Subway, Inc., an innovator in the made-to-order sandwich market that grew to 43,000 stores worldwide, is in trouble.
First, its 15-year spokesman, Jared Fogle, was charged with distributing child pornography and repeatedly pursuing paid sex with minors. Fogle rose to national prominence after reportedly losing 200+ lbs. by eating Subway sandwiches, the “fresh and healthy” alternative to McDonald’s and Burger King.
According to Subway’s chief marketing officer, Fogle’s image became woven into the fabric of Subway’s brand and the company owed nearly half of its growth in the past 15 years to his image. Then Fogle was charged with sex crimes.
Fogle cut a deal in early August 2015 with federal prosecutors for the Southern District of Indiana, agreeing to pay $1.4 million in restitution to his 14 victims. The victims, including 8 minors and 4 adults, will each receive $100,000, which will assist them in counseling, housing, education and other needs. Given Fogle’s $15 million net worth, restitution should be no problem. In addition, Fogle is expected to plead guilty to some or all of the charges, which could bring him a maximum sentence of 12 years in prison.
I agree with Subway’s marketing executive: thinking of Subway makes me think of Jared Fogle, the sex criminal. I believe it will take a new, nonthreatening, girl-next-door spokeswoman to erase the Fogle image from my mind.
Secondly, even with Fogle’s pre-scandal assistance, Subway’s sales were precipitously falling. In 2014, Subway’s sales fell by 3% to less than $12 billion, despite opening nearly 780 new stores. Subway’s “fresh and healthy” pitch has been usurped by Chipotle and Panera Bread, which make Subway look like a dinosaur rather than an innovator.
Subway is struggling to catch up by changing its bread recipe and vowing to remove all additives, preservatives, artificial flavors and artificial colors from its food by 2018. Whether the brand can survive two terrible blows remains to be seen.
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