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Subway continued closing locations last year

Sources say as many as 10% of the chain’s units closed, though the company says some were temporary, as the coronavirus accelerated its pullback.
Photograph: Shutterstock

Subway closed as many as 10% of its restaurants in the past year as the coronavirus accelerated the decline of the country’s largest restaurant chain by unit count, according to a variety of sources.

Those sources told Restaurant Business that an estimated 2,200 to 2,400 of the chain’s units closed last year.

Actual numbers were not available. Asked for comment, Subway would not provide the number of restaurants in the chain and noted that the number of permanent closures last year was “lower than your estimate.”

“Subway does not disclose this information, but we can tell you that the figure you provided is not accurate,” the company said in an emailed statement. “The number of permanent closures in 2020 is lower than your estimate, as there are temporary closures due to COVID.”

Subway’s unit-count decline has been well documented. The Milford, Conn.-based sandwich giant has been shrinking for years and closed more than 1,000 locations in both 2018 and 2019. In the five years going into 2020, the chain shrunk by 12% as its franchisees closed more than 3,000 units overall.

Subway entered 2020 with 23,801 locations. If the company closed 2,400 locations it would have 21,401 locations right now, wiping out well over a decade’s worth of unit count growth.

The pandemic has been particularly bad for the company’s locations in malls and in urban areas where industry sales have been weakest. A few dozen Subway locations closed in New York City last year, for instance.

Subway doesn’t operate any of its own locations, leaving that to thousands of franchisees, most of whom operate only a couple of units. When a unit closes, in other words, an investor loses his or her investment in that restaurant.

Subway has historically deployed an aggressive expansion strategy, focused on selling more sandwiches simply by peppering the world with its restaurants. The company grew into the largest restaurant chain in the world by number of locations and at its peak had more than 27,000 locations.

With so many locations, however, its operators generate a small amount of sales per restaurant. Its average unit volumes before the pandemic were about 60% of those of its nearest competitor, while chains such as Jersey Mike’s and Potbelly do twice the amount of sales per location as Subway.

Sandwich chains’ pre-pandemic unit volumes

Source: Technomic

Subway has struggled for years to shift away from a low-cost strategy it used during the recession and find an advertising campaign in the aftermath of the arrest of longtime spokesman Jared Fogle back in 2015.

As the chain’s same-store sales stagnated and costs increased for labor and food and technology, operators began closing their doors.

The closures in 2020 suggest that the years of declines in unit count may not be leading to higher sales at nearby units—which would keep other locations afloat. In other words, the company could be facing more closures in the coming years.

“It would seem like they haven’t hit bottom yet,” John Gordon, a restaurant consultant in San Diego, said in an interview. “Until we see some corporate actions that are either a very solid marketing that drives memories and utility with the customer, yet while still building a profitable transaction with the customer, and/or providing some reasonable economic relief for franchisees, then there is no underpinning for stores continuing to close.”

Subway has taken numerous steps in a bid to get back into customers’ good graces. It has overhauled its executive team under John Chidsey, named CEO a year ago. It has been pushing price competition this year and used price deals to get customers on its smartphone app.

This month, the company revealed a new line of protein bowls designed to target customers who are cutting carbs—one reason why some believe the chain has struggled to regain the health halo it had during the Jared years.

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