'Subway is dying': Battles at HQ are killing the world's largest fast-food chain — and many franchisees are turning against the CEO

  • Subway's public-relations crises and inability to keep up with trends are merely the tip of the iceberg of the company's problems.
  • Franchisees say executives have been slow to innovate and have made decisions that are killing business.
  • Divisions are present in the company's headquarters, as seen with the ouster of the head of US marketing.
  • Three franchisees told Business Insider they thought the chain needed to replace top executives, including CEO Suzanne Greco, the younger sister of the chain's cofounder Fred DeLuca.


Subway is in crisis.

National sales and traffic figures dropped in 2017, according to multiple people with knowledge of the situation, marking the chain's fourth consecutive year of declining sales.

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The 25 best fast-food chains

25. Jet's Pizza

Headquarters: Sterling Heights, Michigan

US sales in 2016: $368 million

Number of US locations: 404

Customer satisfaction rank: 24

Value rank: 35

Brothers Eugene and John Letts opened the first Jet's Pizza restaurant in Michigan in 1978 and since then, it's spread to 18 different states across the US.

Jet's claims not to scrimp on ingredients. And its pizzas aren't dirt cheap. On average, customers can expect to spend $8.05 on a meal at the chain. Its signature style, the deep-dish square pizza, comes in many varieties or customers can choose to create their own from scratch

Photo credit: Facebook.com 

24. Jamba Juice

Headquarters: Frisco, Texas

US sales in 2016: $547 million

Number of US locations: 828

Customer satisfaction rank: 16

Value rank: 37

Founded in 1990 in a California beach town, Jamba Juice was years ahead of today's ubiquitous green smoothie and healthy living trends and remained a favorite for loyal customers over the years.

The chain's menu has expanded sine then, now offering Greek yogurt or acai berry bowls with soy milk. There's also plenty of new fruit and vegetable smoothies.

Photo credit: Getty 

23. Potbelly Sandwich Shop

Headquarters: Chicago, Illinois

US sales in 2016: $446 million

Number of US locations: 454

Customer satisfaction rank: 25

Value rank: 16

When Potbelly opened in 1977, it was an antique shop. The young couple who ran it decided they wanted to serve lunch to their customers and the store evolved into a local lunch spot. In 1996, entrepreneur Bryant Keil bought Potbelly and turned it into a franchise; he stepped down as CEO in 2008 and is no longer involved.

Today, not only do all the Potbelly stores serve sandwiches and fresh cookies, but each location has its own potbelly stove

Photo credit: Getty 

22. Jimmy John's Gourmet Sandwiches

Headquarters: Champaign, Illinois

US sales in 2016: $2.22 billion

Number of US locations: 2,620

Customer satisfaction rank: 30

Value rank: 15

At Jimmy John's, customers can't get enough of the chain's signature subs and "freaky fast" delivery service. Jimmy John Liautaud opened the first shop back in 1983 to avoid pressure from his father to perform a stint in the Army. Papa Liautaud lent him $25,000, and if the restaurant turned a profit the first year he wouldn't have to enlist. Sure enough, the gourmet sub business took off and he slowly expanded across the country — it now has the most amount of franchises in our top 25 list.

Jimmy John's franchises commit to sustainability by partnering with suppliers who reach high standards of sustainable and ethical food practices. The chain also employs local businesses to build and maintain each JJ's store.

Photo credit: Getty 

21. Firehouse Subs

Headquarters: Jacksonville, Florida

US sales in 2016: $683 million

Number of US restaurants: 1,037

Customer satisfaction rank: 8

Value rank: 6

This Florida-based franchise was founded in 1994 by a pair of brothers who were former firefighters and sought to bring the enthusiasm and appetite of the firehouse to their restaurants.

Serving bold-flavor sandwiches piled high with quality meats and cheeses, this popular chain is in growth mode, having opened in Canada and now expanding into Mexico

Photo credit: Getty 

20. Cold Stone Creamery

Headquarters: Scottsdale, Arizona

US sales in 2016: $362 million

Number of US restaurants: 905

Customer satisfaction rank: 4

Value rank: 30

It's not just ice cream parlor, Cold Stone Creamery serves up smoothies, cakes, and shakes also. The ice cream is freshly made every day in the stores and blended on a frozen granite stone, which keeps the temperature exactly the same.

