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Frank Olito, Mary Hanbury, and Nancy Luna
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- Subway opened in the 1960s and scaled to become one of the largest fast-food chains in the world.
- The chain took a turn in 2015 when sales declined and after a scandal tied to pitchman Jared Fogle.
- Despite closing thousands of sub shops, Subway was able to sell itself this week to Roark Capital.
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In the past few years, Subway restaurants have been dealing with growing pains, declining sales, and a public-relations issue with legal troubles for Jared Fogle, its former spokesman. The sandwich company has been closing hundreds of stores all over the US for the past few years and fighting allegations that its tuna isn't tuna.
But it hasn't always been like this. In the '80s, '90s, and early 2000s, Subway was expanding rapidly, becoming the world's largest fast-food chain in terms of locations.
Despite its recent issues, Subway was able to sell itself this week to Roark Capital.
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The first Subway was actually called Pete's Super Submarines.
Peter Buck, a nuclear physicist, and Fred DeLuca, a college student, opened Pete's Super Submarines in 1965, in Bridgeport, Connecticut.
On the first day, the shop sold 312 sandwiches, each costing less than $1.
In 1968, the two founders rebranded the shop and called it Subway. By 1974, the company had 16 shops throughout Connecticut.
By 1981, Subway had 200 locations across the US, with 100 more opening the following year.
At the time, the chain was known for its BMT — marketed as the "Biggest, Meatiest, Tastiest" sandwich — and its Snak, which eventually became the 6-inch sandwich we know today.
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It was relatively easy to buy a Subway franchise, so the company easily grew throughout the '80s and '90s.
It was one of the cheapest brands to franchise in the fast food world and as a result, expanded quickly, both in the US and overseas. The company charged a $15,000 franchise fee, and startup costs range from $229,050 to $522.300, according to the chain's 2023 Franchise Disclosure Document.
Source: Insider
Subway opened its 5,000th restaurant in 1990, as the company focused on opening franchises in nontraditional spaces.
Subway opened restaurants in gas stations, truck stops, rest areas, and even convenience stores. Its "anywhere and everywhere" mentality allowed it to expand quickly.
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In the '90s and early 2000s, health became more of a priority for many Americans, so Subway marketed itself as a healthier alternative.
Though Subway always marketed itself as a healthy fast-food option, the company emphasized its health advantages as the country became increasingly diet-focused.
In 1997, Subway released a campaign that advertised its seven low-fat sandwiches and compared them with other fast-food chains' burgers and tacos.
By tapping into many Americans' priorities, Subway became the largest restaurant chain by number of locations in the US, passing McDonald's in 2002.
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Subway also released another health-focused campaign with Jared Fogle, who claimed to have lost over 200 pounds by eating Subway.
In 2000, Subway introduced the US to Jared Fogle, who said he used to weigh 425 pounds and lost much of thatby eating Subway sandwiches.
Fogle was often seen on commercials holding up his old pants to show how much weight he had lost.
The campaign was so successful that sales rose by 20% after the first commercial aired.
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During the 2008 recession, as finances became a priority for many US consumers, Subway focused its marketing on the $5 footlong.
Riding off the success of Fogle's ads, Subway launched a new "$5 footlong" campaign with a catchy jingle. The campaign was a response to many Americans' desire for cheaper food options.
By 2011, the company's sales had reached $11.5 billion.
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Company insiders said many of the chain's issues dated back to Fred DeLuca, who ran the business between 1965 and 2015. He ran Subway with a tight grip and surrounding himself with employees who loved and feared him.
DeLuca devised a complicated Subway franchise system that gave him the final say on how to run the compay. DeLuca, for years, was the brilliant center of the Subway universe, nearing godlike status for many franchisees and employees. He created a secretive, complex multibillion-dollar enterprise, and ensured no one knew Subway the way he knew Subway.
Source: Insider
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But everything started to change in 2014. That year, Subway's sales started to drop.
In 2014, Subway's sales declined by 3% — and competition from chains like McDonald's, Jimmy John's, Potbelly, and Panera didn't help.
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Subway's many store locations suddenly became a problem.
Subway got too big, too fast.
Instead of focusing on location, the company focused on restaurant count. As a result, restaurants opened within blocks of one another, creating competition within the same company.
