Subway revenue down 4.3 percent; net income takes a dive

By Kevin Zimmerman

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“Fresh is what we do” may be the Subway restaurant chain’s motto, but its financial situation appears to be getting stale. The Milford-based chain’s revenue dropped 4.3 percent to $1.11 billion last year, according to the company’s franchise disclosure document, with net income down 87 percent to $1.15 million from 2014’s $9.19 million.

Famed for its seemingly inexhaustible expansion, Subway opened 911 new U.S. stores last year … but also closed 877, leaving it at year’s end with 34 new outlets as opposed to 313 newly-opened restaurants in 2014. As of December 31, 2015, the company said it had sold 36,204 franchises, of which 27,128 are currently open and 623 are in development.

The chain has certainly had a rough go of it over the past several months. Other fast-food restaurants have redoubled their efforts to promote the ingredients in their own wares as fresh. McDonald’s decision to offer breakfast all day has had a major impact. And “fast casual” eateries like Panera Bread have made significant inroads. Indeed, Panera’s first quarter earnings of $685.2 million represented a 5.5 percent increase over first-quarter 2015.

In addition, company co-founder and CEO Fred DeLuca died last September with his sister Suzanne Greco, who had been named Subway president in June, taking over as chief executive officer. Then there was the infamous Jared Fogle case, which ended in November when the longtime Subway spokesman was sentenced to a minimum of 13 years in prison after pleading guilty to child pornography charges.

The chain even had to settle a class action lawsuit over perceived shortcomings in its “footlong” sandwiches, with the result that Subway franchisees must use a tool to measure bread in its restaurants to ensure that they are the 12- or 6-inches advertised. Subway also paid attorneys for the plaintiffs $525,000 for legal costs, as well as $500 to each of the 10 people who led the class action.

Nevertheless, “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 in a statement.

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