Dive Brief:
- Subway vice president James Walker, who led the company’s North American operations, resigned last week to pursue other opportunities.
- According to Restaurant Business, Walker’s resignation comes on the heels of CMO Joe Tripodi’s departure in December and less than a year after CEO Suzanne Greco left the company.
- Subway — the third largest U.S chain by sales — closed more stores than it opened for the first time in 2016. In 2017, the chain closed 909 locations, or more than 3% of its domestic system.
Dive Insight:
A busy executive turnstile is never a good sign for a business, particularly one in dire need of a turnaround like Subway. In 2016 alone, Subway’s domestic system sales declined by $200 million. The sandwich giant has endured a number of challenges since about 2012, which can be attributed to a confluence of factors — the swift growth of the fast casual sandwich category among them. According to Technomic, the number of fast casual sandwich chains with more than $50 million in annual sales increased 70% to more than 7,500 in the past five years.
There was also the very public downfall of Subway spokesman Jared Fogle in 2015 and the discovery of a chemical used in yoga mats in Subway’s bread in 2014, among other issues.
Arguably, however, the chain’s biggest challenge erupted in 2012 when the company launched its $5 Footlong promotion. With rising food costs, the chain eventually moved away from the promotion and, according to Restaurant Business, this move weakened the chain's value offering. When the company attempted to revisit the $5 Footlong in 2017 to rectify a nearly 25% drop in traffic since 2012, franchisees — worried about rising labor and other costs — pushed back.
More than 400 franchisees signed a petition claiming the national promotional focus left many operators unprofitable and, in some cases, unable to pay off debts.
Divisions have persisted between the chain’s franchise base and headquarters. Though it’s hard to say if they have eased a bit since Greco’s departure, that sort of rift doesn’t just heal overnight. When he left the company, Tripodi told Marketing Week that the brand is isolated and requires a significant transformation across the business.
Franchisee tension is never a good sign for a brand and it could have even been Walker’s cue to leave. According to Nation’s Restaurant News, Walker was tasked with meeting with North American operators to better Subway's operations.
It's worth noting that Subway has made some notable progress on store refreshes, menu upgrades and, especially, its digital and loyalty presence. But with yet another seasoned executive exiting the company, don’t expect a turnaround to be immediate.
