Subway Faces Downsizing Due to California’s $20 Minimum Wage Impact
The Subway chain is experiencing a decline, with 733 American store closures in 2023, influenced by California’s high minimum wage. Despite opening 396 new stores, the overall count decreased by 443. Labor costs are a significant concern, prompting price hikes and reduced operating hours. Private equity firm Roark Capital seeks to acquire Subway for $9.6 billion, subject to FTC review. The Subway chain is facing a downturn, marked by 733 American store closures in 2023 due to California’s high minimum wage impact. Although launching 396 new stores, the net count dropped by 443. Rising labor costs led to price increases and shortened business hours. Roark Capital eyes a $9.6 billion acquisition of Subway pending FTC approval.
By Jack Davis April 29, 2024 at 4:28pm
The Subway chain is shrinking in a trend that could grow now that California’s sky-high minimum wage for fast food workers is in effect.
Subway closed 733 American stores in 2023, according to the New York Post.
Although it added 396 stores and acquired some others, overall the chain’s store count dropped by 443.
Overall, Subway began 2024 with 20,133 American stores. It started 2023 with 20,576 stores.
In November, CEO John Chidsey estimated a net loss of about 100 stores.
“We’ll be treading water in the U.S. at worst,” Chidsey said.
Subway peaked with about 27,000 locations in 2015 and has declined every year since then.
Also, in 2023, unit volumes were 25 percent where they should have been to keep pace with inflation, according to the website Restaurant Business.
John Gordon, a restaurant analyst at Pacific Management Consultant Group, told the Post that the April 1 hike in the minimum wage for fast food workers from $16 per hour to $20 per hour was only going to hurt the restaurant chain.
Is a $20 minimum wage bad?
“They are still hemorrhaging stores,” Gordon said. “Subway is still a troubled brand in the U.S.”
The Post cited sources it did not name as saying labor costs represent 28 percent of a Subway outlet’s costs, which means an increase in wages could cut profits.
“Subway is no longer the most popular chain in the world this year after closing hundreds of stores. McDonald’s has taken the lead with 40,000 stores. Subway and Starbucks follow with 38K and 33K stores each. At a distant fourth is KFC. Pizza Hut beats out Burger King for…” pic.twitter.com/qZnWNxsH07
— Dr. Elden Wayne Whalen III, ShD (@wayne_effect) April 8, 2024
“You’ll see a lot more people deciding to close when their leases expire,” a California franchisee the Post did not name said. “Why would I choose to stay open if I was only scraping by?”
The Post said price hikes of between 7 and 10 percent have been many franchise’s responses to the higher wage.
Some outlets want to reduce the hours they are open, which would cut labor costs.
Private equity firm Roark Capital, which owns Dunkin’ Brands, Arby’s and Jimmy John’s, is trying to buy Subway for $9.6 billion.
The Federal Trade Commission is reviewing the deal.
An Important Message from Our Staff:
We who work here at The Western Journal have fought for years against Big Tech and the elites who want to shut us down and then shut America down.
Make no mistake — nothing will be the same after November 2024. Will you help us fight? Will you help us expose the America-hating elites who will do everything they can to steal this election?
We’re a small group of people fighting to save the country for our readers and for our own family and friends. Can we count on your help?
At this point, Big Tech has cut off our access to 90% of advertisers. Imagine if someone took 90% of your paycheck and there was nothing you could do. They’re trying to starve us out.
Donations from readers like you have literally helped keep our lights on, and we need you now more than ever.
We operate on a shoestring budget, but with that budget, we terrify the globalists. Please help us continue the fight. Stand with us, and we will never surrender.
Thank you for reading The Western Journal and for believing in America.
It is a pleasure to serve you.
P.S. Please don’t let the America-hating left win. Stand with us today!
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
