Subway’s emergency meeting with franchisees of its 19,000 US stores amid falling sales could be an indicator that it is battling similar headwinds on Australian shores.
The sandwich chain has more stores in Australia than competitor McDonald’s, but a much smaller share of industry revenue – 5.6 per cent compared with the burger joint’s majority share of 20.3 per cent, according to retail data firm Geotech Information Services.
Earlier this month, McDonald’s revealed its first sales decline in four years as inflation pushed up its prices and budget-conscious consumers spent less, with one marketing expert noting: “When it’s bad for McDonald’s, it’s bad for the entire industry.”
While Subway’s national sales figures are not publicly available, one telling indicator is the number of stores nationwide, which has been steadily declining in recent years.
Between 2015 and 2022, Subway closed 202 branches (a considerable 14 percent of its total floor space), reducing the number of stores from 1,444 to 1,242.
Accredited dietitian Anna Debenham said a change in eating habits among Australian consumers, who were “more aware of what was going on in their bodies”, was likely a factor.
‘If you look at the options, you have salad bars, healthy Mexican restaurants or places that make sushi rolls… “Then there are fresh food delivery services like HelloFresh and Marley Spoon,” Debenham previously told Daily Mail Australia.
Since then, a further 22 branches have closed their doors and the number of Subway outlets now stands at 1,220. McDonald’s is approaching 1,043 despite the cost of setting up a Subway being a small fraction of that of opening a Maccas.
Subway has called its US franchisees into an emergency meeting to discuss sales and traffic with the Australian subsidiary of the business, which has closed hundreds of stores in recent years.
Some people online pointed to rising inflation as a reason why consumers were not flocking to Subway stores.
The meeting of Subway franchisees in the United States is understood to be focusing on ways to boost sales and refresh the company’s outdated brand.
Private equity firm Roark Capital Group will buy Subway in 2023 in a deal rumored to be valued at $14 billion.
An invitation from the company sent to U.S. store owners says the corporation will outline plans to win back customers and increase its faltering market share.
“This conference is essential,” said the invitation obtained by the New York Post.
‘Join us…to discuss the state of the industry and an update on our business.’
The invitation, sent last week, will remind franchisees of promotional offers being tested.
Some franchisees at US stores have criticised the “crazy” discounts being pushed when traffic has dropped.
All Subway locations are franchised and the company receives an 8 percent royalty from the owners.
“They’re making crazy coupons,” one said.
‘Our gross sales are not even at 2012 levels, and profits then were five times what they are today.’
“They charge $6.99 for any sandwich while they’re $11 on the menu,” they complained about a recent deal.
Subway does not provide overall sales data, but the eastern U.S. region, with about 1,000 square meters, saw sales drop 8.7 percent between June 25 and July 16 compared with a year earlier. The New York Post reported.
The sandwich giant is battling changing eating habits and the perception that its brand is outdated.
Subway franchisees say ‘crazy’ promotions are bad for their business margins
A spokesperson for the chain denied the conference was an emergency and instead insisted that “we are constantly and proactively communicating with our franchisees to share updates and business plans.”
Those posting online offered their reasons for moving away from the brand.
“Maybe Subway is calling an emergency meeting because no one wants to pay $12 for a mediocre sandwich they can make for $3 at home,” wrote Douglas Boneparth, president of Bone Fide Wealth in X.
An Australian recently wrote that he “worked at Subway a while back and could always get a 12″ sandwich for under $10 and a 6″ for under $6.”
‘A six-inch tube now costs as much as a foot-long tube ($9.95) and foot-longs cost $15.
“I understand that this is inflation, but it’s interesting to see how much it affects everyday items. In this case, 50 percent or more for a packed lunch.”
Another said: ‘When I was in college, between 2013 and 2015, you could get a 12-inch turkey for $7.’
“Why go to Subway when you can get something fancy at a diner or a Vietnamese pork roll for less?”
Former AFL player and Big Brother contestant turned radio DJ Ryan Fitzgerald starred in this Subway advert which aired in South Australia around 2009.
The promotional price of the steak and beet salad sandwich was $5.95, which shows how much prices have risen in 15 years.
A third noted that prices often vary between stores.
‘I paid $10, $12, and $20 for a 12′ Pizza Sub at three different stores in one month.’
‘The cheapest one is a shopping centre in Perth and the $20 one was a small shop near Crown Melbourne.
‘McDonald’s is up 40 percent since 2020. A hash brown alone costs $3.15 or more. It’s crazy.’
Franchise industry writer Glenn Walford said Subway was being overshadowed by more modern food options.
‘Guzman and Gomez has been on a store-opening campaign driven by what appears to be a growing desire for fresh Mexican food.’
‘In terms of brand power, it has undoubtedly positioned itself as the ‘reference’ offering in the market niche.’
Guzman and Gomez recently went public with an IPO that rose in value from $2.2 billion to $3 billion by the end of its first day of trading on the ASX.
Mexican-themed restaurant Guzmán y Gómez has established itself as a major disruptor in Australia’s fast food market in just a few years.
A few years ago, Subway Australia implemented a store renovation across many branches in order to reposition the brand as modern.
The new stores feature digital menu boards, a brighter environment, vegetable displays, free Wi-Fi and remote pickup areas.
Subway’s global brand had endured a series of controversies, with its former spokesman Jared Fogle sentenced to 15 years in prison in 2015 after pleading guilty to child pornography charges.
A class-action lawsuit was also filed against Subway in 2020, accusing it of misleading the public about its “100 percent tuna” products.
The case was based on laboratory testing of 20 tuna samples from 20 California restaurants, of which the company said 19 “had no detectable tuna DNA sequences.”
Subway called the allegations “baseless” and the lawsuit was quietly dismissed in court in 2023, receiving far less press than the wild claims about its tuna.
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