Cold Stone also supports community projects, working closely with Best Buddies, a non-profit that helps people with disabilities to secure jobs and live independently.

Photo credit: Getty 

19. Tim Hortons

Headquarters: Oakville, Canada

US sales in 2016: $760 million

Number of US restaurants: 683

Customer satisfaction rank: 44

Value rank: 36

This Canadian chain, known for its coffee and donuts, has also become a favorite in the US. It was set up in 1964 by its namesake Tim Horton, a former National Hockey League legend in Canada.

Horton started off by selling coffee and donuts, which cost 10 cents each, but by the '80s he added muffins, cakes, soups, and chili into the mix. These are now staples on the menu.

The cafe also offers Cold Stone Creamery ice cream in certain locations.

Photo credit: Reuters 

18. Schlotzsky's

Headquarters: Atlanta, Georgia

US sales in 2016: $338 million

Number of US locations: 362

Customer satisfaction rank: 15

Value rank: 18

The average customer order totals just over $10 at Schlotzsky's, according to Technomic. That's pricey for a sandwich shop, but the higher-quality offerings keep customers satisfied. Schlotzky's serves up a mix of classic and specialty sandwiches as well as offering four different types of mac n' cheese, flatbreads, soups, salads, and gourmet pizzas.

After more than 40 years of operation, Schlotzsky's now has locations in 35 states and three foreign countries.

Photo credit: Facebook.com

17. McAlister's Deli

Headquarters: Ridgeland, Mississippi

US sales in 2016: $593 million

Number of US restaurants: 387

Customer satisfaction rank: 22

Value rank: 14

The Mississippi-based deli specializes in local and regional American favorites, from The New Yorker with its corned beef, pastrami, and Swiss on marbled rye to the Spicy Southwest Chicken with guacamole, fire-roasted corn, and chipotle ranch sauce.

It's well-known for its Sweet Tea drink, which is brewed in store and comes with free refills.

Photo credit: Facebook.com

16. Five Guys Burgers and Fries

Headquarters: Lorton, Virginia

US sales in 2016: $1.4 billion

Number of US locations: 1,284

Customer satisfaction rank: 14

Value rank: 62

The cult favorite started in Washington, DC, in 1986 when former bond trader Jerry Murrell and his family opened a burger joint — named after Murrell and his four sons — with the goal of cooking hamburgers and fries using the best quality ingredients.

The chain is off-limits to those with peanut allergies, as all fries are cooked in peanut oil and there are barrels of old-fashioned peanuts lining each shop's dining area. 

Photo credit: Reuters 

15. Cinnabon

Headquarters: Atlanta, Georgia

US sales in 2016: $163 million

Number of US locations: 836

Customer satisfaction rank: 12

Value rank: 33

Cinnabon is all about cinnamon. This popular chain was the brainchild of a father and son duo, who opened the first bakery in Seattle, Washington in 1985.

It's is known for its signature warm cinnamon roll, which comes with a rich cream cheese frosting and is sold in various different sizes, but there's also cinnamon flavored donuts, crispy pastry straws, and an expansive coffee menu.

Photo credit: Getty 

14. Ben & Jerry's

Headquarters: South Burlington, Vermont

US sales in 2016: $58 million

Number of US locations: 172

Customer satisfaction rank: 5

Value rank: 8

Best friends Ben Cohen and Jerry Greenfield originally had plans to create a bagel company but found that the bagel-making equipment was too expensive. Instead, they purchased an old gas station and turned it into a scoop shop.

The brand celebrated 39 years in business this March and is now known for inventive ice-cream flavors like Red Velvet Cake, Phish Food, and Cherry Garcia. Each employee that works for the company is given three tubs of Ben & Jerry's a day.

