When is the last time you stopped at a Subway?
If it's been a while, you might not be surprised to learn that 2017 was not a good time for
the chain that's been banking on their "Eat fresh" image to get customers through the
door.
It was only in late 2017 that franchisees found out that business had fallen 25 percent
since 2012, and stores were shutting their doors.
CNN reported that in 2016, Subway closed 359 locations, and 2017 was even worse.
According to Business Insider, that year saw Subway closing another 909 stores across the
US, which accounts for about three percent of their domestic footprint.
So, it's not entirely surprising there's a lot going on behind the scenes at Subway,
and their problems are way more complicated than you might think.
So, why did your neighborhood Subway close?
Subway built their brand on the idea of eating
fresh, so if you've been to almost any location in recent years, you may have been surprised
to find your sub toppings looking a little less than garden fresh.
It's not your imagination — and there's a business-breaking reason for that.
Business Insider UK spoke to a number of Subway franchisees and managers, and found most locations
only get shipments of vegetables and produce once a week.
Particularly busy locations get fresh produce in twice a week, but that's still not enough.
While Subway stated they worked with around 100 suppliers and family farms to make sure
all their locations had the freshest produce available, those on the front lines had other
things to say, like the Pennsylvania employee who said:
"A lot of the lettuce we receive is often near-[expiration] and is already turning brown
even though the bags are vacuum sealed.
The same goes for tomatoes.
Often they are delivered and within a week are mushy and rotting."
"Subway, eat fresh."
Is this chicken?
One of the other things Business Insider says is to blame for Subway's continued struggles
is scandals like the mystery-meat chicken findings of early 2017.
That's when CBC Marketplace did DNA testing on six different chicken sandwiches, including
two Subway sandwiches.
For the other fast food chains that were investigated, McDonald's, Tim Hortons, Wendy's and A&W,
tests showed that what they were serving was at least 85 percent chicken, if not more.
Subway?
The averages of their tests showed customers were getting between 42 and 53 percent chicken.
The rest was soy, and it's not surprising people were pretty outraged by the deception.
"Subway takes a big hit on this chicken challenge and it's not over yet."
Subway, on the other hand, says the tests were wrong, and claimed they allow for only
one percent or less of soy to be included in their chicken products.
Denials notwithstanding, that's the sort of headline that can destroy a business's reputation.
Subway launched a lawsuit against the CBC for $210 million.
"Is this chicken what I have, or is this fish?"
In December 2017, The New York Post got wind
of more behind-the-scenes problems for Subway: an outright revolt from at least 400 of their
franchise owners.
It started when Subway corporate decided to temporarily bring back the $5 footlong promotion
in hopes of revitalizing dwindling sales.
"Five dollar footlong!"
Franchisees got together to petition against the deal, saying it was only going to hurt
their already suffering bottom lines.
The franchisee letter sent to corporate read, in part:
"The national promotional focus over the past five years […] has decimated [us] and left
many franchisees unprofitable and even insolvent."
At the same time franchisees were revolting against the $5 footlong, the promotion's original
creator, Stuart Frankel, spoke with Restaurant Business on why even he thought bringing it
back was a bad idea.
As the owner-operator of a college campus-based Subway, Frankel came up with the idea in 2003,
but says Subway latched onto it and kept it for way too long.
Even though it allowed them to grow and push some competitors out of the way, it did some
major damage in the long run.
Frankel says, "[Once] you keep pushing a low price point
in the minds of the consumer, it's hard to sell sandwiches for what they're really worth."
The fight over the $5 footlong was just the
tip of the iceberg, and franchisees on the front lines of the business were seeing something
much different from what corporate apparently was, so store owners called for a change in
leadership.
Specifically, they wanted to see a new CEO installed.
Suzanne Greco inherited the job when her brother, Subway founder Fred DeLuca, passed away in
2015 after a battle with leukemia.
Anonymous franchisees claim that part of the problem is that anyone with a viewpoint contrary
to Greco's will be on the outs at corporate.
Meanwhile, one franchisee summed up their situation like this:
"I wish we had an advocate.
This was my retirement, and now, well, it's over."
Tracking the downfall of Subway is surprisingly
complicated, and Restaurant Business Online says growing market competition is playing
a huge part in taking business away from Subway.
When they first entered the restaurant market, Subway didn't have that much in the way of
large-scale competitors.
Quiznos was the other big kid on the block, and they made their name on their toasted
subs.
"We love you subs!
Subs are a dollar off.
When bring a coupon"
It was easy enough for Subway to adjust — they
just added the option for customers to have their rolls toasted — but other chains have
since flooded the market.
At the same time Subway's profits have tanked, competitors Jimmy John's, Potbelly, Firehouse
Subs and Jersey Mike's amassed some serious growth in 2016, accounting for $540 million
combined — while Subway not only lost money, but started closing stores.
Since Subway has been content with the status quo, that's allowed competitors to step up
and start stomping them out.
The last thing anyone needed was another sub shop.
They needed a better one."
But it isn't just other restaurants that are becoming competition for Subway, it's the
number of their own franchises.
Mark Shearer is an attorney who has represented a number of franchise owners in lawsuits against
Subway corporate, and he told Business Insider: "This level of dysfunction has risen to the
level of being flat-out evil."
Shearer says corporate is less concerned with giving their franchisees a chance to grow
than they are with collecting the franchise fees from new owners.
Stores open right on top of each other, corporate collects the fees, and the stores are left
to scramble for business.
Even worse, any complaints directed to corporate, about corporate, have led to what Shearer
described as "Mafia-style" techniques employed to sabotage stores.
Franchisees could have their licenses revoked over the most minor of reasons, he says, and
describes franchise owners as: "[Always] in a state of extreme fear.
[...] They fear reprisal for telling their stories."
Subway, of course, says none of that is true.
As a whole, people are becoming more aware
of what's in fast food.
It seems like Subway, with their "Eat fresh" motto, should be on the top of the heap as
far as healthy goes, but there's not much that's farther from the truth.
Part of that is reflected in the fact they were surprisingly slow to make some serious
changes to their menu and ingredients.
While other chains like Panera Bread and McDonald's announced a long time ago they were going
to be phasing out artificial ingredients, Subway only hopped on that bandwagon in 2015.
And given that announcement only came a year after an online petition condemned them for
using an ingredient in their bread that was also used in the production of yoga mats,
well, that's not good publicity for anyone.
Their menu has stayed the same for a long, long time.
And the Huffington Post says the fact that they were slow to develop a breakfast menu,
and that they shy away from anything too experimental means that the 21st century has been moving
on without them.
"Fresh has a different meaning than it had 20 years ago."
The face of Subway
"Let's call this what it is.
This is about using wealth, status, and secrecy to to illegally exploit children."
When Jared Fogle became the face of Subway, it seemed like a good idea.
He was the perfect poster child for their healthy eating claims, and according to the
Los Angeles Times, Subway profits rose 20 percent after his first commercials went national,
and dropped 10 percent after his contract expired in 2005.
Then, Fogle found himself in court on serious criminal charges with minors — charges to
which he pleaded guilty.
Subway's profits were already headed in a downward direction.
While it's impossible to say how many people decided to take their lunchtime business elsewhere
after Fogle's arrest, it's safe to say it's definitely been a major factor for some people.
Subway has since publicly ended their association with Fogle, but whether or not it was enough,
who knows?
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