Photographer: Andrey Rudakov/Bloomberg

Subway Revenue Drops as It Closes Hundreds of U.S. Restaurants

  • Revenue fell 4.3% in 2015, declining for second straight year
  • Company is facing more competition from fast-casual chains

Subway Restaurants revenue fell in 2015 for the second straight year, a sign one of the fast-food industry’s stalwarts is losing ground to newer chains.

Revenue dropped 4.3 percent to $1.11 billion last year, according to the company’s Franchise Disclosure Document, which was filed with the Minnesota Department of Commerce last week. Subway owner Doctor’s Associates Inc. also is slowing its pace of new restaurant openings and shuttering hundreds of underperforming locations.

Fast-casual chains such as Panera Bread Co. have been taking share from Subway restaurants in the U.S., bringing its once-torrid growth phase to a halt. Founded in 1965 by Fred DeLuca and Peter Buck, the submarine sandwich shop had expanded quickly over the decades by aggressively franchising. It now has more than 44,000 locations worldwide. Lately, though, Subway has struggled to keep pace with more modern rivals, which cater to millennials with items such as quinoa salads and Greek yogurt.

While Subway opened 911 new locations in the U.S. last year, it closed 877. That means it netted just 34 restaurants in 2015, a slowdown from 313 the year before. Subway had a total of 27,129 domestically at the end of 2015, all of them franchised.

Net income declined 87 percent to $1.15 million from $9.19 million in 2014.

Last year, the company said it was putting new store development on the back burner while it focused on making its restaurants more profitable. “That hasn’t changed,” Subway said in a statement on Tuesday.

“The outlook for 2016 is more optimistic based on the terrific feedback we received from our guests about our culinary improvements and exciting new menu offerings,” the company said.

Still, Subway is feeling more pressure from traditional fast-food chains. McDonald’s Corp. is luring back customers with an all-day breakfast push and aggressive discounts, such as offering two sandwiches for $5. To fight back, Subway just started promoting a buy-one-get-one-free sandwich deal in the morning during May.

The Milford, Connecticut-based chain had a tumultuous 2015. DeLuca, the co-founder and chief executive officer, died in September, putting the company in the hands of his sister, Suzanne Greco. In November, former spokesman Jared Fogle was sentenced to more than 15 years in prison after pleading guilty to child-pornography charges, capping a scandal that had rocked the sandwich chain for months.

In December, the company named former Coca-Cola Co. veteran Joseph Tripodi as its global chief marketing officer, a sign it’s looking to revamp its image. Subway’s longtime “Eat Fresh” slogan lost cachet in an industry where most every chain now touts its ingredients.

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