Something is up at Subway, referring to the sandwich shop franchise and not your local public transportation system. Whatever is going on certainly doesn't sound good at first glance. The company sent out a notice last week announcing a hastily called online conference with all of its 19,0000 North American affiliates. The meeting was called with almost no notice. The company isn't referring to it as "an emergency meeting," but that's what many of the franchise owners are calling it. The stated purpose of the meeting is to "discuss plans to improve traffic and win back market share." The word "back" in that description is probably somewhat revealing. Many franchise owners are reporting significant declines in both sales and profits amid a flurry of "crazy coupons" that are making the rounds. (NY Post)

Subway has called a hasty meeting with franchisees of its 19,000 North American sandwich shops as they grapple with faltering sales and profits, The Post has learned.

The fast food giant — which sold itself in April for $9 billion to Roark Capital, owner of Dunkin, Arby’s and Cheesecake Factory — told franchisees it will reveal plans to improve traffic and win back market share at the Thursday meeting.

“This conference is essential,” Subway said in the invite. “Join us … to discuss the state of the industry and an update on our business.”

The confab — which one franchisee called an “emergency” meeting, noting that the invite was only mailed out last week — will include a recap of promotional offers that are currently being tested in restaurants.

This looks like more than some sort of temporary blip in sales. One franchisee with 20 stores told reporters that he recorded profits between five and ten percent lower than the same period last year. A regional manager for an area with roughly 1,000 stores said that during the period of June 25 and July 16 (covering the crucial 4th of July holiday week) sales fell by nearly nine percent as compared to the same time in 2023. Others reported similar results.

Also at issue is the fact that the home office has already been sending out promotional offers around the country, including the "crazy coupons" mentioned above. Customers are showing up with coupons promising $6.99 for any sub when the same sandwich sells for $11.00 on the menu. Another offers three subs for $17.99. The franchisees never signed on for this and insist that they can barely turn a profit at their normal prices.

Part of the issue being observed may indeed be a lack of communication between the national chain and the individual franchises. They are putting the individual stores in an untenable position. But there is clearly more going on than just that. While Subway wants to talk about "winning back market share," the problem isn't that their stores are being massively outsold by local competitors. All of these eateries are feeling the downstream effects of Bidenomics (soon to be Kamalanomics if we manage to blow this election) and the effects of persistent inflation amidst stagnant wage growth. 

Working-class people are less and less able to afford the "luxury" of going out and ordering lunch or dinner at a place like Subway. So when they see an amazing coupon showing up slashing the price of a meal in half, of course they're going to jump at the chance. Traditionally, the concept of offering discount coupons by mail was intended to draw new customers to the shop. If they tried the product and enjoyed it, the hope was that they would continue patronizing the eatery at regular prices. But if nearly everyone starts showing up with these coupons and the only time they show up is when they have one, profits quickly vanish.

That's what appears to be happening to Subway. It's a respectable chain and I've enjoyed their offerings many times myself. But nobody is skating away from the current economic disaster without taking some damage. This clearly applies to fast-food franchises ever bit as much as blue-collar families. Some big changes in government policy will be required to right this ship.