The rise and fall of Subway, the world’s biggest food chain

With 43,945 sandwich shops in 110 countries, Subway has become the world’s most ubiquitous restaurant chain, posting armies of “sandwich artists” in more American outposts than McDonald’s and Starbucks combined.

Yet at the dawn of its 50th birthday, all is not well in the land of Jared and jingles about $5 footlongs. Subway’s U.S. sales last year declined 3 percent, or $400 million, falling faster than any other of America’s top 25 food chains. The mega-deli was also knocked back to America’s third best-selling food chain for the first time in seven years.

Subway ascended over the last several decades on the back of broad American tastes, offering a healthy alternative for eaters leery of fast food, and at prices that made it unstoppable during the Great Recession. Even First Lady Michelle Obama praised Subway during a visit last year for “working to get kids excited about eating their vegetables.”

 

But the chain’s fast-rising rivals, like Chipotle Mexican Grill and Firehouse Subs, are beating Subway at the game it helped create, offering seemingly fresher, healthier, build-your-own meals.

Diners increasingly say they want to know their meat has been cut fresh, not peeled off wax paper; their meal heated by steamer, not microwave.

That’s led to what analysts say is one of the sub empire’s biggest threats yet: What Americans see as healthy has evolved. Subway hasn’t

 

“The ‘Subway fresh’ has lost its appeal with consumers, because to them fresh has evolved to mean something very different,” said Darren Tristano, executive vice president of industry researcher Technomic. “More people have money to spend, and they’re choosing to spend a little bit more on better concepts where they get a better product. . . . Subway’s strategy has only been to open more stores, and ultimately those stores just cannibalize each other.”

 

Milford, Conn.-based Subway’s problems run close to those of fellow food king McDonald’s, the sagging-sales chain now launching a turnaround because of “challenging industry dynamics” and changing tastes.

 

But in some ways, Subway’s money-making challenges look even sharper than those of the Golden Arches. The average Subway sold $437,000 worth of subs, sodas and cookies last year, the smallest haul in half a decade, and about a fifth as much as the typical Mickey D’s, which pulls in $2.4 million per store.

Tricia Hetherington, the company’s director of research and development, said in a statement, “We’ll continue to evolve our reasonably priced, fresh, customizable sandwiches and salads to better meet our customers tastes and needs.” Subway, which is privately run and closely held, would not comment further..

Breaking out of Bridgeport

Subway debuted as Pete’s Super Submarines in Bridgeport, Conn., in the summer of 1965, when a Brooklyn-born 17-year-old named Fred DeLuca borrowed $1,000 from a family friend, a doctor named Peter Buck. De­Luca, an aspiring doctor who is now worth $2.6 billion, hoped slinging sandwiches would help him pay his way through medical school.

The duo slogged through several slow years of sandwich-
making until, in 1974, they started selling franchises under a new name, Subway. (One theory: The old name, on radio ads, sounded confusingly like “Pizza Marines.”)

In the decades that followed those first shops, Subway franchises have expanded, yeast-like, onto what seemed like every street and strip mall in America. By 2013, Subway was opening 50 new shops a week. Today, Subways serves nearly 2,800 sandwiches every minute, data from industry researcher IBISWorld shows.

Still owned by Doctor’s Associates, the founders’ holding company, Subway has opened inside hundreds of U.S. colleges, malls, military bases and other, less-predictable locations: a car showroom in California, a Goodwill thrift store in South Carolina, a church in Buffalo.

At 1 World Trade Center, a Subway housed in an American-flag-adorned trailer was hoisted floor by floor to serve construction workers building Freedom Tower. Franchise owner Richard Schragger, who beat out nine competing bidders for the honor, served hot dogs and ice cream along with the subs.