Photo credit: Getty 

13. The Habit Burger Grill

Headquarters: Irvine, California

US sales in 2016: $298 million

Number of US restaurants: 172

Customer satisfaction rank: 10

Value rank: 21

West Coast chain Habit Burger Grill first set up shop in 1969 in Santa Barbara, serving burgers with freshly-baked buns. Since then, the chain has swelled to 175 restaurants in 10 states across the US. It's also added chicken and tuna burgers, salads and shakes to its menu, and was named the best-tasting burger in America in 2014, according to a survey by Consumer Reports, beating competitors like Shake Shack, In-N-Out, and Five Guys.

Photo credit: Getty 

12. Marco's Pizza

Headquarters: Toledo, Ohio

US sales in 2016: $489 million

Number of US locations: 770

Customer satisfaction rank: 21

Value rank: 13

This cheap pizza joint first opened in Toledo in 1978. Today, it has 800 restaurants across the US, the Bahamas, India, and Puerto Rico.

The menu has grown too, and Marco's now offers sandwiches, hot chicken wings, and salads, along with multiple sauces to go with each dish.

Photo credit: Facebook.com

11. Zaxby's

Headquarters: Athens, Georgia

US sales in 2016: $1.7 billion

Number of US locations: 825

Customer satisfaction rank: 32

Value rank: 46

Started by two childhood friends aiming to alleviate the lack of great wing joints in their Georgia hometown, Zaxby's is known for its craveable wing sauces and crinkle-cut fries.

Photo credit: Facebook.com

10. Jersey Mike's Subs

Headquarters: Manasquan, New Jersey

US sales in 2016: $825 million

Number of US restaurants: 1,187

Customer satisfaction rank: 11

Value rank: 41

CEO Peter Cancro bought his first Jersey Mike's at the age of 17 after spending his summers working at the sandwich shop in Point Pleasant, New Jersey. A high school senior at the time, Cancro was able to buy the shop after he took a loan from his school football coach at the time.

Jersey Mike's is now known for its handcrafted subs loaded with high-quality ingredients. In 2016, Nation's Restaurant News announced that it was the fastest growing restaurant chain in the US.

Photo credit: Facebook.com

9. Culver's

Headquarters: Prairie du Sac, Wisconsin

US sales in 2016: $1.3 billion

Number of US restaurants: 605

Customer satisfaction rank: 23

Value rank: 29

At Culver's, diners can expect to spend a little more than they would at a run-of-the-mill burger joint, with average orders totaling around $10, according to Technomic. But it might just be worth it for the chain's frozen custard and ButterBurgers, the signature burger that gets its name from the glaze of butter that coats the bun.

This year, Culver's was ranked in second place on Restaurant Business' annual list of America's favorite chains.

Photo credit: Facebook.com 

8. Jason's Deli

Headquarters: Beaumont, Texas

US sales in 2016: $702 million

Number of US restaurants: 260

Customer satisfaction rank: 9

Value rank: 12

Nutrition is a priority at Jason's Deli, which serves sandwiches, salads, pastas, soups, and desserts. It has eliminated artificial trans fat, most artificial MSG, and all artificial colors, dyes, and flavors from its food over the past 10 years. It even claims that its soft-serve is made with 100% natural ingredients.

Photo credit: Facebook.com 

7. Papa Murphy's Pizza

Headquarters: Vancouver, Washington

US sales in 2016: $885 million

Number of US locations: 1,537

Customer satisfaction rank: 7

Value rank: 2

This pizza franchise started in 1995 after the merger of two pizzerias, Papa Aldo's and Murphy's Pizza. Its pies are "take and bake," meaning they are made to order and cooked in the customer's oven at home.

Customers can pick from the signature pies like Pepperoni and Hawaiian, or they can create their own and choose the type of dough, sauce, and toppings. Papa Murphy's scores top marks for customer satisfaction on value, coming in at second place in the total list of 25 restaurants.

Photo credit: Facebook.com

6. Pollo Campero

Headquarters: Dallas, Texas

US sales in 2016: $111 million

Number of US restaurants: 68

Customer satisfaction rank: 13

Value rank: 4

With only 68 stores, Pollo Campero is by far the smallest chain on the list. But diners adore the casual chicken spot, touting it as a solid value.

