- Subway is the largest chain in the US, having long leapfrogged industry giants such as McDonald’s.
- But after the death of its cofounder Fred DeLuca in 2015, Subway has taken a turn for the worse.
- Insider’s on top of the developments, so here’s what you need to know about the ongoing Subway saga.
- See more stories on Insider’s business page.
After the death of Fred DeLuca, Subway’s cofounder and CEO, in 2015, the sandwich chain went into a tailspin marred by mounting store closures and sinking sales.
With no real succession plan put in place, the company floundered under new leadership, including DeLuca’s sister, Suzanne Greco.
Over the past few months, life at Subway has been further marked by chaos and conspiracy, including the increase in franchise startup fees and the downsizing of staff under the leadership of John Chidsey, the former chief executive of Burger King who became the CEO of Subway in November 2019.
Under Chidsey, Subway has laid off upwards of 500 corporate staffers, closed hundreds of stores, and frustrated franchisees who struggled to turn a profit. Former executives and franchisees believe that Subway overexpanded and struggled to stay relevant, in part because of a muddled vision for the future of the company.
Changes have led to feuds with hundreds of franchisees and some consideration of whether a sale should be in the privately held brand’s future.
Insider is on top of all the developments going on at Subway. The following covers everything you need to know about the latest happenings at the chain.
Rumors are swirling that Chidsey is setting Subway up for a sale
Chidsey’s role in spearheading Burger King’s sale to 3G Capital in 2010 has helped fuel industry chatter that Subway is trying to sell itself. Restaurant Brands International and Inspire Brands – the parent companies of Burger King and Arby’s, respectively – are believed to have sniffed around Subway to weigh the pros and cons of a potential acquisition, an industry expert said. But Subway insists that it’s not for sale.
- Read more: Rumors are flying that Subway is up for sale as the distressed sandwich chain lays off hundreds to cut costs and abandons franchisees
- Read more: Insiders are buzzing about Subway’s attempts to sell itself to Arby’s or Burger King’s parent companies
Subway franchisees criticize major changes from corporate
Subway is the largest chain by location in America.
DeLuca once hooked entrepreneurs, many of them immigrant families, with historically cheap fast-food franchise startup costs. The reasonable fees allowed franchisees to invest in multiple stores.
But after years of declining sales and store closures, franchisees have found themselves at odds with leadership. The chain closed 1,882 stores in the US in 2020.
Franchise disclosure documents for 2021 also said Subway has raised the startup investment costs for new franchisees. Franchisees whose contracts were up for renewal were also presented a new contract forcing them to choose between higher royalty fees or tighter restrictions on how they run their stores.
In July, Subway rolled out a menu overhaul with TV spots featuring sports icons like Serena Williams. Some operators told Insider that pricey ads wouldn’t drive traffic to stores especially after the chain tried and failed to give away 1 million free subs featuring the new ingredients.
- Read more: Subway’s ‘dirt cheap’ startup costs for franchisees just increased by thousands even as the company’s unit count declined by 1,600
- Read more: Subway franchisees say a new contract forces them to sign away their ability to criticize the struggling chain
- Read more: Subway tried to give away 1 million sandwiches to promote its new menu. Franchisees say almost nobody wanted them.
- Read more: Some Subway franchisees say pricey celebrity ads and a menu overhaul can’t fix the chain
Insiders say internal battles have been raging for years
Franchisees and employees have been complaining about Subway’s inability to keep up with trends and its footprint expansion cannibalizing sales for years. Many of these problems, insiders said, can be tied back to DeLuca, who led Subway from its founding in 1965 until 2015.
Those close to DeLuca knew him to be extraordinarily hands-on and dedicated to Subway. But, they told Insider, he made certain strategic mistakes and refused to believe others could do the job as well as he could. Today, the sandwich empire is owned by two secretive billionaires, who insiders said have been unable to turn the chain around.
- Read more: Subway cofounder Fred DeLuca ruled the company like a demigod and pursued wives of franchisees. How one man sent the world’s biggest fast-food chain into a tailspin.
- Read more: ‘Subway is dying’: Battles at HQ are killing the world’s largest fast-food chain – and many franchisees are turning against the CEO
- Read more: Inside the 2 secretive billionaire families that own Subway, as they face backlash from furious franchisees