Subway is the world’s largest fast-food chain, based on locations. Its last official count was 44,788 in 112 countries. In the U.S., however, Subway is shrinking and shed hundreds of stores last year.
Subway closed 359 U.S. locations in 2016, which dropped the total to 26,744. Subways’s U.S. revenue dropped 1.7% last year to $11.3 billion. McDonald’s (NYSE: MCD) is the next largest fast food chain in the U.S. with 14,146 locations.
Subway is not alone in its need to reset its store distribution. McDonald’s reported same-store sales dropped 1.3% in the fourth quarter of 2016. This drop came despite a concerted effort to keep many stores open 24 hours a day. McDonald’s has also extended the number of hours a day it serves breakfast and added “healthy choices” to its menus. These healthy choice include salads and foods with low calorie and salt counts.
There are a number of theories about why fast food companies, in general, have faced sales challenges in the last year. One is that the market has become progressively crowded with both mainstream companies like Subway, pizza operations like Little Caesars, Mexican food outlets led by Chipotle (NYSE: CMG), and a wide variety of other niche players like Arby’s. Another theory is that as grocery prices have fallen, more people cook and eat at home. Yet another theory is that restaurant chains like Olive Garden has dropped prices to better compete with Subway and McDonald’s. Yet another is that recent increases in gas prices have kept people home
Subway, owned privately by Doctor’s Associates Inc. is unique compared to most other fast food chains. All of its locations are owned as franchises. The company does not own any of its own stores.
In a statement to Bloomberg, Subway management wrote:
Sales for 2016 reflect our focus on international growth. We are undertaking an exciting transformation that includes introducing new and improved products, creating an even greater customer experience, refining operations, and positioning Subway franchisees for continued success.
Subway’s U.S. home market is no longer seen as key to its future expansion