December 27, 2017

Coleman’s C-Suite Report– Subway Franchisees Closing Stores Amid Sales Decline

Subway is in trouble says Business Insider’s Kate Taylor.

Bloomberg Stats

US Stores Closed 2017 — 909, down to 25,835
2016 Sales — down 1.7%
Foot Traffic — off 25% in the last five years

Reports the New York Post

In a Nov. 30 memo to franchisees that revealed the stomach-churning drop, Subway’s owners promised $25 million to boost marketing this spring for the company’s 44,000 locations and to bring back a limited-time, $4.99 footlong sandwich promotion.

Subway is concerned that consumers no longer see its sandwiches as a bargain versus its key competitor, McDonald’s. Subway likewise wants to plow into healthier and more natural fare, including wraps and “all-natural turkey,” according to the memo obtained by The Post.

Writes Kate:

Subway has struggled to keep up with fast-casual competitors like Panera and Sweetgreen that many see as better suited to meet Americans’ swiftly evolving health trends.

“Today, people are ever more educated on nutrition, food sourcing, and ethical holistic business models,” Sara Bamossy, the chief strategy officer at ad agency Pitch, told Business Insider. “To create (or to rekindle) loyalty and sales, it is not enough to label something as ‘natural’ and it’s not enough to be affordably priced.”

The company also faced negative publicity from a scandal involving its former spokesman Jared Fogle. Fogle is serving a nearly 16-year prison sentence after being charged with having sex with minors and possessing child pornography. Subway cut ties with him in 2015.

Subway’s SBA Loan Performance

SBA 7(a) Stats
Ten years — 2007-2016
Loans Approved — 1,446
Loan Amount — $338 million
Loans Paid in Full — 44%
# Loans Charged Off — 2.8%
Charge Off by $ — 1.1%

SBA 504 Stats
Ten years — 2007-2016
Loans Approved — 79
Loan Amount — $27 million
Loans Paid in Full — 25%
# Loans Charged Off — 5.1%
Charge Off by $ — 7.5%

Source: 2017 Franchise Coleman Report

Coleman Report Grade
Subway — C+
About Coleman Report Grades.
The Coleman Report Grade is the opinion of the Editor of the risk to the small business lender of a franchisee’s future loan performance.
A — Minimal
B — Acceptable
C — Average
D — High
F — Unacceptable