Pollo Campero, initially founded in Guatemala in 1971, stands out from other "better chicken" chains, such as Wingstop and Raising Cane's, for its authentic Latin flavors and impeccable service — meals are served on real plates with real silverware.

Photo credit: Getty 

5. Krispy Kreme

Headquarters: Winston-Salem, North Carolina

US sales in 2016: $758 million

Number of US restaurants: 307

Customer satisfaction rank: 6

Value rank: 17

In 1937, Krispy Kreme founder Vernon Rudolph used a recipe given to him by a New Orleans chef so that he could make and sell doughnuts to local grocery stores. As the fresh-baked donut smell wafted into the streets, customers began requesting to purchase the delicacies directly, so Rudolph cut a hole in the wall to open his first retail location.

In October 2015, the chain opened a new store in North Carolina which resembled a coffee shop, Business Insider reported. Six months later, it was bought by JAB, the parent company of coffee brands including Caribou Coffee, Peet's Coffee and Tea, and Keurig Green Mountain, for around $1.35 million.

Photo credit: Getty 

4. Whataburger

Headquarters: San Antonio, Texas

US sales in 2016: $2.2 billion

Number of US locations: 806

Customer satisfaction rank: 17

Value rank: 11

Whataburger founder Harmon Dobson's goal was to create a burger so big that customers would have to use both hands to hold it. It would be so good that at first bite they would declare, "What a burger!" Thus, in 1950, Whataburger was born.

What started off as a burger stand, almost 70 years ago, now has 700 restaurants in the US. Although it lost out to In-N-Out Burger in Business Insider's taste comparison, it's still a favorite of many in the south.

Photo credit: Getty 

3. Chick-fil-A

Headquarters: Atlanta, Georgia

US sales in 2016: $6.7 billion

Number of US restaurants: 2,062

Customer satisfaction rank: 2

Value rank: 3

This Southern favorite is the largest food chain on our list and comes in first place for total sales in 2016.

The fried-chicken chain diversified its menu last year, adding a kale and broccolini salad, a premium coffee line, new sauces, and a barbecue-bacon sandwich in an effort to take on competitors. If you want to know what's best to order, check out Business Insider's guide.

Photo credit: Getty 

2. Raising Cane's Chicken Fingers

Headquarters: Baton Rouge, Louisiana

US sales in 2016: $741 million

Number of US restaurants: 306

Customer satisfaction rank: 3

Value rank: 5

Raising Cane's Chicken Fingers focuses on only one menu item: first-rate chicken strips. But what truly keeps fans addicted is Cane's signature tangy sauce, a secret blend that customers can't get enough of.

Raising Cane's has a high customer satisfaction rating and it's benefiting the chain; sales grew by 31% in 2016.

Photo credit: Facebook.com

1. In-N-Out Burger

Headquarters: Irvine, California

US sales in 2016: $807 million

Number of US restaurants: 325

Customer satisfaction rank: 1

Value rank: 1

In-N-Out Burger scores highest on customer satisfaction and value, making it the winner overall.

California's first drive-thru hamburger stand, In-N-Out Burger first opened in 1948. Nearly seven decades later, the menu remains simple, offering only five items. But loyal customers know that if they want to expand their options, they can order off the not-so-secret menu — it features items such as a protein style burger and grilled cheese.

In-N-Out can only be found on the West Coast, but there's a good reason for that. Since the chain prides itself on serving top-notch ingredients free of additives or preservatives, all stores must be within 300 miles of the distribution facilities. Sorry, East Coasters.

Photo credit: Getty 

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The sandwich chain's US store count fell by 909, losing almost three times as many locations as the year before. One franchisee estimated that up to one-third of Subway's locations could be unprofitable, citing internal conversations and national sales numbers.

As trends change, Subway struggles to attract customers as a compelling healthy option — especially after scandals surrounding former spokesperson Jared Fogle

However, conversations with more than 30 current and former franchisees, employees, and others with knowledge of Subway's current predicament revealed problems that went beyond larger restaurant-industry trends.

