• Market Crumbs

Layoffs Hit Subway As Store Count Shrinks And Sales Deteriorate


Image via Decider

It's been a long fall from grace for Subway, the restaurant chain known for its $5 footlongs and fresh cookies. The chain even sponsored arguably one of the greatest golfers of all time, Happy Gilmore, who said of the cold cut combo "I eat three every day to keep me strong!"


At the end of 2010, Subway surpassed McDonald's to become the largest fast food chain in the world by store count. At the time, Subway had 33,749 restaurants compared to McDonald's 32,737.


Subway has since continued to grow exponentially, with more than 41,000 locations now scattered across 100 countries. However, Subway's United States restaurant count peaked in 2015 at 27,103. Since then, Subway's U.S. store count has shrunk by 13% to 23,692 at the end of last year. Subway closed a net 1,106 U.S. locations last year, bringing its store count to the lowest level since 2009 when it had 23,034 locations. Outside of the U.S., Subway has continued to shrink as well, with the number of international locations declining by 3% since peaking at 18,004 locations in 2017.


Last year, Subway's U.S. sales reportedly fell below $10 billion for the first time since 2001, marking the lowest sales figure since 2009. In doing so, Subway dropped out of the top five U.S. restaurants by sales, a list in which it used to occupy the second spot behind McDonald's. Wendy’s and Dunkin', which sit at 7th and 8th on the list, respectively, are growing modestly and could overtake Subway at its current pace over the next couple of years.


This week, the struggles affecting Subway hit employees at corporate headquarters. Subway announced it laid off 300 employees, about a quarter of its corporate workforce, from its headquarters in Miford, Connecticut. A local news station reported that police were even on the premises to escort terminated employees from the headquarters.


"A reduction in workforce is never an easy decision but streamlining and simplifying our business with a smaller and nimbler workforce will help us react quickly to the changing needs of the business," a Subway spokesperson said. "In order to deliver on that strategy, a difficult decision was made to eliminate approximately 300 positions at our global HQ in Milford, Conn."


The cuts are the latest move by John Chidsey, who was named CEO of Subway in November, to turn the company around. Chidsey, who was formerly the CEO of Burger King, was brought in nearly five years after the death of the company's co-founder and former CEO Fred DeLuca, who died in 2005.


Chidsey hasn't wasted time making changes in the few months he's been at Subway. Since he was hired, a handful of high-level executives, many who have been with the company for decades, have departed the company. Subway has even reportedly begun enforcing its 20-year franchisee agreements for the first time in the company's 54-year history in an attempt to slow the rate of closures.


On the product side, Subway, like many other restaurants, has started to offer plant-based meats. They've also debuted milkshakes and King's Hawaiian bread in an attempt to repair their image, which was damaged a few years ago when it was found their bread had contained a chemical used in yoga mats.


With a Subway location seemingly in every shopping center across America, the company is desperately trying to stop franchisees from closing shop. As consumers continue to seek other alternatives, Subway better hope they can come up with something to turn its sales around or the number of locations closing will likely continue.


Leftover Crumbs

  • This won't end well. Users of online personal finance website SoFi rushed to buy Tesla shares this week as the stock continued its short squeeze to all-time highs. According to SoFi, Tesla passed Apple as the largest holding late last month and continued to separate itself this week as Tesla continued to soar. In what may end up being a costly lesson on investing, SoFi users—who are mostly millennials, purchased 20 times the amount of Tesla stock relative to historical purchases this week. SoFi also said that interest in Tesla this week has led to the largest trading volume of fractional shares since being introduced last summer. 

  • Changes such as replacing Masa Son with Adam Neumann? Activist investor Elliott Management has built a $2.5 billion stake in troubled Japanese conglomerate SoftBank Group. Elliot, which has already met with SoftBank founder Masayoshi Son and some of his deputies, is pushing for the company to repurchase between $10 billion and $20 billion in SoftBank stock and improve its governance practices. Elliot said in a statement "Elliott’s substantial investment in SoftBank Group reflects its strong conviction that the market significantly undervalues SoftBank’s portfolio of assets." SoftBank responded, saying "SoftBank always maintains constructive discussions with shareholders regarding their views on the Company and we are in complete agreement that our shares are deeply undervalued by public investors."

  • Surprised it took them so long. Shares of Twitter soared 15% after the company reported quarterly revenue that exceeded $1 billion for the first time in the company's history. Twitter also announced daily active users increased by 21% compared to the same quarter a year ago to 152 million people. Twitter said it plans to increase headcount by 20% this year, focusing on engineering, product, design and research. Twitter still continues to struggle with a long-standing issue—actually getting people to join the site. "A lot of people see tweets every single day. They see them on television, they see them in newspapers," Twitter CEO Jack Dorsey said. "We haven't given them enough reason yet to come to the app and utilize it themselves.

  • Is a podcast bubble brewing? Spotify has acquired The Ringer, a podcast company covering entertainment, sports and pop culture. The Ringer, founded by former ESPN writer and commentator Bill Simmons, has a monthly audience of 14 million users. Terms of the deal weren't disclosed, but Spotify continues to spend money to expand its podcast offerings. The company spent nearly $400 million last year to acquire three podcast companies. "We look forward to putting the full power of Spotify behind the Ringer as they drive our global sports strategy," Spotify’s chief content officer, Dawn Ostroff, said. 

  • Is it the best acquisition ever? Sources at Bloomberg believe Instagram brought in $20 billion in ad revenue last year for Facebook. Facebook, which had more than $70 billion in revenue last year, bought Instagram in 2012 for $1 billion in cash and stock. For comparison, Alphabet announced earlier this week that YouTube ad revenue totaled just over $15 billion last year. Facebook, which declined to comment, doesn't break out Instagram revenue in its filings.