Crack In The Subway Bubble? Number Of Locations Shrinks For First Time Ever

Image courtesy of Marike79

After years of growth, Subway is beginning to shrink. Sure, the chain remains the most popular eatery in the world (at least in terms of stores), with more locations than McDonald’s. However, the 100% franchised chain reported a net decrease in its number of stores in the United States this year for the first time ever.

Subway announced this week that at the end of 2016, it had 26,744 restaurants in the United States. That’s a net decrease of 359 stores since the end of 2015, while total domestic sales in the company’s restaurants decreased 1.7%.

International sales are up, though, perhaps because the rest of the world hasn’t been over-saturated with Subways yet, and the chain is adding more restaurants in those markets.

The typical Subway store is smaller than most fast food locations, and often requires less equipment and fewer employees. This helped the chain to attract franchisees, who were opening new stores at a rate of nearly three per day in 2012.

The company reached its current level of stores about three years ago. At the time, founder Fred DeLuca claimed there was still room in the U.S. for another 7,000 or 8,000 Subway locations.

Subway has more than 40,000 locations around the world, while McDonald’s has around 36,000. However, Subway has the lowest income per store in the fast food industry. What matters to its corporate overlords are franchise fees, though, and not pure sales numbers.

“We will continue to relocate some shops to better locations and look for new sites — both traditional and non-traditional,” the company told Reuters in a statement this week.

While the chain has pushed relentless growth for decades, there are multiple issues that could be affecting its franchisees now. It faces competition from other fast-food restaurants that consumers perceive as more healthy.

The company has also dealt with the dealt with the death of DeLuca, and the high-profile arrest and imprisonment of its longtime spokesman on child pornography charges, not to mention the end of its deeply memorable $5 footlong promotion.