By Mike Fishmore May 3, 2024
Shut down
The Subway franchise is experiencing a reduction in size, a trend that may continue as California's elevated minimum wage for fast-food employees comes into play.
Getty ImagesIn 2023, Subway shut down 733 stores across the United States, as reported by the New York Post. Despite opening 396 new stores and acquiring some existing ones, the overall store count for the chain decreased by 443.
Net loss
YouTubeAt the beginning of 2024, Subway had 20,133 stores in the U.S., down from 20,576 stores at the start of 2023. CEO John Chidsey anticipated a net loss of approximately 100 stores in November.
Treading water
YouTube“We’ll be treading water in the U.S. at worst,” Chidsey said. Subway reached its peak with approximately 27,000 establishments in 2015 but has witnessed a decline in numbers annually ever since.
The increase
YouTubeFurthermore, in 2023, the unit volumes were reported to be 25 percent lower than what was necessary to align with inflation, as indicated by Restaurant Business. According to John Gordon, a restaurant analyst at Pacific Management Consultant Group, the increase in the minimum wage for fast-food workers from $16 per hour to $20 per hour on April 1 was predicted to have a detrimental impact on the restaurant chain.
Troubled brand
YouTube“They are still hemorrhaging stores,” Gordon said. “Subway is still a troubled brand in the U.S.”
Labor expenses
YouTubeAccording to undisclosed sources mentioned by The Post, labor expenses account for 28 percent of the total costs incurred by a Subway establishment. This implies that a rise in wages could potentially reduce the profits of the outlet.
No longer
YouTube"Subway is no longer the most popular chain in the world this year after closing hundreds of stores. McDonald's has taken the lead with 40,000 stores. Subway and Starbucks follow with 38K and 33K stores each. At a distant fourth is KFC."
Deciding to close
YouTube“You’ll see a lot more people deciding to close when their leases expire,” a California franchisee the Post did not name said. “Why would I choose to stay open if I was only scraping by?”
Price increases
YouTubeThe Post reported that several franchises have implemented price increases ranging from 7 to 10 percent in response to the elevated wage rates.
Operating hours
YouTubeCertain outlets are considering reducing their operating hours as a strategy to decrease labor expenses.
Acquiring Subway
YouTubeRoark Capital, a private equity firm that holds ownership of Dunkin' Brands, Arby's, and Jimmy John's, is in the process of acquiring Subway for $9.6 billion. The Federal Trade Commission is currently examining the proposed acquisition deal.
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