Claire Corlett

Fish Food, Fish Tanks, and More
The Rise And Fall Of Subway

The Rise And Fall Of Subway

With more than 42,000 restaurants in over 100 countries,
Subway has the most locations of any fast-food chain on the planet. And at first, that sounds like a sign of a thriving sub giant. However, Subway is anything but. Subway’s closed thousands of stores in the last three years and saw a 25% fall in
business from 2012 to 2017. So what happened? The chain began as Pete’s Super Submarines in Bridgeport, Connecticut, in 1965. Three years later, cofounders Fred DeLuca and Peter Buck rebranded
it to simply Subway. Announcer: Subway’s famous
giant foot-long sandwiches are made right before your
eyes, the way you want ’em. Len Van Popering: What
was so compelling then and still is today about Subway is really an open-kitchen format. In many ways, they really pioneered that and the ability to
customize your sandwich. Narrator: The brand redefined fast food with fresh ingredients
that customers could see. Compared to other fast-food
chains at the time, it felt healthy. And it worked. By 1981, there were 200
locations across the US, and soon after, Subway went international. Joel Libava: In the late ’70s, and in the ’80s, and in the ’90s, everyone knew about Subway. I mean, they were everywhere. They’re still everywhere. Narrator: That’s Joel Libava,
an expert in franchising. While each store looks
and smells the same, they’re all independently
owned franchises. Libava: The format is pretty simple. You buy a franchise, you get trained, they help you secure a location. They help with a grand opening, and you’re open. You’re open for business. Follow the several-hundred-page
operating manual, do the advertising, and customers will come in. Narrator: Not only were
Subway franchises successful, they were, and still are, one of the cheapest chains to franchise. It costs between $116,000 and $263,000 to open a Subway franchise. Compare that to opening a McDonald’s, which costs up to $2.2 million. Because Subways were easy to open, the number of stores skyrocketed. Between 1990 and 1998, store locations rose from 5,000 to 13,200. And in that same period of time, gross sales rose by about $2.1 billion. Subway’s success continued
into the early 2000s. At a time when obesity was
rising rapidly in America, Subway continued to market itself as a healthy alternative to fast food. Kate Taylor: One of
their biggest successes for sure was the Jared Fogle story. Everyone remembers those ads, where it’s him in those huge pants where he’s showing how he
lost all of this weight. And that just made them so much money, and it really made people think about Subway as a really
great health brand. It was one of the biggest advertising wins that any chain’s had in recent decades. So that was a huge, huge
part of their brand. Narrator: Subway carried
Fogle’s success story for nearly a decade. But by 2008, the world was suffering from the effects of the Great Recession. And for many Americans, hunting for deals replaced the
obsession with weight loss. So Subway changed up its message. In March 2008, it
introduced a new promotion that would come to define the chain. ♪ Five ♪ ♪ Five dollar ♪ ♪ Five dollar footlongs ♪ Narrator: By August 2009, as other restaurant chains were struggling through the Recession, the
$5 footlong had pulled in $3.8 billion in sales for Subway, a 17% jump in US sales
from the year before. But even the best deals run their course. ♪ Five dollar ♪ ♪ Five dollar footlong ♪ Narrator: Starting in 2014, Subway’s sales began steadily dropping. Behind the scenes, many of the reasons for Subway’s success had turned on them. Quiznos was once Subway’s
main competition, but tons of sub chains, like Jimmy John’s, Firehouse, Potbelly, and Jersey Mike’s, and fast-casual chains like Panera, were offering seemingly
fresher and healthier options. And they started stealing market share. Taylor: They were competing
against people who bring in fresh produce every day. A lot of Subway locations only bring in fresh produce
once or twice a week. Narrator: On top of that, fast-food chains that had been around as long as Subway were coming up with healthy
alternatives of their own and getting creative with new menus. Taylor: More and more
fast-food chains really want to have that innovation pipeline where they’re bringing something
out new almost every month. Fast-food places are looking for ways to bring in new customers, drive traffic, and Subway has not tried to do that in the same way other places have. Narrator: But other fast-food chains weren’t the only competition
for Subway franchises. With Subway’s franchising
model making it so easy to open locations, stores
inevitably started opening up around the corner from each
other in lucrative markets. Take downtown Manhattan, for example. Within a 15-minute walk in
less than half a square mile, there are 10 Subway locations. And these locations in close proximity began cannibalizing each others’ sales. Libava: The Subway franchise
agreement, the contract, it says they can open anywhere. There is no protected territory. So franchisees really have no say-so in where the other
franchisees are going to open. It’s a problem. Narrator: And Subway
corporate wasn’t stopping it, because the company benefited from a high number of locations. More locations meant more franchising fees and high royalties to Subway corporate, which diminished the effect of falling sales from a single location. Taylor: When franchisees’
sales are kind of slipping, as long as they’re staying open, it doesn’t necessarily hurt Subway as much as it would some other chains. If everyone’s kind of,
like, chugging along, like, opening new locations,
then they can kind of keep on keeping on, and it’s not gonna be the end of the world for
the corporate office. Narrator: Franchise
owners, on the other hand, took the hit. In 2012, each Subway franchise generated an average of $482,000 a year. Four years later, that number had slipped to $422,000 a year. For comparison, the average annual revenue of a McDonald’s franchise in 2016 was $2.6 million. And to make matters worse, Subway would lose the face of its company. In 2015, the man who had embodied Subway’s “eat
fresh” mission was charged with possession of child pornography and having sex with minors. Subway cut ties with Fogle, and he was sentenced to 15
1/2 years in federal prison. Taylor: And the Jared Fogle
thing kind of basically went from a huge positive to huge liability. Like, the worst things possible that your brand could be associated with. Narrator: All of these things created the perfect storm for Subway. And soon, locations started to close. In 2016, Subway closed
359 stores in the US. It was the first year the
chain closed more locations than it opened. In 2017, that number was over 800, and by the end of 2018, over
1,000 locations had closed. With all these sour ingredients, it’s hard to imagine
Subway could bounce back. But the chain is certainly trying. In 2017, Subway launched
its Fresh Forward program, starting with remodeled stores. The revamped locations
featured new menu boards, WiFi, USB ports, updated
furniture, and music. Libava: I will give Subway credit. They’re doing something interesting. They are offering grants where, if a franchisee applies
and everything’s in line, they can get up to $10,000
towards remodeling. Narrator: By the end of 2020, over 10,000 locations will have
this new restaurant design. But Subway says food is its next priority, and it’s backing it up with
an $80 million investment in updated menu items. Subway’s partnered with
the media company Tastemade to develop hundreds of new menu ideas, like the Green Goddess Tuna Melt and the Southern Style French Dip. In 2018, the chain introduced
its cheesy garlic bread, its most successful promotion
in the last five years. And in 2019, a line of ciabatta sandwiches and Halo Top milkshakes hit stores. Van Popering: Historically,
Subway would evaluate about six or seven new
menu items per month, but we’ve set up a process
and invested in capabilities where we’re literally testing at least 100 new menu items every month. Narrator: As for whether
or not all these menu items and revamped designs will
stop shuttering stores and dropping business,
only time will tell. Taylor: They need to figure out who they want their customer to be. I think it’s really an
uphill battle for them. But if they kind of go back to the basics, think about what people want, ask people what they want and think about it a
little bit more innovation, that’s kind of going to
be a good start for them.

