- Subway opened in the 1960s and has grown to become one of the world's largest fast food chains.
- The chain saw sales decline in 2015 and things changed after a scandal involving pitchman Jared Fogle.
- Despite closing thousands of sub shops, Subway was able to sell itself to Rourke Capital this week.
In recent years, Subway restaurants have faced public relations problems, including growing pains, declining sales and legal troubles from former publicist Jared Fogle. Sandwich companies have closed hundreds of stores across the U.S. in recent years to battle allegations that their tuna isn't tuna at all.
But it wasn't always like that. During the 80s, 90s, and early 2000s, Subway expanded rapidly and became the world's largest fast food chain in terms of number of stores.
Despite recent problems, Subway was able to sell itself to Rourke Capital this week.
The first Subway was actually called Pete's Super Submarine.
Nuclear physicist Peter Buck and college student Fred DeLuca opened Pete's Super Submarine in 1965 in Bridgeport, Connecticut.
On its first day, the store sold 312 sandwiches that cost less than $1 each.
In 1968, the two founders rebranded the store and named it Subway. By 1974, the company had 16 of his stores throughout Connecticut.
By 1981, Subway had 200 locations across the United States, with another 100 opening the following year.
At the time, the chain was known for the BMT, which was marketed as the “biggest, meatiest, tastiest” sandwich, and the snack that eventually became the 6-inch sandwich we know today.
Because it was relatively easy to acquire Subway franchises, the company easily grew through the '80s and '90s.
It is one of the cheapest brands to franchise in the fast food world, resulting in rapid expansion both within the United States and internationally. The chain charges 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, focusing on franchising in non-traditional spaces.
Subway opened restaurants at gas stations, truck stops, rest areas, and even convenience stores. The “everywhere, everywhere” mentality has enabled rapid expansion.
In the '90s and early 2000s, as health became more of a priority for many Americans, Subway promoted itself as a healthier alternative.
Subway had always promoted itself as a healthy fast food option, but as the country became increasingly diet-focused, the company emphasized its health benefits.
In 1997, Subway ran a campaign promoting its seven low-fat sandwiches and comparing them to burgers and tacos from other fast food chains.
By tapping into the priorities of many Americans, Subway overtook McDonald's in 2002 to become the largest restaurant chain in the United States by number of stores.
Subway also released another health-focused campaign with Jared Fogle, who claims to have lost over 200 pounds eating Subway.
In 2000, Subway introduced Jared Fogle to the United States. Mr. Fogle used to weigh 425 pounds, but he lost much of that weight by eating Subway sandwiches, he said.
Fogle was often seen in commercials lifting up his old pants to show how much weight he had lost.
The campaign was very successful, with sales increasing by 20% after the first commercial aired.
Many of the chain's problems date back to Fred DeLuca, who ran it from 1965 to 2015, company officials said. He ran Subway with firm control, surrounded by employees who loved and feared him.
DeLuca devised a complex Subway franchise system and gave him final say over how the company was run. For years, DeLuca has been the glorious center of the Subway universe, reaching near-godlike status for many franchisees and employees. He founded a secretive and complex multi-billion dollar company that made sure no one knew Subway the way he knew Subway.
Source: Insider
But in 2014 everything started to change. That year, Subway's sales began to decline.
In 2014, Subway's sales fell 3%, and competition from chains like McDonald's, Jimmy John's, Potbelly, and Panera didn't help either.
Subway's multi-store expansion suddenly became a problem.
The subways were getting too big and too fast.
Rather than focusing on location, the company focused on number of restaurants. As a result, restaurants opened within blocks of each other, creating competition within the same company.
“I think their concern 10 years ago was just adding more stores,” a two-store franchisee told Business Insider in 2017. DeLuca, one of Subway's founders, was “obsessed with having as many stores as possible, and he accomplished that.”
“People have opened up to us in all aspects,” the franchisee said. “That was definitely an issue.”
Subway suffered a major setback in 2015 when its former boss Fogle pleaded guilty to sex with a minor and distributing and receiving child pornography.
