Chains like McDonald's and Freshii are lining up to profit from Subway's downward spiral

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  • Subway closed more than 900 locations in the US in 2017, amid franchisee reports of declining traffic and sales.
  • Fast-casual chain Freshii wrote an open letter to Subway franchisees, calling for some of them to swap their allegiance from Subway to Freshii.
  • McDonald’s also stands to grab additional market share with Subway closures, according to one analyst.

Rival chains are circling Subway like vultures as the sandwich chain closes hundreds of locations.

Freshii 9Hollis JohnsonFreshii.

On Wednesday, fast-casual chain Freshii published an open letter to Subway franchisees, highlighting Subway’s more-than-900 store closures in 2017 and declining traffic.

“Let’s work together to convert select Subway stores to Freshii restaurants,” the letter, from Freshii CEO Matthew Corrin, reads. “This will allow Freshii and Subway to achieve a mutually beneficial outcome: supporting entrepreneurial franchise partners and continuing to deliver on our missions.”

Corrin argues that the overall health of the Subway brand will be improved if some franchisees jump ship.

Freshii isn’t the only chain that stands to benefit from Subway’s problems. As the largest restaurant chain in the US, Subway’s declining traffic and closing locations provide opportunities for other restaurants to attract former regulars.

“We believe hundreds of Subway franchisees are in financial distress, and we would not be surprised to see a net-closure count in the hundreds once again for Subway U.S. during 2018,” Nomura analyst Mark Kalinowski wrote in a note earlier in January.

Kalinowski continued: “Should this occur, it’s an opportunity for McDonald’s U.S. to grab additional market share within the quick-service industry.”

Franchisees recently told Business Insider that up to one third of Subway locations in the US were not profitable, and that the chain was bracing for more closures in 2018.

“The brand is tired,” Joel Libava, a franchise consultant, told Business Insider. “The employees even look tired.”

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