Subway is making a huge mistake that could undermine its business

Subway’s biggest problem has nothing to do with shamed former spokesman Jared Fogle.

The company dismissed its weight loss pitchman last week after it was announced his house had been searched in an FBI investigation and one woman alleged he made inappropriate comments about middle school girls.

While the scandal with Fogle will pass, the company’s rapid expansion plan is a bigger issue that could hurt business, according to Jonathan Maze at Nation’s Restaurant News.

“It’s really been a victim of its own success,” David Henkes, from consulting firm Technomic, told Bloomberg. “It’s really saturated the market. It’s got over 27,000 (US) locations now. The unit economics are very tough. Competitors have really come in and provided some alternatives to consumers that have caused Subway to suffer some sales losses.”‘

Subway has 44,000 restaurants worldwide, more than McDonald’s. Executives say it eventually plans to reach 100,000 locations.

Subway’s US sales last year fell by 3%, the most of any of the top 25 fast-food chains, Drew Harwell reports at The Washington Post.

Subway also fell two spots to become the third-most-popular fast-food restaurant for the first time in seven years.

The expansion plan is backfiring, according to The Post.

Jared Fogle SubwayMatt Sayles/Invision for SUBWAY Restaurants/AP ImagesJared ‘The Subway Guy’ Fogle poses with #WhereSuperHeroesEat 3D street art in celebration of SUBWAY Restaurants’ partnership with the upcoming Marvel movie ‘Avengers: Age of Ultron’ on Monday, April 13, 2015 in Los Angeles.

“More people have money to spend, and they’re choosing to spend a little bit more on better concepts where they get a better product,” said Darren Tristano at Technomic told The Post. “Subway’s strategy has only been to open more stores, and ultimately those stores just cannibalise each other.”

In other words, Subway is so ubiquitous that customers leave one restaurant to go to a closer one.

Tristano also told Bloomberg that “if your goal is to have the most versus the best, you’ll eventually run into trouble,” presenting a threat to Subway.

In other words, Subway is so ubiquitous that customers leave one restaurant to go to a closer one.

Subway should focus on innovating its menu instead, according to Maze.

With its vegetables and lower calorie counts, Subway arguably invented the idea of “fresh” fast food two decades ago.

But while Subway stayed the same, better competitors got into the space.

Chipotle offers food that is raised without fillers or antibiotics and is prepared fresh in stores. Firehouse Subs and Potbelly offer elevated ingredients and side dishes such as gourmet kettle chips and potato salad.

Americans who once praised Subway’s low-fat offerings are now concerned the chain’s lunch meats and sauces are overly processed with fillers and additives.

“What Americans see as healthy has evolved,” Harwell writes. “Subway hasn’t.”

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