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Subway Is “Dying” – Food Scandal, 25% Traffic Plunge, And Now Revolting Franchisee

When was the last time you spent money on Subway? If you can’t remember, you’re not alone. Subway’s menu is so boring that only losers would step into the restaurant. Even if you think the food isn’t that bad, you might have second thought about their fake proclamation of “healthy food”. And now Subway is facing internal revolt – from their franchisee.

Subway’s problem isn’t new. Over the past 5 years, the struggling Sandwich chain has seen its customer traffic plunges by a whopping 25%. That’s a potential quarter loss in revenue and profit, thanks to fierce price competition in the multi-billion-dollar fast food industry. Business has been bad that while Subway opened 911 new locations in the U.S. in 2015, it closed 877.

Rivals such as Panera Bread Co. and McDonald’s have been consistently snatching customers away from Subway Restaurants. So on 30th November, Subway issued a memo to its franchisees, promising US$25 million to boost marketing for the company’s 44,000 locations. The mission: to bring back a “limited time” promotion offer – US$4.99 foot long sandwich.

Subway Footlong Sandwich

It appears that consumers are staying away from Subway as they no longer see the restaurant’s sandwiches as a bargain against its competitors. Therefore, Subway thought a promotional campaign could bring back its customers. But the plan has attracted problems before it could even begin. More than 400 franchisee, however, disagree with the promotion offer.

They have apparently signed a petition protesting the 2-month foot long deal scheduled to begin in January 2018. The Subway franchisees argue that the nationwide campaign would leave many of them in losses, even insolvent. Subway, meanwhile, has been having meetings with the franchisees, arguing that discounts will prop up profits instead of pinching them.

Subway’s memo also said – “The erosion of baseline traffic and related profitability decline is the overwhelming primary issue for our brand.” But cheaper food isn’t the only problem hitting the sandwich restaurant. In 2013, the same foot long sandwich that Subway is now trying to bring back was hit with a lawsuit. When measured, the supposedly giant sandwich was only 11 inches.

Subway Footlong Sandwich - Only 11 Inches - Cheating

A year after the shorter than promised foot long sandwich cheating case, Subway plunged into food scandal. In 2014, Subway admitted that its bread contained “azodicarbonamide”, a chemical approved by the Food and Drug Administration for use in food as a bleaching agent and dough conditioner. But the ingredient was also used to make yoga mats.

In 2015, Subway pitchman Jared Fogle was sentenced to 15 years and 8 months in a federal prison on child-porn charges. Amusingly, he blamed Subway foot-long diet for making him a raging paedophile. His lawyer argued that while the sandwich chain’s turkey and veggie subs helped him in weight loss, it also made him a sex-crazed paedophile.

Forensic psychiatrist John Bradford told the judge – “Once he lost weight, it seemed as though in a short time he had hyper-sexuality, and began fantasizing about prepubescent girls and boys and seeking out 16​ and 17-year-old prostitutes”. However, U.S. District Judge Tanya Walton Pratt wasn’t impressed with Fogle, whose net worth was estimated at US$15 million, and sent him to prison.

Subway Chicken Scandal - A Chicken Sandwich with Guacamole

The year 2015 also saw Subway’s chicken meat heavily tainted with “antibiotic”. This year alone, Subway was exposed by Canadian CBS Marketplace investigators of cheating customers when the chicken sandwich contained only half the chicken. The rest of the so-called chicken turns out to be soy filler disguised as a component of the company’s chicken.

Subway CEO Suzanne Greco has made a controversial move in order to save money for the company. Highly paid “development agents” – the so-called contractors who for decades grew restaurant counts in exclusive territories and supervised their day-to-day operations – were fired. As the territories now filled in, the millions of dollars paid to each agent are stopped.

Not only Subway couldn’t grow the territories they snatched from their agents, the zero growth territories actually are doing worse. Julian Shelton of Ashland, Va., who won the 2014 Subway franchisee of the year award, wrote in last week’s petition that Subway needs to try new flavours like teriyaki glaze and adobo chicken seasoning.

Subway - Food and Drink

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This post first appeared on Finance Twitter, please read the originial post: here

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Subway Is “Dying” – Food Scandal, 25% Traffic Plunge, And Now Revolting Franchisee

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