There may still be a Subway sandwich shop on every other corner in every town in America, but they aren’t as busy as they used to be. Is it a case of over-franchising? Is the company still reeling from the 2015 death of founder Fred DeLuca and the ignominious downfall of longtime Subway frontman Jared Fogle?
There were just shy of 27,000 Subway locations in the U.S. in 2016, nearly twice the number of McDonald’s and more than double the size of Starbucks. But after years of rapid growth, the number of Subway shops — every single one of them franchised — is finally plateauing, and may even be on the decline.
According to a new report, Subway is struggling to bring in customers and it’s not helping that various executives are refusing to agree on how to fix things while they squabble for control.
People like sandwiches, not Subway
Customers haven’t lost their taste for sandwiches, the New York Post explains: The expansion of newer sub chains like Jersey Mike’s and Firehouse Subs demonstrates that. How can Subway recapture lost market share, with same-store sales down 13%?
Subway’s president and CEO is Suzanne Greco, the sister of co-founder DeLuca. She was his chosen successor, and she believes that the way forward to attract new customers includes helping franchisees to invest in technology like ordering kiosks and USB chargers at tables inside restaurants. The company has promised to “invest heavily” in this project, even though all of its restaurants technically belong to franchisees.
Greco runs the company, but doesn’t own any portion of it, and that’s where the dispute comes in. Her brother’s half of the company went to his widow when he died, and co-founder Peter Buck owns the other half. They have their own ideas about how to fix the chain’s troubles.
Buck would prefer to launch sub-brands, or Subway stores with different branding and features to differentiate themselves.
“How about opening four brand new sub-chains?” he asked the Post. The company could also acquire an existing successful smaller regional chain instead of developing them in-house.
Elizabeth DeLuca, meanwhile, the other co-founder’s widow, isn’t interested in investing in technology or in developing more sub shop sub-brands, and wants to simply keep things as they are.
Franchisees told the Post that they don’t have a lot of faith in the corporate office, since the long-promised new loyalty program doesn’t even work with restaurants’ point-of-sale systems.
“The loyalty program is a year behind, with many false starts,” an unnamed franchisee explained.