Love it or leave it, Subway is the top fast food restaurant with 42,000 outlets worldwide.
Since 2016, they’ve been closing many of their outlets and keep doing so exponentially
every year since. There is lots happening behind the scene, but these are 10 Real Reasons
Subway is Disappearing Across the Country.
Super Rapid Expansion and Too Many Outlets
Subway’s rapid expansion has backfired and hurt business. It’s been a victim of its
own success. It quickly saturated the market with over 27,000 locations in the U.S. alone. They
were opening outlets within blocks of each other and handing out franchises like candy.
Fierce competition and a bad economy have led to some Subway outlets to be less profitable. Subway's
only strategy has been to open more stores, it’s so ubiquitous, that customers leave
one restaurant to go to a closer location around the block if they do not like the restaurant’s
service or store conditions. Ultimately the outlets just cannibalize each other. It seems
that Subway’s only marketing strategy was to open one store after another and then let’s
see which one survives. With this method of thinking you will eventually run into trouble,
and they have. They started to close many of the stores that were less profitable and
in too close proximity of one another. Instead of focusing on changes to their menu, they
focused on statistics. Now their bad business practices have come back to bite them in their
foot-long sub.
Loyalty Plan Rewards is Worthless
Since 2016, Subway has shuttered more than a thousand stores in the US and counting.
They’re aware that their business has been steadily declining and bleeding money. They
started a revitalization and marketing plan in 2018 for improvements to the customer experience.
They have been promoting things like digital menu boards and a mobile app, along with a
loyalty program to help encourage repeat customers. Subway launched the MyWay Rewards program, where
customers will earn four tokens for each dollar spent. When they hit 200 tokens, they get
a $2 reward. That is $2 in rewards for every $50 you spend, which is not really a good
deal after all, just do the math. To boot, false starts linked to software difficulties
and syncing each store's POS systems with the mobile apps made things difficult. In
addition to the virtual tokens, Subway rolled out special “surprises” to loyal customers.
But how a person got one of these rewards is dubious. Apparently, you won’t know you’ve
earned your reward until you get it. The Subway Loyalty reward program seems to be more beneficial
to them than the customer.
The Foot-Long Scam
The foot-long dispute left many people feeling cheated. This lead in part, to a decline in
sales and also pushed away many of their loyal customers. It all started in 2007, when a
television station in Arizona reported that three of Subway's "Giant Sub" sandwiches,
were not actually 3-feet long, but actually 2 feet 8 inches. The same scenario repeated
itself in 2013, with the “Foot-long” sub. This time it was shorter than 12 inches. After
lots of backlash on Facebook, they changed their tune to say that the “Foot-long Sub”
was not the actual size but more of a trademark name. Subway in turn tried to sue other businesses
who were using the term foot-long in advertising, when in fact it wasn’t even trademarked
to them. The application to trademark the term was only submitted after all the hoopla
started. Subway never got their trademark for the foot-long as it was determined in
court that the term was too generic and can be used by anyone. But we are still left with
the notion that we are not getting what we came for.
Bad Leadership
Subway is an American privately-owned company started by Fred Deluca in 1965, in Bridgeport
Connecticut. Its humble beginnings started when Fred borrowed $1000 from a family friend
Peter Buck to start Pete’s Super Submarines. His goal was to earn enough money to pay tuition
for medical school. Though neither the first nor the second restaurants were financial
successes, they continued to expand their operations, and in 1968 changed the name to
Subway and began franchising out the restaurants. By 1974, they had 16 locations throughout Connecticut.
Ten years later, they opened locations on the West Coast and across the US. The 80’s
and 90’s saw expansion into the Middle East and Europe. Subway also began opening stores
in Walmarts, and had surpassed the number of McDonald's locations. The decision to
add so many new locations led to over expansion and eventually had a negative effect on the
business. In 2015, Fred DeLuca died of leukemia and his sister Suzanne Greco became president
and CEO and quickly addressed the situation. In 2016, she began restructuring and eliminating
the less profitable stores, experiencing a large loss in locations for the first time.
Subway Franchisee Revolt
Buying a Subway franchise used to be a great opportunity for many small business owners
who didn't have much capital. As early as 1995, lawsuits were launched by franchisees
claiming that Subway misrepresented their asset value and they were being forced out
of their own business due to management’s questionable practices. In a study, Subway
emerged as the biggest problem in franchising and appeared as one of the key examples of
every abuse possible. Subway Corporate oversees every location to the minutest detail via
inspectors who ensure that the stores conform to their highest standards. These inspectors
were sometimes other Subway competitors whose only benefit was for their own pocketbook. Too
many infractions meant corporate would eventually take back the store from the franchisee. It
sometimes was given to the inspector who then closed it to cut out competition. Franchisees
were left to watch helplessly as those rivals snatched up their stores that they'd worked
so hard to build.
