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Here's why Subway could close another 500 restaurants

Posted at 5:43 PM, Apr 25, 2018

Fast food sandwich chain Subway expects to close about 500 stores in North America this year.

But it's also hoping to open as many as 1,000 stores overseas.

The company has 44,000 locations globally -- more than any other retailer. The National Retail Federation put its US store count at nearly 27,000 as of 2016, compared to 17,500 for Yum Brands, which runs Pizza Hut, Taco Bell and KFC, and the 14,000 locations for McDonald's.

The company said Wednesday it expects stores to close after it rolls out a revitalization plan, announced last summer, that will require franchise owners to invest more in their operations. All Subway stores are franchise owned, rather than owned by the company. The plans to revamp locations include adding self-service kiosks, more comfortable seating and Wi-Fi and USB charging ports. In February, Subway also announced plans for a loyalty program to win back customers and stem slumping sales.

Store closings are new for Subway. It had a net loss of more than 350 US stores in 2016, the first year in the company's history that it trimmed rather than increased its number of stores. The privately held company has yet to disclose its 2017 store count, but there were reports of hundreds of store closings.

"Looking out over the next decade, we anticipate having a slightly smaller, but more profitable footprint in North America and a significantly larger footprint in the rest of the world," the company said on Wednesday.

Many of Subway's locations are smaller compared to other fast food rivals. That's one of the reasons there are so many of them -- it's much less expensive for a franchisee to open a Subway storefront rather than one for McDonald's or Burger King.

Many traditional brick-and-mortar stores have been closing locations in recent years, as people buy more goods online. But that hasn't been the case for fast food, where there is virtually no competition from online competitors.

Fast food sales on the other hand are getting hit by the drop in retail foot traffic in the places like malls, as well as the growing demand for healthier food.

Subway also took a public relations hit in 2015 when Subway spokesman Jared Fogle pleaded guilty to charges of child pornography and crossing state lines to pay for sex with minors. He was sentenced to more than 15 years in prison. The company had not used him in a television commercial since 2013, and it quickly cut ties with him when his legal problems became public.