To jump-start remodels in the U.S., Subway has launched a multimillion dollar grant program that will cover about one fourth of the cost of a lower-cost remodel for aging stores.
As of Monday, the Milford, Conn.-based sandwich chain said nearly 5,400 operators had applied for the grant, which covers 25% of remodel costs.
While the grant program applies for the premium Fresh Forward overhaul, Don Fertman, Subway’s chief development officer, said most operators are using the grant money to pay for a less expensive remodel introduced last year called Fresh Start.
The grants, which are under review, will be divvied out on a priority basis over the next year. Each owner will get roughly $10,000.
“We’re expecting 5,000 [Fresh Start remodels] in the next year and half in the U.S.,” Fertman told Nation’s Restaurant News during a phone interview on Monday.
The grant program is the second incentive Subway has dangled before operators to encourage them to remodel stores.
Last year, the company launched Fresh Start, which costs about $40,000. The less expensive remodel includes a floor overlay, new lighting fixtures, upgraded sandwich assembly bins, Subway’s three-year-old redesigned logo and new wall artwork.
The floor overlay allows owners to reduce the cost of the remodel significantly, as ripping up and replacing existing flooring was one of the most expensive elements of the Fresh Forward plan, Fertman said.
Most consumers will never know the difference between the Fresh Forward and Fresh Start looks because most of the key Fresh Start changes are consumer-facing, he said.
Going forward, Fertman said the Fresh Forward plan will likely be reserved for new construction stores. Ground up locations cost between $200,000 and $300,000, depending on the market.
To date, nearly 1,300 Subway restaurants globally have adopted the Fresh Forward or Fresh Start designs. Of those, 101 stores are Fresh Start restaurants and 454 are Fresh Forward restaurants in North America, the company said.
After bringing down the remodel costs last year, Fertman said company leaders looked for other options to incentivize franchisees: “What do we do to encourage more people to do remodels?” Fertman said.
As of Monday, 5,352 operators had applied for grants to help with costs for the Fresh Start program, he said.
“They will get the $10,000 grant,” Fertman said, adding that the qualifications are basic.
Operators must show that they are “running restaurants in compliance with brand standards,” said the 38-year Subway veteran.
“We’re very excited that we’ll have these additional remodels to add to the 1,300” completed to date, he said.
As systemwide closures, Fertman and company spokesman Kevin Kane said closing and relocating locations are part of the company’s ongoing transformation program.
“There will be closures as part of [Subway’s market] optimization plan,” Kane said.
The world’s largest restaurant company, by units, saw U.S. locations drop 4.3%, or a net loss of 1,110 restaurants in 2018, according to Nation’s Restaurant News upcoming 2019 Top 200 census.
The company has no projections on how many closures or relocations will occur this year.
For a 54-year-old company, Fertman said downsizing and relocations are inevitable as population centers and real estate costs change over time.
“It will be ongoing for the life of Subway,” he said.
Also, ongoing will be the remodels.
The goal, Fertman said, over time is to have “every single restaurant” in the system refreshed in some manner – from adding the new company logo to a complete overhaul.
Subway declined to provide any data on how the store remodels are impacting sales. However, Fertman said store enhancements are positive -- economically and emotionally.
“This Fresh Start is giving a fresh start to our sandwich artists, to our franchise owners and to our guests,” he said. “It’s a fresh start of a new era of Subway.”
The 100% franchised company has about 24,800 restaurants in the U.S.
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