According to insiders, the factors driving customers away from the chain are deeply tied to internal conflicts within the company. With disagreements between corporate headquarters and franchisees, franchisees say they're stuck bearing the brunt of the damage.

As a result, franchisees are calling for major changes at the company. Three franchisees from different US regions told Business Insider they thought the company needed new leadership — specifically, a new CEO.

"I have sadly watched my peers close their doors only to see Subway resell their investment to others with no benefit to them," one franchisee told Business Insider. "It is inevitable that I will do the same in the near future."

She continued: "I wish we had an advocate. This was my retirement, and now, well, it's over."

The search for a turnaround

Business Insider spoke with more than a dozen current and former franchisees, as well as people who had worked in Subway stores and corporate offices, regarding issues at the chain.

Many spoke on the condition of anonymity, as the company does not allow franchise owners or workers to speak with the media. As locations close and many franchisees find themselves in conflict with corporate, many expressed concerns that the company's leadership team wasn't capable of turning the chain around.

In April of last year, Subway made a major hire when it appointed Karlin Linhardt, a former McDonald's executive, to be the chain's vice president of marketing in North America. Linhardt had already been working with the company on the brand's transformation as a senior consultant for the firm Accenture. At the time, he was seen as critical to improving Subway's damaged reputation.

Subway needed the reputation boost.

In 2015, the chain cut ties with its iconic spokesperson Jared Fogle after he was arrested on charges related to paying for sex with minors and possessing child pornography. Customers were increasingly skeptical of food quality after scandals like a social media campaign that was launched against a chemical used in Subway's bread. In general, when people thought "fresh" food, they had a growing number of fast-casual options to replace Subway. 

Linhardt was not, ultimately, the savior the chain needed. The executive was out at the company less than a year later, parting ways with Subway in mid-December.

"Karlin has tendered his resignation and Subway accepted it," a representative said at the time. "We wish him well in his future endeavors. Our focus remains on Subway's brand transformation and our North America marketing team will continue their innovative work."

Trouble at the top

The New York Post, which broke the news of Linhardt's departure, reported that he had been driven out in a franchisee revolt over a revamped $5 footlong deal. More than 400 franchisees signed a petition protesting a new $4.99 deal that had been Linhardt's brainchild.

Subway confirmed to Business Insider that some franchisees refused to offer the deal when the national promotion kicked off this month.

Others with knowledge of the situation, however, told Business Insider that Linhardt was pushed out of the company by other executives with conflicting strategies for Subway's future. According to these franchisees, the issue was not one specific deal — or franchisees' response to it — but that certain executives wanting Linhardt out.  

One franchisee upset by Linhardt's departure said the executive "probably did more than most of the executives have done [in decades] in two years."

Linhardt led Subway's search for a new creative agency for the America's, announcing that the company had picked Dentsu Aegis Network in early December. Over the summer, he led a campaign of having Subway partner with music festivals to convince younger customers to "reconsider" how they see the brand. 

However, Linhardt was making an aggressive push to make significant changes at the company in a manner that was at odds with what executives — specifically its CEO, Suzanne Greco — wanted.

Most of the menu innovation under Greco's leadership had emphasized health and updating recipes to remove artificial ingredients. Meanwhile, Linhardt pushed hard for Subway to advertise more options, even if they weren't exactly healthy, such as the chain's limited-time Reuben sandwich, which was reintroduced in November. 

While some franchisees rejected the new $4.99 deal, most critical franchisees who spoke with Business Insider said their biggest issue with Subway was the multi-year emphasis on low prices even as ingredient costs increased, not this specific promotion.

Because Subway is 100% franchised, corporate offices arrange food-supplier deals and coordinate national advertising. If Subway's marketing efforts fail to drive sales or force franchisees to rely on nonprofitable items to drive traffic, locations can quickly start losing money. 

Nevertheless, both franchisees who supported the $4.99 deal and others who opposed it expressed frustration with Subway's executives, all the way up to Greco. Multiple franchisees said there were major concerns regarding Greco's ability to lead the company.

