Subway's empire collapses: closes 6,000 stores in seven years

The fast-food chain blames the failure on "outdated operations and decor, outdated menus and profit-damaging offerings."

Published by

Verónica Silveri Pazos

4 de mayo, 2023

Topics:

Subway

Since 2016, Subway has closed around 6,000 stores across the country. Last year alone, the fast food chain closed 571 locations (2.7% of all its U.S. stores).

The franchise justifies the downward trend in a report obtained by Reuters in which it cites "overexpansion of its stores, outdated operations and decor, outdated menus and profit-damaging offerings."

Fewer closures and 2023 targets

Although the chain continued to close stores in 2022, the document showed that the number of closures was lower than in previous years (more than 1,000 in 2021 and more than 1,600 in 2020). According to the statement:

The slowdown in closings is the result of the progress we have made in returning to smart growth, which will boost franchise profitability and protect our market position.

The company expressed that in 2023 its "goal is to increase new openings in North America by approximately 35% compared to 2022." Its sales increased in the first quarter of the year (up 11.7% in North America and 12.1% globally) driven in part by the strength of its digital app.

The company's main market is in the USA. Despite having around 37,000 establishments worldwide, more than 20,000 are in the country.

A possible sale for $10 billion

The chain announced earlier this year that it was exploring a $1 billion sale. However, exclusive information from Reuters confirmed that the offers had increased to $8.5 and $10 billion.

The reason for the increase is that more than ten major investors, most of them private equity investors, have shown interest in acquiring the company. Among them: TPG Inc (TPG.O), Advent International Corp, TDR Capital, the acquisitions division of Goldman Sachs Group Inc (GS.N) and Roark Capital.

John Chidsey, CEO of Subway, commented last month that it was the "perfect time" to find a buyer.

Recovery plans and scandals

In 2021, under Chidsey's leadership, the franchise's turnaround plan included a revamped menu and new advertising campaigns featuring celebrities such as Serena Williams and Steph Curry. The company tried to step up its game for its customers and win over its critics:

We have spent the last two years optimizing our footprint by using a strategic, data-driven approach to ensure restaurants are in the right location, image and format (...) This includes opening new locations, keeping quality as a top priority, relocating restaurants to maximize guest traffic and closing locations when necessary.

Restaurant consultant John Gordon stated that these plans may take several years to execute.

Adding to the sales crises, Subway's public image was tarnished in 2015 when the face of the company, Jared Fogel, was convicted on child pornography charges. The company has also faced lawsuits regarding the quality of its ingredients, specifically bread and tuna fish, and a ban in Ireland due to excessive amounts of sugar in its bread. According to franchise consultant Robert Edwards:

That's baggage they'll have a hard time walking away from.