Fast-food chain Subway has put itself on the menu – announcing on Tuesday it is exploring a possible sale of its business after 58 years of family control.
After years of rapid growth, rising costs and mounting competition from rivals have taken their toll on the company in recent years, but it still has more than 37,000 restaurants in over 100 countries – making it one of the largest chains in the world.
The Wall Street Journal said last month a potential sale of the company could value Subway at more than $10bn.
Founded in Bridgeport, Connecticut, in 1965 as “Pete’s Drive-In: Super Submarines”, the chain was the brainchild of then 17-year-old founder Fred DeLuca and family friend Peter Buck, who lent DeLuca $1,000 to get started.
In its early years, Subway was very much a family affair: DeLuca’s mother ran the first shop and his sister and wife both worked for the company.
The idea of running a fast-food company that DeLuca claimed “provided a healthful, less fattening bill of fare” took off when the company turned to franchisees. By 1987 it was opening 1,000 stores a year and was ranked by Entrepreneur magazine as the top franchise company in the world.
But scandal has also dogged the company. Its former spokesman Jared Fogle was sentenced to 15 years in prison in 2015 on charges of receiving child abuse imagery and other sex crimes.
Fogle had attracted DeLuca’s attention after he read an article about an Indiana man who lost 245lbs while eating Subway sandwiches. He went on to become the face of the company for five years.
More recently, an Irish court ruled that Subway’s “bread” could not be defined as bread for tax purposes because of its high sugar content. Subway’s signature sub was found to have five times more sugar in it than Ireland’s definition of bread.
The company’s sandwich fillings have also come under scrutiny. A class-action lawsuit filed in California in 2021 claimed its tuna sandwiches “are completely bereft of tuna as an ingredient” and were instead a “mixture of various concoctions”.
Subway has fiercely contested the charges and said there is “no truth to the allegations”.
Even some of the franchisees who made the business have turned against the company. A 2021 lawsuit filed in Nevada claimed some of the company’s business development agents (BDAs) – typically large franchisees – had exploited immigrants, who own about 50% of the chain’s franchises, a larger percentage than other US fast-food chains.
The suit claimed the BDAs had enticed would-be franchisees with low startup costs and then hit them with hidden fees and costs for infractions such as smudged windows. At the same time, the BDAs allegedly encouraged rivals to open nearby competitors. When the businesses failed, the suit alleged, BDAs would snap up the better locations at bargain prices.
Subway’s sales hit a peak of $18bn in 2012, according to industry consulting firm Technomic, but have struggled over the past decade.
In 2019, the company appointed John Chidsey, formerly executive chairman and chief executive of Burger King, as its first outside chief executive. Chidsey has overseen a turnaround at the company, closing locations, cutting costs and concentrating on delivering “more craveable food”.
The company has also poured more money into marketing – hiring the NBA star Steph Curry, tennis icon Serena Williams and US soccer star Megan Rapinoe to highlight its menu upgrades in an effort to win back customers.
Subway has appointed JP Morgan to advise the company and conduct the sale exploration process. “The management team remains committed to the future and will continue to execute against its multi-year transformation journey,” the company said in a statement.
