How California’s minimum-wage law could shrink the Subway sandwich chain to its smallest size in decades

Subway shrunk its sandwich chain in the US by 443 stores last year, a surprise downsizing that experts said could continue as the chain’s California shops face an increased minimum wage.

The fast-food giant closed a total of 733 US stores in 2023 while adding 396 locations and reacquiring 79 stores among other activity, according to a regulatory filing late last week. The net total of restaurants dropped to 20,133 US stores from 20,576 a year earlier, the filing shows.

That’s worse than what CEO John Chidsey had predicted at a Yahoo Conference in November just weeks before the end of the calendar year, when he said he anticipated Subway would close between 300 to 400 US stores while also adding 200 to 300 locations in other areas of the country, resulting in a net loss of only 100 stores.

“We’ll be treading water in the US at worst,” Chidsey said.

Instead, 2023 was Subway’s eighth straight year of shrinking its store count since it hit a peak of 27,000 in 2015. Having weathered a slew of woes — including the sex scandal embroiled ex-pitchman Jared Fogle and lawsuits over alleged fake tuna and its footlong subs being an inch short — Subway is now operating its fewest stores since 2005.

The threat of further closures hangs over 2024, according to John Gordon, a restaurant analyst at Pacific Management Consultant Group — and a major reason is the increased labor costs in California, he said.