting to rebrand itself as a healthier food option by eliminating antibiotics from its chicken and switching to cage-free eggs. Subway is also adding delivery services and has brought former McDonald’s executive Karlin Linhardt to lead corporate marketing in the U.S. and Canada.

Subway has also been mired in controversy of late too. In May, the restaurant said it had filed a $210.0-million lawsuit against the Canadian Broadcasting Corporation (CBC) after it aired an investigation that DNA-tested chicken in sandwiches at various fast food restaurants.

The CBC investigation found that Subway’s oven-roasted chicken contained only 53.6% chicken DNA and its chicken strips had just 42.8% chicken. The rest was made up of soy. Subway said the CBC was “reckless” and “malicious.” The CBC, meanwhile, stands behind its research and testing.

In 2016, Subway hired Katie Coleman to head up its global public relations team. The CBC might be one issue, but she will be busy helping the chain recover from the scandal involving Jared Fogle, the former spokesman who went from pitchman to pariah. (Source: “Jared Fogle Sentenced To 15 Years In Prison For Sex With Minors, Child Pornography,” NPR, November 19, 2015.)

Sources:

Subway says it shut hundreds of U.S. restaurants last year,” Reuters, April 20, 2017.)

Subway Files $210-Million Lawsuit Against The CBC,” Huffington Post, April 18, 2017.

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