To Avoid Collapse, Subway Hires Bain To Prepare For Sale

The accelerating demise of Subway, the world’s largest sandwich chain, will one day be just another case study of how to run a once-magnificent business empire into the ground, as Americans quickly abandon five-dollar footlongs.

The New York Post recently uncovered new knowledge about the 52-year old sandwich chain, which has been in a sales slump since 2016, has hired the infamous consultant Bain & Company to “professionalize operations and position the company for a future sale.”

You may remember in the 2012 presidential election cycle, the abundance of campaign ads focusing on former Republican presidential candidate Mitt Romney, who co-founded Bain & Company, detailing the firm’s destructive path of stripping companies of wealth.

The truth about Subway’s fate, well, the capitalist vultures who ‘eat the carcass’ of companies are circling above - waiting to dive into their next feast: footlongs.

Take, for example, the 2005 leverage buyout of Toys ‘R’ Us via Bain Capital, KKR & Co., and Vornado Realty Trust. It has been 13 years since the group of private equity firms loaded up on Toys “R” Us with debt to take it private; however, the plan did not work too well, and the company ceases to exist.

Toys ‘R’ Us filed Chapter 11 bankruptcy protection in the U.S. on September 2017, and at the end of 1Q18 — announced that U.S. operations of the company were, after 70 years, going out of business and liquidated all 735 locations across the country.

What do the world’s largest toy store and restaurant chain have in common? Well, you guessed it, likely similar fates as the walk down Wall Street is not so random, after all.

While neither Subway, nor Bain, would confirm the reports, the New York Post cites two Subway insiders who confirmed the news of a restructuring plan, then the eventual sale of the company.

The recent downturn in Subway has sparked internal feuds with management, along with many of its struggling franchises.

Last month, Chief Executive Suzanne Greco, the sister of Fred DeLuca, the co-founder of the company, retired after 45 Years.

Trevor Haynes was named interim CEO. The Post said Haynes is on a listening tour of stores and franchise owners across America.

“I think hiring Bain signifies that the board needs a professional business organization to give advice so it can change its downward trend,” one Subway insider said.

“They are running out of options that might positively impact the company.”

For the first time in its 52-years of operation, the company contracted in 2016, shuttering 359 US locations, which was the most significant retrenchment in its history. In 2017, the company closed another 800+ U.S. locations, as details emerged that some one-third of shops in the U.S. could be unprofitable.

Same-store sales in May 2018 declined 3 to 4 percent y/y, according to John Gordon of Pacific Management Consulting.

The story gets worse, as consumer traffic collapsed 25 percent from 2012 to 2017, stated a November 2017 internal Subway memo.

Subway insiders told the New York Post that a recent $4.99 foot-long sandwich promotion failed to attract new customers, which was seen as an uncreative last-ditch effort to stabilize rapidly declining sales. In return, the failed promotion severely cut the margins of franchisees, sources explained.

“It’s business as usual, $4.99 and no imagination,” the source added.

“The promotion doesn’t work well in my stores,” one New York store owner told the New York Post. The shop owner has closed four of 10 stores over the last couple of years.

Subway’s 10-person board is comprised of the founder’s two children, who do not want to run the day to day operations and would like to see the company stabilize before the eventual sale, the source said.

“This [hiring someone like Bain] should have been done when Fred was dying,” Gordon said. “The system is worse off now than it was three years ago.”

A Subway spokeswoman said: “The shareholders have expressed their intentions to the employees of the company that they are investing in the future of the company, committed to the company and have no intentions of selling.”

Brand and crisis expert Dan Hill warned there is no hope left in turning around the failing brand from past PR nightmares.

“Subway’s derailment is attributed to many factors including the face of their brand being convicted of child pornography,” Hill, CEO of Hill Impact says, adding that he believes “there may be no way to get its sales back to where they were,” but it will be interesting to see what Bain can do.

As mentioned above, Bain Capital has a knack for throwing large retailer chains into bankruptcy. While that does not seem imminent for Subway, the accelerated demise of the sandwich shop has now been confirmed, with Bain’s vultures circling above ready for the kill.

Comments

tmosley evoila Sat, 06/23/2018 - 14:43 Permalink

Stopped in to Subway the other day thinking I would try out their breakfast sandwiches that I had never tried. Turns out they stopped offering them. A smart move, I think.

Did try one of their double meat wraps. Came with a tiny cookie. Really good stuff. Nice crispy bacon out of their toaster. Thin sliced chicken with just a bit of guac (thanks Jeb!). Enjoyed it.

Only problem is of course that their greedy corporate masters give out a franchise to any idiot with a pulse, meaning there are three Subways within a few blocks of each other even in a fairly rural suburban area.

In reply to by evoila

Save_America1st topspinslicer Sat, 06/23/2018 - 17:01 Permalink

probably no coincidence at all that the Food Babe busted Subway for it's toxic ingredients a few years ago which then went viral.  Plastic compounds used in the bread along with many other chemicals.  She also noted that the Subway's in Europe didn't use any of the toxic chemicals that they use in N. America.  We're being poisoned to death slowly by all fast food chains, not just Subway.  It's chemical warfare used against us with our food supply. (not to mention the drugs and vaccines mixed in as well to really fuck our bodies up). 

Don't stop at ditching Subway...ditch EVERYTHING and do your best to eat the healthiest food you can get and take the time to make your own meals.  Taco Bell, McD, BKing, etc. etc. etc.  All complete nasty toxic shit.  Look at all the morbidly obese people wobbling around stuffing themselves on that poisonous garbage.  Not to mention the little kids who are obese by the time they're 5yrs old because this kind of shit is all they are fed.

The only exercise most people get who live off that shit is the walk from the parking lot and back if they even bother to not go through the fucking drive-thru. 

