Why Subway Is Closing Another 500 U.S. Stores

April 25, 2018, 3:08 PM UTC

Feeling the need to improve its store fleet amid intense competition in the sandwich industry, Subway is planning to close 500 U.S. locations this year, according to Bloomberg News.

Subway restaurants are small in size, but ubiquitous. The chain is the largest in the U.S. by store count of any quick-service chain with nearly 26,000 locations, well above the 14,000 McDonald’s (MCD) restaurants in this country. This has long been a point of pride for the company.

But as Subway faces more intense competition from everyone from a stronger McDonald’s to Panera Bread to Starbucks (SBUX), the company is finding it preferable to have nicer restaurants even if that means fewer of them. And competition isn’t limited to direct competitors—everyone from Target (TGT) to Walgreens (WBA) has been adding take-out sandwiches to their food offering.

“We want to be sure that we have the best location,” Subway Restaurants CEO Suzanne Greco told Bloomberg News in an interview. “Store count isn’t everything.” The 2018 closings will come on the heels of similar moves in the last two years. A Subway spokeswoman told Fortune the company expects “having a slightly smaller, but more profitable footprint in North America” but with far more stores overseas.

The company, owned by Doctor’s Associates, has a 53-year history, but has more recently hit turbulence. According to Technomic data cited by Bloomberg, Subway’s U.S. sales fell 4.4% last year, compared to a 3.4% increase at McDonald’s, that chain’s best performance in years. Subway recently unveiled a new loyalty program offering $2 off as part of its turnaround plan, with the goal of getting existing customers to come by more regularly.
That plan also includes adding stores outside North America, Subway told Bloomberg. And Subway has also been ramping up its tech, adding a mobile phone app last year and adding touchscreen kiosks in its stores. There too, Subway is facing stiff competition: McDonald’s mobile app has 20 million users in the United States, while Panera was an early adopter of mobile payments.

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