Subway continued to slow its rate of closures last year, but it still closed more than 400 restaurants in the U.S. in 2023, according to new data from the company’s franchise disclosure document.
The Miami-based sandwich giant finished 2023 with 20,133 U.S. locations, its lowest number of restaurants since 2005.
It was the lowest number of locations since 2016. Yet it was the eighth straight year of closures for the chain, whose operators have been closing more locations than they’ve opened since 2015, when Subway peaked at more than 27,000 restaurants.
Subway remains the most prolific restaurant chain in the U.S., with about 3,700 more locations than No. 2 Starbucks and 6,600 more restaurants than No. 3 McDonald’s.
But those closures have lost Subway its status as the world’s largest restaurant chain by unit count to both of those brands.
Revenue at Subway, however, increased 10.3% to $971.9 million last year, according to data from the FDD.
But 40% of that revenue growth came from contributions and discounts from the company’s vendors that sell various ingredients and equipment to franchisees.
Subway last year generated $100.5 million from vendors, or more than 10% of its total revenue. That was up 70% from the previous year.
Without that revenue, Subway’s total revenue would have increased 6% last year.
Subway’s franchise disclosure documents do not report unit-level financials. But the chain’s restaurants averaged $490,000 in sales per location in 2023, according to data from Restaurant Business sister company Technomic.
That was up 4.3% last year, continuing the chain’s post-pandemic improvement. Average unit volumes are up more than 19% over the past five years. It was also the highest in company history, besting the company’s 2012 average unit volumes of $481,000.
That doesn’t mean Subway’s operators are out of the financial woods: Its 2023 unit volumes were still 25% below where they should be had they simply kept pace with the rate of inflation.
And, its unit volumes are among the lowest of any restaurant chain in the Technomic Top 500 Chain Restaurant Report.
Subway has unleashed a host of new and upgraded menu items in recent years, including a new line of wrap sandwiches and footlong snacks such as a footlong cookie. It’s all been paired with marketing designed to improve unit volumes.
Those unit volumes are key to preventing further closures, as operators that generate more revenues at their existing locations are more able to generate a profit and remain open.
That appears to have worked to some degree, as Subway closed about 600 fewer restaurants than it had averaged between 2016 and 2021.
Subway CEO John Chidsey told the Restaurant Leadership Conference last year that the company expected to close “another 300 to 400 U.S. stores” in 2023, though it expected to open 200 new restaurants.
One thing that has picked up: Sales of stores from one franchisee to another. Operators sold 1,764 Subway restaurants to other operators last year, up from 1,505 the year before and higher than pre-pandemic levels.
That means that more than 10% of Subway restaurants either closed or were sold last year.
Subway is requiring franchisees to remodel their restaurants, believing that spruced-up restaurants are key to the brand’s growth in the coming years. Executives have been encouraging franchisees to sell restaurants if they can’t fund those remodels.
The private-equity group Roark Capital has agreed to buy Subway, a deal that is under apparent scrutiny by the U.S. Federal Trade Commission.
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