The rise and fall of Subway, the world's largest fast-food chain

  • Subway, the largest fast-food chain in the US and in the world, opened in the 1960s and quickly expanded in the following decades.
  • Successful ad campaigns with Jared Fogle — the man who said he lost over 200 pounds while eating Subway sandwiches — and the "$5 footlong" jingle have contributed to sales throughout the years.
  • However, the company took a turn in 2014 when sales started to decline.
  • It had a public-relations crisis on its hands when Fogle was arrested and charged with having sex with minors and distributing and receiving child pornography. He was sentenced to nearly 16 years in prison in 2015.
  • In 2019, Subway closed over 1,000 locations nationwide, with more closures announced for 2020.
  • Visit Business Insider's homepage for more stories.

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.

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.

Keep reading to learn how a company that was on the rise for decades suddenly took a turn for the worse.

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.

It was relatively easy to buy a Subway franchise, so the company easily grew throughout the '80s and '90s.

Subway is one of the cheapest brands to franchise, with startup costs of $116,000 to $263,000 to open a Subway.

For comparison, it costs between $1 million and $2.2 million to open a McDonald's.

As a result, Subway expanded quickly, both in the US and overseas.

Subway opened its 5,000th restaurant in 1990, as the company focused on opening franchises in nontraditional spaces.

Subway opened restaurants in gas stations, at truck stops, at rest areas, and even in convenience stores. Its "anywhere and everywhere" mentality allowed it to expand quickly. 

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.

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 that by 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.

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.

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.

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."

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 pornography.

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.

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.

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.

More closures were announced for 2020, and time will tell how the company bounces back in the wake of the coronavirus.

As of 2020, Subway has 22,226 locations in the US.

Like other chains, Subway saw a huge decline in customers at the start of the coronavirus pandemic and was forced to change how it served them. The company even started to sell grocery items at more than 250 of its US locations.

The chain has fewer drive-thrus than its competitors — 600 compared to McDonald's 13,000 — making it harder to serve customers wishing to keep their distance.

Subway restaurants opened to customers in June with added health and safety measures. In September, some franchisees voiced their concerns that Subway wanted them to return to business as usual.

But Subway CEO John Chidsey previously told Forbes he was optimistic about the company's future. He said the company's performance in China indicated business had bounced back.

"This shows that, with time, you can recover," he said. "It will be different all over the world, but Asia gives me hope. I feel good about Subway."

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