Subway Sandwich Shops is a major fast-food chain. In 2023, it operates over 20,000 restaurants in the United States alone plus thousands more across the globe. However, it’s been losing steam for years now. Subway now has the lowest number of restaurants since 2005 after closing 572 franchises in the United States in 2022. [1] It also closed about a thousand shops in 2021, which is understandable after the COVID-19 pandemic. But the closures began back in 2016, when over 6,500 Subway shops closed, drastically reducing the over 27,000 restaurants in the U.S. in 2015. [2] This year, the once family-owned business was sold to private equity firm Roark Capital. What caused the decline of such a well-known chain?
The History of Subway Sandwich Shops
Subway began as a shop called Pete’s Super Submarines in 1965 in Connecticut, U.S. In 1968, the founders Peter Buck and Fred DeLuca rebranded the shop into Subway, and by 1974, they had 16 franchises across Connecticut. The chain grew rapidly, with 200 locations throughout the U.S. by 1981, plus a hundred more opening a year later. Since Subway was one of the cheapest restaurants to franchise, shops continued to popup through the U.S. and around the world. They also opened shops in more unconventional places like gas stations, truck stops, and convenience stores, leading to the chain opening its 5,000th restaurant in 1990.
As Americans became more health conscious in the 1990s and early 2000s, Subway began to market itself as a healthier alternative to fast food. This branding worked, and in 2002, Subway became the largest restaurant chain with the highest number of locations in the U.S. Part of their marketing included Jared Fogle, who claimed to have lost over 200 pounds by eating their sandwiches. Sales rose by 20% after airing the first commercial with Fogle.
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Insiders blamed many core issues with Subway on the founder, DeLuca, who retired in 2015. He created a complicated franchise system that gave him a final say on all major decisions. And the high number of open restaurants became a problem. DeLuca seemed focused on opening the highest number of shops without much concern about whether their locations were profitable.
In 2014, Subway’s sales dropped by 3%, probably due to competition from other fast-food brands. But their sales suffered even more in 2015 when Fogle pleaded guilty to child sex tourism and the possession and distribution of child pornography. Many people blame Fogle for the company’s decline because of how people associate the two after the successful marketing campaign. But Subway immediately distanced themselves from their previous spokesperson and deleted him from their website and social media accounts. [3] But in 2016, as their sales lowered, they closed 359 stores around the world. The trend of shop closures continued as sales dropped year after year.
The shops faced another major controversy in 2021 when the New York Times reported finding no tuna DNA in the tuna in Subway sandwiches. Subway had been denying allegations against their tuna for years until a class-action lawsuit in 2021 that claimed it was made from “a mixture of various concoctions” to save on costs.
Read: Judge rules Subway can be sued over claims that its tuna sandwiches contain other fish species or animal products
Acquisition and Moving Forward
So, Subway has been overhauling its menu for the last couple of years. This included artisan bread, as well as new meats, soups, and dressings, and new standardized sandwich recipes. The company attributes a boost in sales to this new menu. But on August 24, Subway announced that Roark Capital was acquiring the franchise. Roark already owns similar brands like Dunkin’ Donut, Arby’s, Buffalo Wild Wings, and Sonic Drive-in. [4] “This transaction reflects Subway’s long-term growth potential, and the substantial value of our brand and our franchisees around the world,” said Subway CEO John Chidsey in a statement. [5]
“As part of Subway’s transformation journey to improve across all aspects of the brand, we have spent the past two years optimizing our footprint by using a strategic, data-driven approach to ensure restaurants are in the right location, image and format,” said a Subway spokesman about the closures in 2022. The company said it will continue to innovate the menu, enhance guest experiences, modernize restaurants, and expand across the globe. The spokesman added that the slowing rate of closures “is an expected result of the progress we have made to get back to smart growth, which will boost franchisee profitability and protect our position in the market.”
Keep Reading: Fast Food Giant Says It’s Closing Its Doors For Good
Sources
- “Subway’s Mass Restaurant Closures Have Now Brought the Chain To Its Smallest Size Since 2005.” Eat This, Not That. Zoe Strozewski. May 2, 2023
- “Subway’s US restaurant locations have hit their lowest level since 2005 as the company looks to sell – report.” Business Insider. Ben Tobin. May 5, 2023
- “Is Jared Fogle Still in Prison? Where the Former Face of Subway Is Now.” Newsweek. Roxy Simons. March 7, 2023
- “Subway has been sold for billions in one of the biggest fast food acquisitions ever.” USA Today. Doc Louallen. August 25, 2023
- “The rise of Subway: the triumphant and turbulent last decades of the world’s largest fast-food chain.” Business Insider. Frank Olito, Mary Hanbury, and Nancy Luna. August 24, 2023