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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.

Glenn Chapman

100 Comments

  1. They don't have gluten free breads 😂
    I actually really loved it to go there, it was just around the corner
    But gluten wrecked that for me

  2. for me its because every single location was getting supper cheap with their meat, and the ingredients look like they've been sitting out all week. paying 10 bucks for a sub and having 3 slices of turkey was bs when it used to be loaded up.

  3. When did it “fall” according to business queers? Still a great place and everything fresh and good

  4. Hey subway, maybe start by not selling bread made by additive that are used in making rubber yoga mats… and don’t bring in week and a half old bagged lettuce from across the country that’s sprayed with chemicals so it stays fresh…. and meat that isn’t synthetic…. JUST a thought.

  5. Their menu price is ridiculous first of all…almost all fast food chains are having the saver's meals which subway are resisting to introduce

  6. Subway isn’t falling, not as long as that meatball marinara exists. Get in ma belly!

  7. I live in a small town of 15,000. During the day the population swells to about 45,000 from commuters. I mention the last sentence because that is the only reason I can think of for why we have THREE subways, and none of them have tanked yet.

  8. Try putting some meat on your product! I have cards in my wallet thick than the meat on their sandwiches. No matter what you order it taste the same.

  9. Literally used to eat subway 5x a week, and now 0. The yoga mat chemical in the bread was a deal breaker, that and the overall quality of their ingredients.

  10. Lack of Gluten Free in any restaurant in Spain is ridiculous, out of touch old fashioned uncool model with no rebranding or refits will see this company fold.

  11. I visit subway like once or twice a month.

    In the last 2 years or so I don't remember going even once and getting a 100% of what I wanted. Sometimes they limit sauces or another time the bread I want won't be available.

    Also, they lost the appeal of healthy fast food when people realized its not really that healthy with all that cream and sauce on it.

    Also, in India, our street food gives incredible competition because we have a plethora of spicy exciting options to choose from, not to mention cheaper as well.

  12. Subway sandwiches are the pits. I only had one on two occasions – both times I had explosive diarrhea later in the day. Never touched their products since.

  13. I don't know what things are like where you guys live, but in London and UK in general, a £5-£6 foot long actually represents really good value for a lunch 🤷

  14. A couple of friends and me used to go to subway nearly every second day 2016-2017. But the quality dropped so hard in 2018 we rarely go there anymore. our favorite subway hired new staff with zero motivation they don’t even speak German anymore. The food tastes really disgusting and the bread is really saggy.

  15. That so classic reason to get someone in jail, child pornography… seriously?

  16. They didn’t address just how poor the quality of food is but I guess it’s in the fast food line so that’s a given. However when they opened their bread was amazing.

  17. Used to be my go-to place to eat. It wasn't the fact that they cheeped out with 1 slice of meat that stopped me from going. When they refused to allow Veterans to continue their poppy campaign…I never went back and never will

  18. Their restaurants, like most fast food chains, are disgusting. I feel devalued eating at such a dirty place, or even worse – robbed. I think it's time to put an end to fast food culture.

  19. Its simple, no need to look too far. Subways is a "healthier" choice and people prefer to eat McDonalds, Burger King, Wendys, etc. and the fact that the latter have cheaper meals.

  20. "Все работы хороши" channel already did your work on making this video.

  21. They started pushing halal so I booted em in the bum . If the truths known many others have done the same too.

  22. the rise and fall of subway is saying the footlong will be only $5 when in reality it’s like $10.89

  23. was not my sandwich of choice in america, but the only one i can get in China. its decent if you pay for double meat and load up on veg

  24. they went super cheap with their ingredients absolute shit for the last 7 or 8 years.

  25. Subway needs to work on being profitable with the status quo, not growing there is no more market share, but they need to protect against the better Sub chains.

  26. Having low life east Indians as franchise owners started the decline rolling.  They are super cheap….a bread sandwhich.  East Indians are simply bottom feeders.