"I feel their concerns 10 years ago was just opening up locations," a franchisee with two locations told Business Insider in 2017. DeLuca, one of Subway's founders, "was obsessed with having the most locations, and he achieved it."
"We had people open up on all sides of us," the franchisee said. "That was definitely a problem."
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Subway experienced a major setback in 2015 when Fogle, the former face of the company, pleaded guilty to having sex with minors and distributing and receiving child p*rnography.
He was sentenced to nearly 16 years in prison that November.
Subway immediately cut ties with Fogle, deleting any mention of him on its site and social media accounts.
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In 2016, for the first time in its history, Subway closed more stores than it opened in the US.
Sales dropped to $11.3 billion in 2016, down from $11.5 billion in 2015.
In response, the company closed stores, and its locations fell by 359 worldwide.
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The trend continued into 2018, when the company closed 1,108 Subway locations in the US.
At the beginning of 2018, the company said it expected to close 500 stores that year, but it ended up closing more than 1,100.
In 2019, Subway's sales dropped $210 million from the previous year to $10.2 billion, and the company closed another 1,000 stores.
In 2019, John Chidsey was brought in to turn around the company. Chidsey had been CEO of Burger King in the early 2000s and was known for slashing costs at the chain before selling it to 3G Capital in 2010.
Insiders said that Chidsey used the same strategy at Subway when he took on the role of CEO – laying off corporate workers and pushing deals to bring customers into stores that ended up alienating some franchisees.
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Like other chains, the chain saw a huge decline in customers at the start of the COVID-19 pandemic and was forced to change how it served them.
Because it has fewer drive-thrus than competitors, it also made it hard to serve customers wishing to keep their distance.
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In 2021, rumors started to circulate that Subway was looking to sell itself. The company later denied the news but unrest starting growing among its franchisees.
In an open letter in 2021 to Elisabeth DeLuca, one of the company's owners, a group of franchisees urged her to fix the business.
They said Subway had denied their requests for higher-quality tuna and vegetables and cannibalized their sales by opening too many locations.
Around that time, Subway also raised the startup investment costs for new franchisees. While existing franchisees were presented with higher royalty fees or tighter restrictions on how to run their stores.
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In 2021, the New York Times published a report stating that it found no tuna DNA in Subway tuna sandwiches.
Subway has been defending its tuna for years.
Earlier that year Subway was hit with a class-action lawsuit claiming that Subway's tuna was made from "a mixture of various concoctions." The lawsuit said this made it cheaper for Subway.
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Over the last two years, Subway began overhauling its menu, adding new ingredients and bread. This year, the company added meat slicers to 20,000 stores.
The company invested $80 million, equipping 20,000 restaurants with meat slicers over nine months.
Before introducing slicers, Subway has rolled out artisan loaves of bread, upgraded soups, new meats, and dressings since 2021. It's evenbranched out from its classic build-your-own sandwichesby introducingstandardized sandwiches as part of the chain's "Eat Fresh Refresh" marketing campaign launched in 2021.
The company credited the menu revamp to a boost in sales.
The sandwich chain said earlier this year that it had achieved 10 consecutive quarters of positive sales, including recording its highest weekly average unit volume in North America in the second quarter of 2023. Globally, same-store sales were up 9.8% year-over-year in the first half of 2023, with a 11.1% jump in digital sales.
Source: Insider
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Amid sales talks earlier this year, Fogle came back into the Subway spotlight in March when he became the subject of a true-crime documentary.
The jailed former Subway pitchman was the subject of anin-depth documentary on true-crime channel ID that shows how federal authorities had pursued Fogle for years, but never made an arrest. The series revealed how Fogle led a double life. He was aSubway rep by day, child predator by night.
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After weeks of speculation, Subway said it was selling itself to Roark Capital. The private equity firm owns Jimmy John's, Dunkin', Arby's, and Buffalo Wild Wings.
On Thursday, August 24, Subway said it had entered a definitive agreement to be acquired by affiliates of Roark Capital. The value of the deal was not disclosed.
Roark is best known for building an empire of fast-food brands, including Jamba, Arby's, Sonic Drive-in, and Dunkin'.
"This transaction reflects Subway's long-term growth potential, and the substantial value of our brand and our franchisees around the world," Subway CEO John Chidsey said in a statement.
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