- Subway is offering a multimillion dollar grant program specifically to help franchisees cover the cost of remodels, according to Nation’s Restaurant News.
- The grant will provide $10,000 to owners and cover about 25% of the remodeling costs for older stores to move toward its Fresh Forward and Fresh Start designs, introduced in 2017 and 2018, respectively.
- So far, about 5,400 operators have applied for the grant. Those applications will be reviewed and chosen based on priority in the next year, though chief development officer Don Fertman told Nation's Restaurant News that they will get the grant.
Subway introduced its Fresh Forward redesign in 2017 as an attempt to modernize dated stores and turnaround hemorrhaging sales. This latest incentive could have big implications. Firstly, it could provide an olive branch of sorts for franchisees during a time when friction has been reported within the Subway system. Not only have operators expressed grievances over cost remodels, but also arbitrary infractions and the $5 Footlong deal.
When McDonald's franchisees expressed grievances about the high cost of remodels, the company responded by extending their deadline. There was a catch. Franchisees that chose to push back their remodels will receive a smaller incentive from the company. According to Restaurant Business, McDonald's contributes 55% of the cost, but will drop that down to 40% to operators who delay the upgrade. Still, such a compromise has helped warm relations between franchisee and franchisor, at least according to CEO Steve Easterbrook.
For Subway, such a nudge could expedite the remodels and provide tailwinds for a company in dire need of some. The chain closed more than 1,000 restaurants in the U.S. last year, about twice as many as originally planned. These closures follow 836 closures in 2017 and 359 closures in 2016. According to Restaurant Business, Subway is now at its smallest footprint since 2011.
Sales are also down. The company's 2018 sales were down 3.6% to $10.4 million, compared to $10.8 million in 2017 and $11.3 million in 2016.
That Subway is focused on remodeling incentives versus expansion is also a positive sign, as some of the company’s troubles are attributable to oversaturation and decline in quality. Restaurant renovations can increase sales between 7% and 20%, according to BFS Capital.
But that doesn't mean a small incentive is a silver bullet. Fertman said the company is aiming to have every location refreshed from having something as basic as a new logo added on up to a complete remodel. The Fresh Start remodels, which cost about $40,000, are a less expensive version of the tech-heavy Fresh Forward redesigns and include new lighting, upgraded sandwich assembly bins, new flooring as well as a new logo and wall artwork.
Even with the less expensive option, reaching every store could be quite a feat. About 555 units in North America have been updated so far and there are about 24,800 Subways in the U.S. alone.