Market Overview

Subway's Turnaround Plan Is In The Works

Subway's Turnaround Plan Is In The Works

Subway fired 300 people at its headquarters but a source close to the matter told Restaurant Business the decision was not based on any financial reason.

What Happened

Subway's new CEO John Chidsey fired hundreds of workers to foster a sense of urgency to do more and reverse seven years of poor performance, according to Restaurant Business. The CEO told employees slashing hundreds of jobs is the right move to foster a more "entrepreneurial" spirit and help the chain return to its roots as the successful "old Subway," according to a source.

According to Restaurant Business, police were dispatched to Subway's headquarters to ensure a mass departure was orderly and the layoffs haven't been posted to an online database, as is mandated by the federal WARN Act.

Layoffs in restaurant chains ahead of a turnaround is common, most notably seen at McDonald's Corp (NYSE: MCD) in 2015. Some of the successful turnaround stories in recent history include Domino's Pizza, Inc. (NYSE: DPZ) which started a campaign appropriately named "we suck!" in 2010.

Why It's Important

Restaurant consultant John Gordon told Restaurant Business Chidsey's decision to fire hundreds of workers could result in "fresh faces" and "new blood." This is exactly what the company needs to have a greater chance of succeeding in a turnaround.

Chidsey's turnaround plan faces some opposition from a frustrated franchisee base. The CEO wants to prioritize digital ordering as part of a turnaround plan and will launch a buy-one-get-one-free offer for all digital orders next month. The people on the ground don't want to continue discounting items which could impact their profitability, according to Restaurant Business.

Related Links

Subway Continues To Shed Stores, Execs

Subway Franchisees Reportedly Hate New CEO's Promotional Stance


Related Articles (DPZ + MCD)

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