"She surrounds herself with people who won't necessarily challenge her," one franchisee said. According to him, the "vast majority" of franchisees believed Greco needed to be replaced based on discussion among other franchisees and franchisee groups. 

The younger sister of the chain's cofounder and longtime CEO Fred DeLuca, Greco started working in Subway locations in her teens and joined the chain's corporate staff immediately after college. She has worked at Subway ever since, primarily in research and development — an area where some franchisees feel Subway has fallen short over the years.

"A lot people in the industry feels that Suzanne is not qualified to be the CEO of the company," another franchisee said. "She tells us like she is doing us a favor while franchisees are losing everything they own."

"Franchisees in my market are hurting," a third said. "I think there is going to be some major change, I'm just not sure who will go."

However, replacing Greco is complicated by the fact that Subway is a private company — and half of it is owned by her family, with ownership split evenly between the-late DeLuca's widow, Elizabeth, and his co-founder Peter Buck. 

Dysfunction that has turned 'flat-out evil'

Subway insiders pointed to conflicting interests between franchisees and corporate headquarters — as well as executives' unwillingness to address problems this created — as the crux of the company's struggles.

Subway headquarters grew store count for years, despite plummeting traffic.

Traffic fell by 25% from 2011 to 2016, according to a memo obtained by The New York Post. However, Subway continued to open hundreds of stores every year until 2016, when store count dropped. Subway has 25,835 shops open and operating in the US, according to a representative. 

Franchisees say that, at the same time, executives failed to provide promised support or listen to franchisee concerns on issues such as intense discounts cutting into profits, subpar food quality, and other factors that contributed to losing customers. 

"I can't name one franchisee that I know that's currently happy with their store," a franchisee from a Southern state said. "My store is currently 40% down in profits this year ... We are all jumping through hoops for Subway corporate."

"These guys are not on the same team," Mark Shearer, an attorney who has represented several Subway franchisees in arbitrations against Subway and the chain's regional development agents, told Business Insider.

Shearer has represented and advised roughly 20 franchisees over the past few years. In his view, DeLuca's ambitions as CEO helped create a structure that took advantage of franchisees for corporate offices' benefits. 

"This level of dysfunction has risen to the level of being flat-out evil," Shearer said.

Opposition to corporate, such as by complaining about too many stores opening nearby, can result in "Mafia-style" revenge techniques, according to Shearer. He added that development agents tasked with inspecting locations will pick up on minor infractions as justification to revoke the franchisees' license and take away the location.

"When I meet with a new client, that person is always in a state of extreme fear," Shearer said. "They fear reprisal for telling their stories."

A Subway representative said this is "absolutely not true," and that franchisees are the "backbone of our business." 

"As part of our franchise agreement, every restaurant is regularly inspected to ensure they are meeting our high standards, including food quality and cleanliness, to ensure we deliver the best customer experience and maintain the integrity of our business," the representative said. 

Too big to survive

One issue that many said was representative of a disconnect between headquarters and franchised locations is the chain's massive size.

"I believe that Subway was more interested in the opening of stores," a former corporate employee said. "That is where they made the most money — the franchise fee."

DeLuca "made his money from the franchise fee," the person said, adding: "The more stores he opened, the more dollars he made."

Many other franchisees agreed that opening stores was a top priority for corporate — and that Subway had gone too far in its quest to become the biggest chain in the world. Even franchise owners who said they personally had positive sales figures suggested certain stores needed to close to revitalize the brand.

"I saw the handwriting on the wall with the focus being on opening as many units as possible, even if it angered franchisees," Scott Godwin, who owned three Subway locations in Virginia until the early 1990s, told Business Insider.

"I feel their concerns 10 years ago was just opening up locations," a franchisee with two locations said. The person said DeLuca "was obsessed with having the most locations, and he achieved it."

Subway's franchised model means that the company's corporate offices don't operate any of the chain's restaurants. This structure gives the company an incentive to open more locations to increase franchisee fees and royalties.

According to Subway's chief development officer, Don Fertman, the chain conducts "extensive site reviews when needed using a proprietary mapping system and demographic data to determine the best locations" when opening new locations.

