Subway, once the king of the sandwich world, is facing a major crisis as it grapples with plummeting sales and shrinking profits. In an urgent move, the company has called a critical meeting with franchisees from its 19,000 North American locations, aiming to address these alarming trends and discuss strategies to reclaim lost market share.
The meeting comes on the heels of Subway’s $9 billion sale to Roark Capital, the same investment group that owns other fast-food giants like Dunkin’, Arby’s, and Baskin Robbins. Now, just months after the acquisition, Subway is finding itself in dire straits, struggling to maintain its footing in an increasingly competitive market.
“This conference is essential,” Subway stated in the meeting invite, emphasizing the importance of discussing the state of the industry and the company’s future. However, one franchisee, speaking on condition of anonymity, labeled it an “emergency” meeting, noting the unusually short notice. “They’re scrambling to figure out what’s gone wrong,” the franchisee said, pointing to the drastic drop in customer traffic.
At the heart of Subway’s woes is a series of aggressive discount promotions that have backfired. One franchisee with nearly 20 stores revealed that his same-store sales have dropped by 5% to 10% in recent weeks compared to last year. The culprit? Deep discounts that have slashed profits to the bone. “They are doing crazy coupons,” the franchisee lamented. “Our gross sales aren’t even at 2012 levels, and profit then was five times what it is today.”
Subway’s promotional strategies, like offering two sandwiches for the price of one through their app, have left franchisees struggling to break even. The result has been a noticeable decline in sales across the board. Data shared with The Post indicates that in an Eastern U.S. region with about 1,000 Subway locations, same-store sales slipped by 8.7% between June 25 and July 16 compared to the previous year.
John Gordon, a restaurant consultant, called the meeting “very unusual” and noted that the recent sales numbers from both the West Coast and East Coast show troubling declines. In major markets like Los Angeles and San Diego, same-store sales are down by 8% as of early August. This decline is a sharp contrast to last year when Subway proudly reported a 5.9% increase in North American same-store sales.
Subway’s latest attempt to drive sales with new menu items, like the $3 foot-long hot dipper snacks introduced in June, has fallen flat. These items simply aren’t selling in sufficient quantities to offset the losses from discounted core items. Last year, Subway had more success with its Sidekicks—foot-long cookies, pretzels, and churros—which briefly boosted sales, but that buzz has since died down.
Adding to the pressure, Subway’s new owners at Roark Capital now face hefty interest payments on debt following the acquisition. The company, which earns its money through 8% royalty fees from franchisees, can’t afford to see earnings continue to decline.
As Subway struggles to navigate this crisis, it’s clear that the fast-food giant is in uncharted waters. Other chains are also battling the discounting wars, with competitors like White Castle, Wendy’s, and even McDonald’s slashing prices to lure customers. But as the numbers show, the strategy is proving to be a losing battle across the industry.
Subway, once a symbol of fast-food success, now faces the challenge of regaining its footing before it’s too late.
