Subway closed over 900 stores this year as franchisees claim promotions have 'decimated' business

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• Subway's US store count dropped by 909 locations in 2017.
• The closures could be just the beginning of a crisis at the chain as franchisees petition against a new $5 footlong deal and traffic declines.
• This is the second year in a row that Subway has closed hundreds of locations.

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Subway is in a downward spiral.

The sandwich chain's US store count dropped by 909 locations in 2017, according to figures that a Subway representative provided to Business Insider. That represents more than 3% of the chain's 2016 US stores.

The chain has 25,835 shops open and operating in the US, according to the representative, compared with 26,744 at the end of 2016.

In 2016 sales at the chain reportedly fell 1.7% and its store count dropped by 359 locations in the US — marking the first time in the company's history that the chain closed more stores than it opened.

Globally, Subway's store count is down 471 locations. The chain has 44,014 shops worldwide, down from its 44,485 stores in 2016.

Andrew Winning/Reuters

The 909 shuttered US locations this year could be just the tip of the iceberg for Subway closures.

Last week news broke that franchisees were protesting the chain's plan to bring back the $5 footlong deal.

On Monday, Subway's head of North American marketing, Karlin Linhardt, resigned from the company.

And traffic has fallen 25% over the past five years, according to an internal memo reviewed by The New York Post.

"The national promotional focus over the past five years … has decimated [us] and left many franchisees unprofitable and even insolvent," petitioners led by Virginia franchisee Mitesh Raval complained in a letter sent to Subway and obtained by The Post.

More than 400 franchisees have reportedly signed the petition, which protests the chain's plans to roll out its famous $5 footlong deal in January.

Subway has struggled to keep up with fast-casual competitors like Panera and Sweetgreen that many see as better suited to meet Americans' swiftly evolving health trends.

"Today, people are ever more educated on nutrition, food sourcing, and ethical holistic business models," Sara Bamossy, the chief strategy officer at ad agency Pitch, told Business Insider. "To create (or to rekindle) loyalty and sales, it is not enough to label something as 'natural' and it’s not enough to be affordably priced."

The company also faced negative publicity from a scandal involving its former spokesman Jared Fogle. Fogle is serving a nearly 16-year prison sentence after being charged with having sex with minors and possessing child pornography. Subway cut ties with him in 2015.

"Subway is in the midst of a massive transformation, and change of this size takes time," a representative for the company said in a statement to Business Insider last week. "Our goal is to strengthen the Subway brand in every market around the world to give Subway franchisees the greatest opportunity to successfully grow their businesses."

The chain is rolling out a new store design, remodeling locations across the US. Subway is also trying to catch up with competitors like Starbucks with an upcoming digitally focused loyalty program.

If you work or have worked at Subway and have a story to share, email ktaylor@businessinsider.com.

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