#160 The Subway System in Austria

After a golden age of expansion in the 1980s, 1990s, and early 2000s, the last decade hasn’t exactly been the best for sandwich chain Subway. A few years ago, Subway had approximately 42,000 restaurants in 111 countries globally, and proudly proclaimed itself the world’s largest fast food chain. In recent years, Subway experienced challenges in many countries and shrunk both in numbers of restaurants and countries. In the United States, the company suffered from serious fallout over its spokesperson Jared Fogle’s conviction as a sex offender, its sales declined, and it had to shut down hundreds of stores year after year. In 2018, the number of store closures even exceeded 1,000. In overseas markets, the picture was a bit more mixed. Subway downsized and withdrew from some, but expanded in other markets. While only a drop in the global bucket for Subway, Germany, for instance, proved to be more favorable territory. Between 2015 and 2019, Subway expanded from 610 to more than 700 stores, and sales increased by about 10 percent to just under EUR 300 million. And what about Subway in neighboring Austria? With less than ten restaurants hardly a major market, Subway seems to be trying hard to be of even less significance. In a market where rival McDonald charges a total of 5 percent in combined franchise and marketing fees, Subway takes more than double from its franchisees – a whopping 12.5 percent. Plus, Subway does not guarantee territorial exclusivity, which sometimes puts franchisees into tough competition with each other – franchisees lose while Subway wins. When one of its Austrian franchisees left Subway in 2019 because of these unfavorable conditions and started an independent sandwich shop, Subway tried to shut its former franchisee’s new operation down via the courts. The action immediately drew the attention of the media, and Subways image – which wasn’t favorable to begin with – suffered even more. At the time of this article, the outcome of the lawsuit was still uncertain, but in Germany, a court had already ruled against Subway in a similar case, and similar outcome was to be expected in Austria.

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