100 comments on “The Rise And Fall Of Subway

  1. i'll tell you what's wrong with subway….1) the sandwiches aren't very good…..2) the sandwiches should cost $1.79……3) they hired that chester jared……so…subway is gross all the way around

  2. I was super excited when I heard about subway – I love deli style sandwiches! Went once – realised all the ingredients were cheap and horrid – reformed meat – such a let down. Never went back.

  3. As per usual the corporation's addiction to $$ prevents them from protecting their franchises. American corporations do not have the DNA to protect those who crate the winning product or service. Its all about getting as much $$ from the machine even if you destroy it in the process. All for today nothing for the future.

  4. you forgot when they got caught lying to the public about the size of their "Footlongs" and the plastic in their chicken breast.

  5. Quality is shit! Every subway I’ve gone to has been garbage. Stale bread, mush tomatoes, brown lettuce, etc. it’s not worth eating anymore. There are far better sub shops than this crap.

  6. Get some quality ingredients…
    Or we'll continue to go to Jersey Mike's, Jason's Deli, Firehouse, and everywhere else that that's better tasting, but most important, higher quality food.

  7. I can get a nice TBone steak, and a jug of ice tea for $10 at my supermarket, go home , and grill it, for the price of and a soggy sandwich, and a cookie. PLus is doesn't have 1000gr of salt to raise my blood pressure. I stopped eating fast food, and in a month my BP went from 150 down to 117 without all the salt. Threw my BP pills in the trash. These places are killing folks slowly.

  8. I buy a sub combs sandwich with drink and coke and only bacon xtra and it would come out to $16 . Wack it’s good but not that good. I just go to a actual restaurant with fresh ingredients

  9. It amazes me how people in US can believe those sandwiches are healthy (just because adverts said so… Pure puppets of marketing)

  10. I think healthy got to a new level with vegans and people really into gyms and nutrition. Plus millennials are not really in the classical fast food culture, often preferring Instagram ready brands, like Starbucks.