Subway, Stop using chemicals in your bread.  From 2015:

https://foodbabe.com/subway/

Is Subway real food? 

https://foodbabe.com/is-subway-real-food/

Excerpt: 

The 9 grain wheat bread might look and smell freshly baked but it contains close to 50 ingredients including refined flours, dough conditioners, hidden MSG, refined sugars, etc. Could bread this processed ever be real food? Certainly not, when it includes a chemical ingredient called azodicarbonamide, which is banned as a food additive in the U.K., Europe, and Australia, and if you get caught using it in Singapore you can get up to 15 years in prison and be fined $450,000. Azodicarbonamide is more commonly used in the production of foamed plastics, however, it is allowed in the United States as a food additive, a flour bleaching agent, and a dough conditioner that improves elasticity of bread. The U.K. has recognized this ingredient as a potential cause of asthma if inhaled, and advises against its use in people who have sensitivity to food dye allergies and other common allergies in food, because azodicarbonamide can exacerbate the symptoms. Let’s not forget it only takes 4 or 5 simple ingredients to make REAL whole-wheat bread including flour, yeast, salt, water, and maybe honey.

read this comment below I spotted from the above article...

  1. Pam says:

    February 17, 2015 at 11am

    Warning: This is a true disgusting story. A few years back, I was doing some decorative painting at a friend’s house. She treated my son and I to Subway sandwiches afterwards. Unbeknown to me, my son put his leftover uneaten sandwich into my paint supply bag. Said bag was stored in a closet for a few months before I needed something from it. As I was rummaging through the bag, I came across the half sandwich still wrapped in it’s Subway wrap. My first thought was that “OMG, I could have gotten bugs in my closet” Second thought was “This thing must be so green and moldy and disgusting!” I threw the sandwich into the trash and the wrapping fell away to expose the sandwich. What I saw was more horrifying than the above 2 scenarios!! What was before me was a PERFECT sandwich. Almost AS PERFECT as the day we purchased almost 4 months ago. About the only difference I could see what that the colors of the tomatoes and lettuce were slightly faded. There was no mold, no rot, no breakdown of any kind. Seriously, it was hard as a rock, but other than that it looked just like it did on the day of purchase. It was a fossilized version of it’s former self! Only a non-food food would react like this. Naturally, I’ve never eaten there again. But, strangely, when I retell this story (I’m a hairdresser so my audience is vast lol) people’s reactions shock me. THey are completely grossed out – and then they say some version of “that is sooo gross! But, I love Subway so I’m still going to eat it. It’s one of the healthier choices.” Huh????????

 

In reply to by topspinslicer

GoozieCharlie Yellow_Snow Sat, 06/23/2018 - 17:35 Permalink

In the last year or so, the meats @ S'Way have a ton of MSG added.  I can tell.  I get an awful autonomic reaction to it (it's a rare phenomenon).  But MSG makes your mouth water.  Popeye's, KFC, and now, Subway lead the list.  Most upscale restaurants have gone on the MSG kick.  I swear it's the one thing they teach in culinary school anymore.

In reply to by Yellow_Snow

kiwidor zob2020 Tue, 06/26/2018 - 18:27 Permalink

nature operates an averaging machine in organisations, or collectives of any kind.  whatever you want to call it, progression up the ranks is dictated not by talent, efficacy, strategy or results, but by the appearance of suitability, with all the prejudices that entails. 

so first level supervision gets the most average of the ones below, and so on.  until the CEO, who is usually the most average of the senior management. 

  no psychometric testing or any other method of selection is done with full objectivity.  outliers are ignored, when in fact they're the ideal candidates to select for up-the-chain. 

people turn up for interviews and are rated by the lower-brain of the interviewer.  doesn't matter what the checklist is, reptile brain selects what it likes the look of and the subconscious ticks the desired box, not the appropriate one.

the consequence of this is paradigm concentration , reflected in the language of each layer.

now combine this with mortgage payment obligations. [kiwidor's aphorism is "the larger the mortgage, the lower the functional IQ" ;presto, you have a disfunctional organisation.

no one shall rock the boat.

 

if you want to get ahead, be more average. 

 

In reply to by zob2020

mkkby Team_Huli Sat, 06/23/2018 - 15:36 Permalink

Another infinite growth ponzi.  I feel sorry for the saps who bought franchises. 

That's how these companies make their money.  They charge a huge fee for opening the store.  Then you have to buy their ingredients and follow their rules.  They force you to sell cheap food just to keep up the appearance of growth.  But the little store owner will work his tail off and not break even.

At some point the market for cheap sandwiches is full up and you can't grow any more.  And the debt payments are due.  I would advise anyone thinking about investing in a franchise, think very carefully about how much profit is in a $5 sandwich which takes a lot of labor.

 

In reply to by Team_Huli

GoozieCharlie Goldennutz Sun, 06/24/2018 - 14:43 Permalink

I grew up in a Hunkie /Polak/Italian neighborhood, mid 20th century, with absolutely unequalled cold cuts, locally made, available at a number of small local delis; cold cuts that no cold cut today could ever hold a candle to. 

I never had an issue with the quality of the cold cuts at Slobway. It's the one thing I've always given them credit for.

Judging from these comments a lot of folks (to use Obammy's term) don't consider anything edible unless it's been drenched in Pico de Gayo, slathered in Velveeta, or was served someplace they frequented in that "groovy" college town, that they paid 10 grand/year... just to even be there.

People eating hot dogs, Eckrich sausage, and Bar S bologna, etc. made from ground up chicken vents, cored out cloacas, and turkey wattles and penes ...have their nerve criticizing the cold cuts at Slobway. 

In reply to by Goldennutz