USA- Fast Food Leviathan Subway has called for a strategy meeting with its 19,000 eateries in North America to respond to what the company refers to as a sales crisis.
Company data indicates a significant decline in same-store sales, with some areas in North America recording declines of as much as 10% in H1 2024 compared to the previous year.
These sales and profit challenges come as Subway faces financial constraints stemming from its interest payments on debt from its recent sale.
In May, Roark Capital acquired the fast food giant for US$9 billion after a long sale process that started in August 2023.
Although Subway downplays the urgency of the meeting, various franchisees have expressed concerns over the performance and the current management strategy.
Franchisees have criticized the fast food giant’s recent stretched value deals, such as steep coupons and aggressive discounting that have eroded profits in the past year. Some franchisees have complained they have not been able to break even following these offers.
Speaking to a popular news outlet, a franchisee operating 20 stores has opened up about the scale of the situation. The franchisee reported its same-store sales have declined by 5% in the last quarter, a significantly higher decline compared to the same quarter in 2023.
The franchisee revealed, “They are doing crazy coupons. Our gross sales are not even at 2012 levels, and profit then was five times what it is today.”
The unnamed franchisee also reported as many as 1,000 Subway outlets in Eastern US have reported at least 8.7% drop in same-store sales in June and July because of these discounts despite Subways not disclosing its sales information.
Same-store sales also dropped by 10% in Subways all over the West Coast and East Coast. In Los Angeles and San Diego, same-store sales dropped by 8%, and in Southern California suburbs, sales flattered between 2% and 5%.
These reported same-store declines, combined with a 1.7% decline in customer traffic, have contributed to the current cash crunch. After the sale, the company earns revenues mainly through the 8% royalty fees charged to franchisees.
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