The private equity firm that has agreed to invest nearly $10 billion to acquire Subway is facing significant challenges in reviving the struggling brand amidst a steep decline in foot traffic. Exclusive data from Placer.ai reveals that foot traffic at Subway’s US franchises has plummeted by 21.6% over the past four years. In contrast, rival sandwich chain Jersey Mike’s has experienced a 39.1% increase during the same period. This downward trend poses a major obstacle for Subway’s new owner, as explained by Andrew Pudzer, former CEO of CKE Restaurants.
Pudzer, who played a crucial role in the sale of CKE to Roark in 2013 and served as its CEO until 2017, emphasized the significance of declining foot traffic and its detrimental impact on business growth. He stated, “Continued significant decline in foot traffic is never a good sign for any business that aims to grow. If Subway wants to thrive, it needs to address the decrease in customers visiting its restaurants, which currently stands at 21.6% compared to four years ago, according to data from Placer.ai.”
While Subway isn’t the only sandwich chain experiencing a decline in foot traffic, with Jimmy John’s and Firehouse Subs also witnessing decreases albeit at lower rates, the data demonstrates that Subway’s rivals have managed to attract more customers in recent years. According to Placer.ai, Subway recorded a marginal increase of 0.08% in foot traffic from May 1, 2022, to May 1, 2023. In comparison, Jersey Mike’s saw a 13.7% rise, while Jimmy John’s experienced a 2.4% increase during the same timeframe. Firehouse Subs suffered a 4.2% decrease in foot traffic.
Subway, which operates over 20,000 franchises in the US, highlighted its positive same-store sales growth of 9.3% in North America this year compared to the previous year. The company’s spokesperson stated, “We are delighted with the continued progress made through our transformation journey, which has involved ingredient enhancements, menu improvements, increased profitability for our franchisees, and a streak of ten consecutive quarters with positive sales.”
Roark Capital, an Atlanta-based private equity firm and the parent company of restaurant conglomerate Inspire Brands, has agreed to purchase Subway for $9 billion, with an additional $600 million contingent upon Subway achieving certain performance targets. However, this deal is subject to approval from anti-trust regulators.
Pudzer anticipates that Roark will undergo a rebranding process to refresh Subway’s image and revitalize the chain’s slogan, “Eat Fresh.” Drawing a parallel with Arby’s, which Roark purchased in 2011 and successfully rebranded, Pudzer emphasizes the importance of creating new compelling products and a memorable advertising campaign. He suggests that Subway should develop a new slogan to resonate with its target market.
Over the past decade, Subway has faced several public relations crises, starting with the conviction of its former spokesperson Jared Fogle for possessing child pornography in 2015. In recent years, the brand has also confronted allegations of serving fake tuna and chicken, as well as controversy surrounding Megan Rapinoe’s endorsement and her decision to kneel during the national anthem. Pudzer believes that Subway has lost touch with its target market and needs to focus on making its customers feel comfortable and welcomed again.
In conclusion, Subway’s new owner faces the daunting task of boosting foot traffic and revitalizing the brand’s reputation. By addressing these challenges, implementing a successful rebranding strategy, and reconnecting with its target market, Subway can position itself for renewed success in the competitive fast-food industry.
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