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? Thanks for watching! Click the Mashed icon to subscribe to our
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