  27. Let’s be honest shall we? Subway is totally average! I can make better sandwiches at home.

  28. Made it half way through this video before I remembered "Oh yeah, subway sucks and I don't care."

  29. A few years ago Buenos Aires was full of subways. You could find a subway on every corner. From a moment to the other most of them disappeared

  30. Subway UK introduces pizza subs. Yet they forget in my town there’s 6 pizzerias. Nice 1

  31. If they would stop selling franchises to foreigners, people would be more inclined to patronize them. No one wants creepy 3rd world people who came from sh-tholes, handling their food.

  32. I had subway once, never went there again. overpriced for a sandwich that looked like someone sat on it, also the lettuce looked yellow and disgusting

  33. The one here in Nerima (Tokyo) just closed down. Fresh vegetables pretty expensive here.

  34. i ate Subway once when i was 12. it was a big disappointed for me and my mom (the one bought it for me) while the price sounds stupid. Not to mention the fact that i live in Vietnam, a country that have the infamous "bánh mì" – a traditional bread that have better tastes for half a dollar!
    there is even a shop i the central district where you can buy the most expensive "bánh mì" you can find in my country, which is $1.5. the tastes and the size of a serve is so unbelievable that riches and foreigners fill up the shop

  35. Between the meat coming from antibiotic treated, hormone injected and grain/animal powder fed animals, the gmo grains in the bread, the pus and bacteria infested milk used to make the cheese and cream produce in those large chains, if you think that subway is truly a healthy thing to eat you can shove your finger in your ass out through your mouth…You're just trying to make yourself feel better about eating shit food that you give a pass to….It won't save you from ulcer, arthritis, heart attacks, strokes and cancer in the long run, and the thriving pharmacomaphia treating you and advertise this shit so you keep eating it and get sick and need surgery which is ever on the rise proves that to be true in this day and age

  36. screw all that noise. Just use all that money and open your own mom and pop store and no need to give a percentage of profits to some big corporations pocket. There was one Blimpie owner I knew who had the contract for a while and didn't renew it with them and opened up shop as their own business. Not too certain how that works, but I think they got to keep all the equipment and things even though you would have thought they would be in a longer term contract than just 5 years or whatever it was..

  37. I have never seen an updated subway. Also, bring back the $5 foot long if you actually want to bounce back. Also, your bread pales in comparison to Jimmy Johns…fix that and I’m back.

  38. They need bring that $5 dollar footlong back it's now a $11 dollars footlong that's why they fell

  39. I dont get why people Say its expensive . As a student , i Can get a sandwich + drink + cookie for 8.2€ , for comparison an equivalent amount of food at McDonald's would cost about twice as much

  40. subways subpar poor quality since day one…now its the Indians that open them …hand out a ton of coupons and put it up for sale at profit. In order for me to get a sub there the way I like it would cost me 11.00……it will always suck

  41. because they charge like $6-7 for some 6 inch sandwiches. you can get way more food for that much at mcds, wendys, taco bell.

  42. Downfall began with subway stopping to offer the meatball sandwich in my country

  43. I grew up in an all Italian home MOM made us sandwich lunches with real Italian crusty bread and fresh Italian style cold cuts from an Italian market along with other Italian made condiments. There are a few Italian bar/bistros in my city that serve Italian sandwiches to die for along with an espresso and pastry. And trust me when I tell you that Subway is American S**T Food for ppl who don't know better.

  44. No wonder they are falling the price they want for a sandwich is ridiculous and the price continues raising
    I wish them all the worst

  45. I have a bit of a soft spot for subway when I was younger i had a terrible habit of not bringing enough money and out of all the food places I went subway was the only place they’d let me off and still let me have my sandwich

  46. Franchises don't follow the rules. In Kenya, the Subway REFUSES to have any real bacon or ribs because of the 3%…YES 3 % of the Muslim Population. Never went back to Subway.

  47. In Canada, specifically Ontario, the increase of minimum wage KILLED many Subways. I also find their "regular" sandwiches are reasonably priced. The minute you add something like bacon, the price rises drastically…like $2.50 extra for 2 pieces of bacon?

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