Serious Competition
Another real reason Subway is closing a lot of their outlets is the fast- growing competition
from other similar sandwich shops who are doing things better. When Subway first entered
the US Market in 1965, there was very little competition, aside from Big John Steak & Onions
in Detroit and Blimpie in New Jersey. Subway basically had a monopoly on fast food submarines
and sandwiches for decades. They were able to make huge profits and open thousands of
outlets and grow exponentially. The 80’s saw new competitors like Quiznos, who offered
the same menu but with variations like toasted bread. These days the trend continues, and
we are seeing other popular and profitable submarine chains like Charley’s Philly Steaks
in the Mid-West, Jimmy John’s in Illinois, Firehouse Subs in Florida, and many more independent
restaurants specializing in submarines. It was easy enough for Subway to adjust to Quiznos
demands by just adding the option for customers to toast their buns. But with other chains
flooding the market, offering a variety of items and a much better quality, Subway has
not been able to keep up with demand. Due to their refusal to innovate, their profits
have considerably declined, as customers are going to the next best thing. While the others
continue to grow, Subway has been forced to take a reality check and a really close look
at the way they were doing things.
Their Motto “Eat Fresh” is stale.
Subway arguably invented the idea of fresh fast food years ago, but they did not live
up to expectations. Their slogan was built on the concept that their submarines were
created on the spot with fresh ingredients. They even went as far as calling their employees
“sandwich artists”. But if you've been to a Subway lately, you may have noticed that
the food is highly processed and not so fresh. It's not your imagination, and there's a reason
why. After speaking to a many franchisees and managers, it was discovered that many
Subway locations only get shipments of produce weekly. While Corporate denies this, those
on the front lines are singing a different tune. A Subway employee revealed lots of the
produce they receive are often near expiry date. The lettuce is brown and wilted, tomatoes
are mushy. In 2015, Subway introduced a new marketing campaign called, "Founded on Fresh".
The campaign focuses on Subway's past history, and features Jonathan DeLuca. The new campaign
focuses strictly upon the quality of their products, fat content, calories, and weight
loss benefits to draw back its loyal customers. But momentum has been lost, people have lost
confidence in Subway and have moved on to better things. Americans who once praised
and loved Subway's offerings are now jumping ship because of concerns over their highly
processed meats and sauces. What Americans see as healthy has evolved, and Subway is
lagging behind.
Stagnation at Subway
While everyone has jumped on the health food craze and more fast food chains are changing
to innovative menus to please a larger clientele, Subway has been slow to change or innovate
in every respect. Staying status quo for decades, from their menu to décor, they have been
stagnant, refusing to develop anything new or be too experimental. They were the last
ones to jump on the breakfast and wrap bandwagon, and even that did not win over many customers.
These days, with the new generation of millennials, who are really super conscious about what
they eat and what goes into their food, Subway just doesn’t cut it. More environmentally
conscious millennials are looking for food that is locally produced, of free trade, non-Gmo,
plant based and free of antibiotics. It seems that eating fresh and losing weight is not
their only primary concern. Subway should have seen it coming as far as healthy goes
- they did invent the slogan a while back. But they totally missed the boat on this one.
They have not made any serious changes to their menu or ingredients. They did introduce
wraps and some different menu items but they were not that innovative. Other fast food
chains have moved ahead with the times (even McDonald’s phased out artificial ingredients).
Subway only began changing their menu in 2015, lagging way behind the competition. Unwilling
to update in the 21st century means a slow death, while others are moving ahead in your
place.
Fake ingredients like Mock Chicken
In 2017, an investigation by Canada’s CBC-consumer affairs show, Marketplace, revealed that
chicken from Subway restaurants was not 100% chicken. Tests found that only between 42%-56%
was actually chicken, the rest was soy. Subway did not list soy as part of the chicken ingredients.
When discovered, Subway’s argument was that the proportion was less than 1%, and the findings
were not the actual amount of soy in the product. Subway has called CBC's report "false and
misleading" and demanded a retraction, which CBC has refused, as they say the tests were
done by credible experts. Subway tried to backpedal, saying that ingredients in U.S.
stores differ from Canada. But both countries include soy protein in the chicken strips.
Subway sued the CBC, the reporter, and two producers for $210 million, alleging that
the CBC acted "recklessly and malicious and without just cause”. The fact remains it
is false advertising or non-disclosure which paints a bad picture. Any way you look at
it does not look good and means more losses for Subway.
Subway Lawsuits & Scandals
Another real reason Subway is closing many of its stores is because it’s bleeding money
due to its scandals and lawsuits. In 1999, thirty two customers in Seattle contracted hepatitis
A after eating food contaminated with the virus at two Subway outlets. An Investigation
found that the staff at the Seattle Subway failed to wash their hands and did not use
plastic gloves during food preparation. A class-action lawsuit was launched on behalf
of the victims and was resolved for $1.6 million dollars. The biggest scandal that left a
bad taste in everyone’s mouth and tainted the Subway name has got to be Jared Fogle.
Jared became the Subway spokesperson in 2000, after he lost 200 pounds, thanks in part to
eating Subway or so he claimed. He began giving talks on healthy living, appearing in advertisements
for Subway. Subway cut their relationship with Fogle in 2015 after he was charged with
possession of child pornography and child molestation. He pleaded guilty in August 2015,
and was sentenced to more than 15 years in prison. Subway is still working to bandage that hemorrhage.
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