Subway calls ‘emergency’ meeting with franchisees as sales plummet: sources
Subway has called a hasty meeting with franchisees of its 19,000 North American sandwich shops as they grapple with faltering sales and profits, The Post has learned.
The fast food giant — which sold itself in April for $9 billion to Roark Capital, owner of Dunkin, Arby’s and Baskin Robbins — told franchisees it will reveal plans to improve traffic and win back market share at the Thursday meeting.
“This conference is essential,” Subway said in the invite. “Join us … to discuss the state of the industry and an update on our business.”
The confab — which one franchisee called an “emergency” meeting, noting that the invite was only mailed out last week — will include a recap of promotional offers that are being tested in restaurants.
“There is no emergency virtual conference,” a Subway spokesperson said, disputing the “emergency” characterization of the Thursday meeting.
“We consistently and proactively communicate with our franchisees to share business updates and plans.”
Discounting has become a contentious topic of late.
A Subway franchisee with nearly 20 stores told The Post his same-store sales are down 5% to 10% in recent weeks compared to the prior year.
He blames the chain’s recent price promotions as customer traffic has dropped.
“They are doing crazy coupons,” the franchisee griped.
“Our gross sales are not even at 2012 levels, and profit then was five times what it is today.”
The franchisee added that his stores barely break even with the discounts. In a recent national ad campaign, NBA great Charles Barkley has been urging customers to “Buy any foot-long in the app and get one free.”
“Charging $6.99 for any sub while they are $11 on the menu,” the franchisee lamented.
“Offering three sandwiches for $17.99.”
Subway does not give its franchisees national sales information, but an Eastern US region with about 1,000 Subways saw average weekly same-store sales slip by 8.7% between June 25 and July 16 compared to a year earlier, according to data shared with The Post.
Subway’s meeting “seems very unusual,” said restaurant consultant John Gordon, who noted that he recently has seen Subway sales numbers in West Coast and East Coast regions that show same-store sales drops of 10% in the last few weeks.
Los Angeles and San Diego same-store sales are down 8% for the week ending Aug. 6, a Subway source said.
In the Southern California suburbs, they are off 2% to 5%, the source added.
That’s versus last year, when Subway boasted that its North American same-store sales were up by 5.9% chainwide.
Subway is discounting its best-selling items so it’s hard for it to compensate for the lost revenue, sources said.
The hope was the new $3 foot-long hot dipper snacks introduced in June would boost sales, but they are not selling enough of them, sources said.
Subway last year had more success when offering Sidekicks — foot-long cookies, pretzels and churros, which helped fuel positive same-store sales despite a 1.7% traffic drop.
But the buzz surrounding that snack offering has died off, according to Gordon.
Subway, which owns none of its restaurants and makes its money through 8% royalty fees it collects from franchisees, now faces interest payments on debt following its sale to Roark and can’t afford to have declining earnings, sources said.
Other chains increasingly are offering discounts to entice financially strapped customers.
White Castle slashed the price of its famed sliders to the lowest level in more than a decade, as The Post reported this month.
Nevertheless, fast-food restaurants excluding pizza joints in July saw same-store sales down 2.9% compared to negative 1.9% in June, according to Bank of America credit and debit card numbers.
Taco Bell was up 5%, while Wendy’s and Burger King in the second quarter were flat, according to data firm Technomic. McDonald’s is extending its $5 value meal into October.
The Golden Arches reported last month that same-store sales in the second quarter were negative for the first time in four years, dropping 0.7%.
“This shows the discounting wars are not working in total but are improving traffic a bit,” Gordon said.
