Back in 2011, Subway became the largest restaurant chain in the world, dethroning McDonald’s and opening almost 34,000 locations around the globe in the process. In the years since, the company’s outposts have climbed to over 44,000 worldwide.
Oh, how the mighty have fallen. Now, just five years since Subway clinched the top spot, the Connecticut-based sandwich chain has announced a 4.3 percent revenue drop in a recent franchise disclosure document. According to a report from Bloomberg on Tuesday, the company opened 911 new restaurants in the U.S. last year, but also closed 877—a significant decline from the 313 franchises Subway netted in 2014.
The closings may only be a drop in the bucket for Subway, but 2015 was the second straight year the company’s revenue fell, and those 877 failed locations could hint at larger problems on the horizon. Bloomberg says fast-casual chains like Panera Bread have been eating into Subway's territory recently, and old rivals like McDonald’s are also starting to fight back with “aggressive discounts.” Last year, fast-food restaurants Burger King and Arby’s reported same-store sales growth of 7.9% and 7.6%, respectively, far exceeding the industry average sales growth of 2.3%.
In light of its recent woes, Subway is continuing to slow new store development, instead choosing to focus on making its established locations more profitable.
“That hasn’t changed,” Subway told Bloomberg in a statement. “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.”
All eyes have been on Chipotle this year (the Mexican fast-food chain posted a multi-million dollar first quarter loss last month), but Subway has been steadily heading toward disaster, too. The company suffered a PR nightmare last year when its former spokesman, Jared Fogle, was sentenced to 15 years in prison for sex crimes. And despite the company’s image as the health-conscious lunch choice, studies have shown that Subway is, in fact, no healthier than fast-food purveyors like McDonald’s.
"We found that there was no statistically significant difference between the two restaurants,” Dr. Lenard Lesser, public health scholar, said in a statement to the New York Daily News in 2013. “[P]articipants ate too many calories at both.”
Correction: An earlier version of this article stated that Subway closed 877 of its 911 new restaurants in 2015. The company closed 877 restaurants in general last year, resulting in a net growth of 34 stores.