In November of the same year, he was sentenced to nearly 16 years in prison.
Subway immediately severed ties with Mr. Fogle and removed all references to him from its website and social media accounts.
In 2016, for the first time in its history, Subway closed more stores than it opened in the United States.
Revenue decreased from $11.5 billion in 2015 to $11.3 billion in 2016.
In response, the company closed stores, reducing the number of stores worldwide by 359.
This trend continued in 2018, when the company closed 1,108 Subway stores in the United States.
In early 2018, the company said it expected to close 500 stores in 2018, but ended up closing more than 1,100 stores.
In 2019, Subway's sales fell $210 million from the previous year to $10.2 billion, and the company also closed 1,000 stores.
In 2019, John Chidsey was brought on board to turn the company around. Chissey was Burger King's CEO in the early 2000s and was known for cutting costs at the chain before selling it to 3G Capital in 2010.
Mr. Chissey used the same strategy at Subway when he became CEO, people said, laying off employees and pushing through deals to bring customers to stores, but ended up alienating some franchisees. That's the result.
Like other chains, it suffered a significant drop in customers in the early days of the COVID-19 pandemic, forcing it to change the way it served customers.
It also had fewer drive-thrus than its competitors, making it difficult to accommodate customers who wanted to keep their distance.
In 2021, rumors began circulating that Subway was considering selling itself. Although the company later denied the news, concerns began to grow among franchisees.
In a 2021 open letter to Elizabeth DeLuca, one of the company's owners, a group of franchisees urged her to turn the business around.
They claimed that Subway denied their demands for high-quality tuna and vegetables and cannibalized sales by opening too many stores.
Around that time, Subway also raised startup investment costs for new franchisees. Existing franchisees, on the other hand, were subject to higher royalty fees and stricter restrictions on how their stores operated.
In 2021, the New York Times published a report stating that no tuna DNA was detected in Subway's tuna sandwiches.
Subway has been protecting tuna for many years.
Earlier that year, Subway was hit with a class-action lawsuit that claimed its tuna was made from a “mixture of various formulations.” According to the suit, this led to cheaper Subway fares.
Over the past two years, Subway has begun a complete overhaul of its menu, adding new ingredients and breads. The company added meat slicers to 20,000 stores this year.
The company invested $80 million and installed meat slicers in 20,000 restaurants in nine months.
Before introducing the slicer, Subway had been rolling out artisan breads, upgraded soups, new meats and dressings since 2021. It is branching out further from the classic build-your-own sandwich by introducing standardized sandwiches as part of the chain's “Eat Fresh Refresh” initiative. ” marketing campaign has been launched in his 2021.
The company claims that the menu innovation led to an increase in sales.
Earlier this year, the sandwich chain announced its 10th consecutive quarter of sales growth, including the highest average weekly unit sales in North America in the second quarter of 2023. Global same-store sales increased 9.8% year over year. Digital sales in the first half of 2023 increased by 11.1%.
Source: Insider
During sales negotiations earlier this year, Fogle returned to the Subway spotlight in March when he became the subject of a true-crime documentary.
The imprisoned former subway pitchman was the subject of an in-depth documentary on the True Crime Channel ID that shows how federal authorities pursued Fogle for years without arresting him. The series revealed how Fogle led a double life. He was a subway guy by day and a child predator by night.
After weeks of speculation, Subway announced it would sell to Rourke Capital. The private equity firm owns Jimmy John's, Dunkin', Arby's and Buffalo Wild Wings.
On Thursday, August 24, Subway announced that it has entered into a definitive agreement to be acquired by an affiliate of Rourke Capital. The transaction amount was not disclosed.
Rourke is best known for building an empire of fast food brands including Jumba, Arby's, Sonic Drive-In, and Dunkin'.
“This transaction reflects Subway's long-term growth potential and the substantial value of our brand and franchisees around the world,” Subway CEO John Chissey said in a statement. “There is,” he said.