    So Subway really really has some catching up to do, because if they don’t their future is grim!

  11. Is it just subway under performing could it not be the case that other competitors improved their game? As is suggested here. But not just other chains. How about food trucks, independent sandwich makers and other foods? In the US. Depends town to town I suppose.

  12. SOOO i use to work for Subway in my early youth during the early 2000s… and during that time when i use to work for them the prices were reasonable for their sandwiches, but, eventually, the SUBS got wayy to expensive.

  13. The over charging of franchise fees, overcharging franchisees for rent, going to processed instead of fresh, and also many many piss poor owners

  14. What Happened Its Easy To Find Out…..Look at Todays Modern day People…..There FAT…There SLOBS…OVERWEIGHT….Love There GREASY FOOD….WTF…Would today's FAT FUCKS wanna eat healthy For…😅🤣😂

  15. Subway start hiring immigrants that spoke poor English and they are really suck at customers service. My family had stop going to subway since 2016.

  16. dumb tards…..jack up the price and then go little with the meat and ingredients…..haven't been to one in years went in yesterday and order a roasted chicken breast and i thought the mother forgot to put in the chicken breast and just gave me a veggie sandwich but lone and behold the chicken breast was damn smaller then the bread and it cost 7 bucks for a 6 inch..ridiculous..last time…

  17. I go to subway all the time in my town. I have no complaints. I get a footlong, a bag of chips, and a large drink for a decent price and it always tastes good. Idk why so many people complain about it.

  18. I'm fairly sure I've heard that their subs aren't all too healthy. Even when talking about stuff like fat content (in the dressings), I think it's a similar thing as with McDonald's salads; sounds light, but is just as heavy as the rest of the menu. Of course, you may get some extra vitamins and all from the veggies, but I'm not sure that makes it worth it. Especially if it's not even fresh.

  19. One important truth – bread rarely makes a sandwich but it sure as hell can ruin a sandwich. Until they make better bread their subs will just taste cheap. I mean Bread should not taste stale when it is baked that morning. Just gross sometimes

  20. Jared and stupid management who ignored reports of his activity…Will never eat their shit sandwiches again.

  21. Look guys I worked at Subway and I can tell you this… What happen to Subway? The Indians!!!!! There so greedy!!!!!!!!! Less veggies and meat!!!!!! And then charge you for more as in what it used to be!. That's what happen to Subway

  22. It takes 10 minutes for the idiots behind the counter to make your sub. Why bother going through that chaos. Instead of 3 people on the line passing the sub down for toppings and checkout, you have complete chaos with the workers.

    Go to Jreck Sub in my area and you’ll see a kick ass operation. Line is 20-30 people long and you don’t wait more than 5 mins to check out.

  23. I haven't ate at a subway in over 15 years and Im ok with that…👌
    In my opinion the food is junk compared to other sub places.

  24. The one I go to I get a foot long for $9.30 and it has Italian bread teriyaki chicken lettuce onions tomatoes pickles chipotle sauce

  25. I mean….

    I prefer Subway over ANY other fast food place…at least I can add all my veggies/double protein AND still make my body feel like it got SOME nutritional value while not hurting my wallet.

  26. 2008 changed everything
    Subway and Penn Station and other restaurants experienced the same thing
    The incredibly shrinking sandwich.
    Subway sandwiches are good but super cheap on meats and cheeses
    Penn station sand ware half the size they were.
    You can’t pick up a pound of bacon anymore because most packaged bacon is 12 ozs now not 16

  27. They failed at renewing the brand, and offering a new image to it. It became boring, and doesnt reflect the actual todays market. And yeah Jared ruined their image too.

  28. They stopped 5 dollar footlongs that's what happened..they're the McDonald's of sub shops..shitty food but people will eat it if it's cheap

  29. Never liked a Subway sandwhich. Just felt like huge waste of money that i could have spent on something good instead.

  30. In principle I have always disagreed with Subway's skimpy meat and cheese portions but I will still eat there in a bind. Which isn't often.

    A regular 5" Junior sub at WaWa's has more meat on it that a Subway regular 12".

  31. I can't afford to eat at Subway anymore. $5 for a 6-inch that probably doesn't even fill me up, and I'm a petite woman. I can do way better than that for $5 at a million other places. I'll eat there when they have deals like the Subway at the mall near me did this $2.50 6-inch sub of the day thing for a few months once time.

  32. I don't even understand why is there a menu, Also with different prices and yet you still have to pick every ingredient yourself, and what's better is that at the end you end up paying more for some fckn reason. I HATE subway

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