Subway Shuts Hundreds of Locations in Historic Retrenchment
(Bloomberg) -- Subway Restaurants closed hundreds of domestic locations last year, marking the biggest retrenchment in the history of a chain that spent decades saturating America with restaurants.
The company lost 359 U.S. locations in 2016, the first time that Subway had a net reduction. The store count dropped 1.3 percent to 26,744 from 27,103 in 2015, but Subway remains the nation’s most ubiquitous eatery. (McDonald’s Corp. is No. 1 by sales.)
The closely held company is coping with a sales slowdown in the U.S., made worse by the emergence of newer fast-casual rivals and the industry’s heavy reliance on discounts and promotions. Subway also has lost some of its luster as a healthier-food option. It’s been working to restore its status by eliminating antibiotics from its chicken and switching to cage-free eggs.
In another bid to revive growth, Subway is adding delivery services -- a strategy that’s also been embraced by McDonald’s. And it even unveiled a new, more contemporary logo. But so far, the changes haven’t helped much: Sales fell 1.7 percent last year to about $11.3 billion.
Industrywide, same-store sales continued to slide in the U.S. during March. They dropped 0.6 percent in the fourth straight month of decreases, according to MillerPulse data.
Subway is still growing internationally, though. Last year, sales outside the U.S. rose 3.7 percent to $5.8 billion as it continued to open locations.
“Sales for 2016 reflect our focus on international growth,” the Milford, Connecticut-based company said in a statement. “We are undertaking an exciting transformation that includes introducing new and improved products, creating an even greater customer experience, refining operations, and positioning Subway franchisees for continued success.”
The sandwich chain also has been overhauling its management team. On Wednesday, the company said it’s bringing on former McDonald’s executive Karlin Linhardt to lead marketing for the more than 30,000 Subway stores in the U.S. and Canada.
Last year, Subway hired Katie Coleman to handle global public relations. She was tasked in part with helping the chain recover from a scandal involving former spokesman Jared Fogle. He pleaded guilty to child pornography charges and was sentenced to prison in 2015.
Subway, owned by Doctor’s Associates Inc., was founded about 52 years ago by Fred DeLuca and Peter Buck. DeLuca died in 2015, leaving the company in the hands of his younger sister, Suzanne Greco, who became chief executive officer. The chain’s restaurants are entirely owned by franchisees.
The sandwich seller isn’t alone in closing locations, but other reductions have been more modest. Ruby Tuesday Inc., for instance, lost 109 company-owned locations last year.