Subway’s biggest problem has nothing to do with shamed former spokesman Jared Fogle.
The company dismissed its weight-loss pitchman last week after his house was searched in an FBI investigation and one woman accused him of making inappropriate comments about middle-school girls.
While the scandal with Fogle will pass, the company’s rapid expansion plan is a bigger issue that could hurt business, according to Jonathan Maze at Nation’s Restaurant News.
“It’s really been a victim of its own success,” David Henkes, from the consulting firm Technomic, told Bloomberg. “It’s really saturated the market. It’s got over 27,000 (US) locations now. The unit economics are very tough. Competitors have really come in and provided some alternatives to consumers that have caused Subway to suffer some sales losses.”‘
Subway has 44,000 restaurants worldwide, more than McDonald’s. Executives say the company eventually plans to reach 100,000 locations.
Subway’s US sales last year fell by 3%, the biggest fall for any of the top 25 fast-food chains, Drew Harwell reports at The Washington Post.
Subway also fell two spots to become the third-most-popular fast-food restaurant for the first time in seven years.
The expansion plan is backfiring, according to The Post.
“More people have money to spend, and they’re choosing to spend a little bit more on better concepts where they get a better product,” Darren Tristano at Technomic told The Post. “Subway’s strategy has only been to open more stores, and ultimately those stores just cannibalize each other.”
In other words, Subway is so ubiquitous that customers leave one restaurant to go to a closer one.
Tristano also told Bloomberg that “if your goal is to have the most versus the best, you’ll eventually run into trouble.”
Subway should focus on innovating its menu instead, Maze said.
With its vegetables and lower calorie counts, Subway arguably invented the idea of “fresh” fast food two decades ago.
But while Subway stayed the same, better competitors got into the space.
Chipotle offers food that is raised without fillers or antibiotics and is prepared fresh in stores. Firehouse Subs and Potbelly offer elevated ingredients and side dishes such as gourmet kettle chips and potato salad.
Americans who once praised Subway’s low-fat offerings are now concerned the chain’s lunch meats and sauces are overly processed with fillers and additives.
“What Americans see as healthy has evolved,” Harwell writes. “Subway hasn’t.”
Read more at Business Insider.