8.29.13: Off Track: Subway Franchisees Decry Deep Discounts

“Since we have provided numerous SBA loans to Subway sandwich shop owners and as a subscriber to the $5.00 foot-long bargain myself, I found this New York Post article written by Josh Kosman intriguing and thought I would share parts of it with our readers,” commented Michael D. Sneden, Executive Vice President of ValueXpress.

This summer wasn’t the best time for Subway sandwich shops — the world’s largest restaurant chain — to stumble. Founder and Owner Fred DeLuca, the driving force and vision behind the Milford, CT, chain’s growth into a 40,000-unit chain, is in a Connecticut hospital being treated for leukemia, and he has told associates he is awaiting a bone marrow transplant. The hands-on owner is still in daily contact with regional managers trying to find new ways to reverse a sales decline, a Subway development agent told The Post.

Same-store sales at the closely held company dipped 2% last month and are down over the last several months, the first declines in recent memory, sources close to the company tell The Post. In June DeLuca launched a $4 lunch special — a six-inch sub, beverage and chips — and plans the re-introduction next month of the company’s popular $5 foot-long campaign. But the plans are not going down well with many of the company’s franchisees. At that price, franchisees complain, they just barely cover their costs.

“There are not any Subway owners who like it,” a franchisee who owns three stores told The Post. “Everybody is pissed off.” Margins at a typical store, where revenues are about $400,000 a year, are now between 8% and 10% because of the price cuts, the franchisee said. Just a few years ago, margins were 12%, according to the franchisee.

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This entry was posted in Michael D. Sneden, News & Recent Closings, SBA Loans, The Banker's Mortgage Conduit, Valuexpress and tagged , , . Bookmark the permalink.

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