Cheaper to launch than a coffee shop, now 37,000 locations

The Accidental Empire Built on Cold Cuts

Subway's rise to become the world's largest restaurant chain by location count was never part of a grand strategic vision. In 1965, 17-year-old Fred DeLuca borrowed $1,000 from family friend Peter Buck to open a sandwich shop in Bridgeport, Connecticut, hoping to pay for college. They called it Pete's Super Submarines, and within a decade they'd opened 16 locations. The turning point came when they realized their model required almost no cooking equipment—no grills, fryers, or ovens—just refrigerated prep tables and a bread oven. This meant build-out costs of $70,000 to $100,000 in the 1980s, roughly half what a McDonald's required. By 1974 they'd begun franchising aggressively, and by 1981 the chain had surpassed 200 locations. The name changed to Subway in 1968, and the company discovered that its minimal equipment requirements and small footprint—some stores operated in spaces under 1,000 square feet—allowed franchisees to open in gas stations, Walmart vestibules, and college food courts where traditional fast food couldn't go.

The No-Cook Model's Hidden Economics

Subway's operational simplicity created a franchise model that was cheaper to enter but more expensive to run profitably. Franchisees paid roughly 8% of gross sales in royalties and advertising fees, and food costs ran between 30% and 35% of revenue—higher than most fast-food chains because pre-sliced meats and vegetables cost more than raw ingredients. Labor made up another 25% to 30%. Most Subway locations generated between $400,000 and $500,000 in annual revenue in the 2000s, and after all costs many franchisees netted only $30,000 to $50,000 per year. The company's growth strategy relied on saturation—pack an area with so many stores that competition came from other Subways rather than rival chains. By 2002, franchise agreements prohibited new locations within a certain radius, but existing franchisees complained that corporate approved new stores anyway, cannibalizing their sales. The Federal Trade Commission received more complaints about Subway franchise practices than almost any other chain during the 1990s and early 2000s.

The Jared Years and the Collapse That Followed

Subway's explosive growth in the 2000s owed much to Jared Fogle, the Indiana University student who lost 245 pounds eating Subway sandwiches twice daily and became the chain's spokesperson in 2000. His story drove same-store sales up by double digits for years, and Subway opened roughly 2,000 new locations annually between 2000 and 2010. The chain peaked at 44,852 locations worldwide in 2015, surpassing McDonald's by nearly 8,000 stores. Then Fogle was arrested and sentenced to more than 15 years in federal prison for child exploitation crimes in 2015, and the brand's halo evaporated overnight. Sales declined every year after 2012, and by 2021 Subway had closed more than 7,000 U.S. locations. Franchisees sued the company over food quality issues, including a 2021 Irish Supreme Court ruling that Subway's bread contained too much sugar to legally qualify as bread under Irish tax law. The low barrier to entry that built the empire became a liability—thousands of undercapitalized franchisees struggled as customer traffic fell.

Why the Model Still Matters

Subway's franchise approach permanently changed how retail food chains think about real estate and capital requirements. The company proved that ubiquity could substitute for brand prestige, and that a $100,000 franchise could scale faster than a $500,000 one even if individual stores made less profit. Chains like Jersey Mike's, Firehouse Subs, and Jimmy John's all adopted variations of the Subway model—limited cooking, smaller footprints, lower build-out costs—and grew rapidly in the 2010s as Subway declined. Roark Capital acquired Subway for $9.6 billion in 2023, one of the largest restaurant chain sales in history, betting it could revive the brand by improving food quality and reducing franchise saturation. Today Subway operates roughly 37,000 locations worldwide, still more than any other restaurant chain but far from its peak. The no-cook model's legacy endures in every sandwich shop that opens in a strip mall with nothing but a counter, a cooler, and a toaster oven.