What's Happening?
Subway is implementing new requirements for its franchisees, including extended operating hours and a review process for store closures. Franchisees are now required to keep stores open for 98 hours a week,
up from the previous 91 hours, and to accept third-party delivery services. The company is also launching a nationwide marketing campaign to promote late-night sales, driven by third-party delivery. Franchisees must submit an 'Existing Location Viability Review' before closing a store, which will be evaluated by a committee to determine if the location can be saved, sold, or relocated. This move comes as Subway seeks to slow the decline in its U.S. business, which has seen over 8,000 closures since 2015.
Why It's Important?
The new requirements highlight Subway's efforts to address declining sales and store closures, which have impacted its market presence and purchasing power. By extending hours and leveraging third-party delivery, Subway aims to increase sales and improve unit economics. However, the pressure on franchisees to comply with these requirements may lead to increased operational costs and potential pushback. The review process for closures could slow the rate of store shutdowns, but may also deter franchisees from closing unprofitable locations, potentially leading to financial strain. The success of these initiatives is crucial for Subway's ability to maintain its position as a leading fast-food chain in the U.S.
What's Next?
Subway's nationwide marketing campaign for late-night hours is set to launch soon, aiming to drive sales through third-party delivery. Franchisees will need to adapt to the new requirements, including maintaining high delivery uptime and participating in digital offers. The review process for closures may lead to fewer store shutdowns, but could also result in legal challenges if franchisees are unable to sustain operations. The company's new owner, Roark Capital, will likely monitor the impact of these changes closely, as they have significant implications for Subway's financial stability and growth strategy.
