Subway

Subway's story begins with a 17-year-old's dream and a $1,000 loan. In 1965, Fred DeLuca needed money for college. He approached Dr. Peter Buck, a family friend and nuclear physicist, for advice. Buck suggested opening a submarine sandwich shop.

"There was not much hope that I could get through college because my family simply didn't have the money," DeLuca later recalled. With Buck's $1,000 investment, they opened "Pete's Super Submarines" in Bridgeport, Connecticut.

The first day was promising. They sold 312 sandwiches. But success was fleeting. Within months, they were on the brink of closure. With only $6 left, they made a bold move: opening a second store. This decision would shape Subway's future.

By 1974, DeLuca and Buck owned 16 shops in Connecticut. To reach their goal of 32 stores, they turned to franchising. This strategy catapulted Subway into rapid growth.

The company's innovation lay in customization. Customers could watch their sandwiches being made and choose their ingredients. This transparency and personalization set Subway apart in the fast-food landscape.

Subway faced its share of challenges. Competition was fierce. The company had to differentiate itself. They focused on health-conscious consumers, marketing their sandwiches as a fresher, healthier alternative to burgers and fries.

In 1999, Subway hit a turning point with the Jared Fogle campaign. Fogle claimed to have lost over 200 pounds eating Subway. This campaign resonated with health-conscious Americans. Sales rose by 20% after the first commercial aired.

By 2002, Subway had become the largest restaurant chain in the US by number of locations, surpassing McDonald's. The company expanded globally, entering markets like Bahrain and Puerto Rico.

However, Subway's rapid expansion led to new challenges. By 2014, sales began to decline. The company had grown too big, too fast. Stores were competing with each other. A franchisee noted, "We had people open up on all sides of us. That was definitely a problem."

Subway faced a major crisis in 2015 when Fogle, the face of the brand, was involved in a scandal. The company immediately cut ties, but the damage was done.

To overcome these setbacks, Subway focused on innovation and modernization. They introduced digital ordering, revamped store designs, and expanded their menu. CEO John Chidsey stated, "Our continued impressive performance demonstrates that our efforts to build a better Subway and win back the hearts and minds of sandwich lovers around the globe is working."

These efforts paid off. In the first quarter of 2023, Subway reported its ninth consecutive quarter of positive sales growth. Global same-store sales increased by 12.1%.

Today, Subway operates over 37,000 restaurants in more than 100 countries. The company remains committed to its founding principles: "Never stop evolving to improve the Subway® brand."

Subway's journey from a single store to a global brand illustrates the power of perseverance and adaptability. It's a testament to how a simple idea, executed well and continuously refined, can revolutionize an industry.

Lessons

Lesson 1: Beware of single-point dependencies. Subway's heavy reliance on Jared Fogle as their brand ambassador left them vulnerable. When his scandal broke, it dealt a significant blow to their image. Don't tie your company's fate too closely to any one person, product, or strategy. Diversify your brand assets and marketing approaches. This way, if one element falters, your entire business doesn't crumble.

Lesson 2: Evolve or become irrelevant. Subway's initial success came from positioning itself as a healthier fast-food alternative. But they failed to keep up with changing definitions of "healthy eating". Your initial competitive advantage isn't permanent. You need to constantly reassess market trends and consumer preferences. Stay ahead of the curve, or you'll find yourself playing catch-up.

Lesson 3: Price wars are a race to the bottom. When Subway's marketing became stagnant, they resorted to price-based promotions. This is a losing strategy in the long run. It devalues your brand and trains customers to expect discounts. Instead, focus on creating and communicating unique value. Give customers reasons beyond price to choose you.

Lesson 4: Franchise success depends on brand strength. Subway's brand struggles directly impacted their franchisees. In a franchise model, your brand is the franchisee's most valuable asset. If you let it deteriorate, you're not just hurting your corporate bottom line - you're damaging the livelihoods of thousands of small business owners who trusted in your vision.

Lesson 5: Crisis can be a catalyst for innovation. Subway's recent challenges forced them to innovate. They revamped their menu, improved their digital ordering system, and launched a new loyalty program. Sometimes, it takes a crisis to shake you out of complacency. Don't wait for trouble to innovate. Make it a constant part of your business strategy.

Videos

• The Birth of Subway
• Our Tribute to Fred
• SUBWAY: The Incredible History Of The Subway Sandwich
• The Food That Built America: Submarine Warfare
• How a Boy Who's "Never Made a Sub" Invented Subway
• Why Subway Is Dying

Articles

• The Rise and Fall of Subway Restaurants - Business Insider
• SUBWAY® President and Co-Founder's E-Book of Business Insights to Benefit Grameen Foundation - PRNewswire
• Subway's hidden billions revealed: How its founders sliced up a fortune
• The History of the Subway Franchise - Top 11 Facts | FMS

Book Recommendations

• "Start Small/Finish Big: Fifteen Key Lessons to Start – and Run – Your Own Successful Business" by Fred DeLuca with John P. Hayes
• So You Want to Own a Subway Franchise?: A Decade in the Restaurant Business

Further Readings

• Subway History
• The Intriguing Story Behind Subway Sandwiches
• The Sandwich Evolution: Subway's Customer Experience Innovation
• Revitalizing Subway: A Case Study on Transforming Customer Experience
• Menu innovation, modernization drive Subway sales
• Subway History (UK)
• From Humble Beginnings to Global Domination: The Untold Story of Subway's Rise