Subway is closing another 500 stores -- here's why

Kate TaylorA shuttered Subway in Brooklyn, New York.
  • Subway is planning to close 500 stores this year.
  • Last year, the sandwich chain’s US store count fell by 909; it lost almost three times as many locations as it did in 2016.
  • Subway’s struggles are tied to overexpansion, failure to keep up with trends, and internal battles, including a lack of confidence in the CEO.

Subway is closing 500 stores after years of declining sales.

The sandwich chain told Bloomberg on Wednesday that it planned to close about 500 of its US locations this year, based on projections. Subway’s US store count fell by 909 last year; it lost almost three times as many locations as it did the year before.

“Store count isn’t everything,” CEO Suzanne Greco told Bloomberg. “It’s about growing the business.”

Franchisees and other internal Subway sources told Business Insider in recent months that up to one-third of the chain’s more than 25,800 US locations may not be profitable and that franchisees were bracing for more closures.

Franchisees say Subway has tended to focus on increasing its store count over helping franchisees grow sales. Greco acknowledged in her interview with Bloomberg that the company had “focused in the past on restaurant count.”

“I believe that Subway was more interested in the opening of stores,” a former corporate employee told Business Insider. “That is where they made the most money – the franchise fee.”

Fred DeLuca, Subway’s former CEO and cofounder, “made his money from the franchise fee,” the person said, adding: “The more stores he opened, the more dollars he made.”

“I saw the handwriting on the wall with the focus being on opening as many units as possible, even if it angered franchisees,” Scott Godwin, who owned three Subway locations in Virginia until the early 1990s, told Business Insider.

Subway is attempting to address concerns about international expansion and changes to its loyalty program and efforts to redesign stores.

The chain says it is also working to relocate up to 1,000 struggling locations this year – one of the few Subway initiatives that would boost sales, franchisees with knowledge of the situation told Business Insider.

“Subway restaurants are 100% Franchisee owned and operated, and our commitment to the Franchisees is to work with them to make each restaurant more successful,” a Subway representative said in an email to Business Insider. “Subway is the world’s largest restaurant chain and we are confident we will remain the industry leader”

“In North America we are implementing an aggressive revitalization plan, which we expect to result in the closing, consolidation or relocation of a few hundred locations in 2018,” the representative continued. “Simultaneously, outside of North America we expect to open more than 1,000 new restaurants this year. Looking out over the next decade, we anticipate having a slightly smaller, but more profitable footprint in North America and a significantly larger footprint in the rest of the world.”

Here’s a deeper look into why Subway is shrinking:

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