"Our focus is on market realignment in North America," Fertman said in an email. "We want to make sure we have the right locations with the right franchisees in every market. We will continue to help relocate restaurants to better locations as demographics change and look for new sites primarily in non-traditional venues to ensure we are convenient to our customers."

This isn't the first time Subway has been accused of cannibalizing sales by opening too many locations.

"Now we faced accusations that Subway would sell a franchise to any old hick, to folks who couldn't read English," DeLuca wrote in Inc. Magazine in 2013. "Reporters started suggesting that franchisees couldn't make a living operating our stores. We had all these people complaining to the Federal Trade Commission."

According to DeLuca, the problem was solved by creating a "site-review system" and allowing franchisees who opposed stores opening in the area to voice their concerns. DeLuca died in 2015, two years after receiving a diagnosis of leukemia and handing over the chain's day-to-day operations to Greco.

Yet critics say Subway's cannibalization issues are far from over. Shearer said he was "shocked" by how disorganized Subway's headquarters were when it came to expansion during an arbitration for a franchisee who said Subway opened up a location nearby, taking customers away from his shop. 

"It's like throwing darts at a dartboard and saying, 'We're going to open up locations there today,'" he said.

Conflicting interests

The aggressive expansion just represents one way in which Subway's corporate interests may not always line up with franchisees' concerns.

It isn't uncommon for a restaurant chain's franchisees to protest certain plans for corporate, especially ones that cut into profit margins in the short term. But with hundreds of locations now closing, Subway franchisees' complaints are backed with evidence.

Franchisees' basic argument is that food and labor costs are going up while profits and traffic are falling.

Franchisees are only allowed to use food from designated suppliers, with most locations only getting one or two shipments of produce a week

"This in unacceptable," one franchisee said. "I want to pay more for a better-tasting lettuce and I have been shut down. Today's consumer is extremely sensitive to preservatives and desire cleaner labels."

According to franchisees, being restricted to buying from Subway's suppliers and offering national promotions makes it difficult to turn a profit. Subway, they say, needs to make some major adjustments to the current system. And, franchisees say that changes aren't coming fast enough. 

Among the gripes: Subway has failed to roll out a long-anticipated loyalty program. Locations have failed to add drive-thrus or other changes designed to boost sales or speed up service. And while rivals including Arby's have executed comebacks recently by adding creative menu options like gyros, Subway's menu has remained mostly unchanged aside from efforts to remove artificial ingredients.

The lack of R&D is an especially enraging point for some franchisees because Greco led the department before becoming CEO.

"Our leadership team is fully focused on transformation of the brand," a Subway representative said. 

'Subway is dying'

Subway has made substantial investments in tech in recent years, including establishing a digital team in 2016 and launching a new app in 2015. Last year, Subway introduced a new Fresh Forward design — though some franchisees have been reluctant to make the financial investment in the redesign. 

"Our goal is to strengthen the Subway brand in each market to ensure that Subway Franchisees have the greatest opportunity to successfully grow their businesses," a Subway representative said. 

Not every franchisee is unhappy with the system. 

"When we took over our Subway several years ago it was faltering in sales. We have since almost quadrupled those sales," said one franchisee who believes better management could improve struggling locations. "We did it by being super involved with the community, by being super outgoing, by being super organized, by being super friendly, by being super generous … you get the idea."

According to franchisees and people with experience in Subway's corporate offices, Subway needs to make some major changes and resolve conflicts with franchisees if it wants to survive. 

"I can tell you without a doubt, Subway is dying," a manager said. "Business has plummeted over the past few years, the product has dropped in quality, and the overall mood between owners and staff has dropped, but the pushback between owners and corporate offices has increased immensely."

But, for franchisees who can't manage the turnaround, it's difficult to find a way out. 

"If we want to sell our stores, Subway corporate must approve the buyer ... and they only approve existing franchisees to purchase stores," the franchisee from a Southern state said. "Existing store owners don't want more stores, so we are stuck."

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SEE ALSO: People are ditching Subway, and franchisees expect a wave of store closures — here's what went wrong

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