The Rise and Fall of Subway.

Hey friend,

Picture this: A 17-year-old kid who’s never made a sandwich in his life gets a $1,000 loan to open a restaurant. His first location is a disaster. He’s down to his last six dollars by the end of summer.

What does he do? Opens a second restaurant.

That kid was Fred DeLuca, and his crazy decision eventually built the world’s largest fast-food chain by number of locations. At its peak, Subway had 44,000 restaurants worldwide - more than McDonald’s.

But then it all came crashing down in the most spectacular way possible, involving yoga mats in bread, fake tuna, and one of the worst celebrity scandals in corporate history.

Today I’m telling you the complete rise and fall of Subway - and trust me, this story is wilder than any soap opera.

 The Broke Kid with Big Dreams

In 1965, Fred DeLuca was a typical broke teenager. His family were Italian-American immigrants living in public housing in the Bronx. Fred was earning $1.25 an hour at a hardware store and dreaming of becoming a doctor.

Problem was, he had zero money for medical school.

At a family barbecue, Fred decided to ask the host - a well-off nuclear physicist named Peter Burke - for advice on making money for college. Maybe Peter would even give him a loan.

Peter’s response wasn’t what Fred expected: “You should open a submarine sandwich shop.”

Fred had two tiny problems with this suggestion:

1. He had no money

2. He’d literally never made a submarine sandwich in his life

But Peter was serious. He’d had this business idea brewing for a while but didn’t have time to run it himself. He offered Fred a deal: $1,000 loan to get started, and they’d be partners.

Fred left that barbecue as an accidental restaurant owner.

 The Disaster That Almost Ended Everything

In 1965, 17-year-old Fred opened “Pete’s Super Submarines” in Bridgeport, Connecticut. He printed flyers, ran radio ads with his thick Brooklyn accent that nobody could understand, and waited for success.

The first day was actually promising - 312 sandwiches sold at less than a dollar each. But after the initial curiosity wore off, sales crashed.

By the end of that first summer, Fred had exactly six dollars left. Most people would have quit right there, admitted defeat, and moved on with their lives.

Fred and Peter made a decision that seemed completely insane: they opened a second location.

Their logic was brilliant in its simplicity. If people saw multiple Subway locations, they’d assume the business was successful and the food must be good. It was fake-it-till-you-make-it taken to the extreme.

The psychology worked. Multiple locations created the illusion of success, which eventually became real success.

 The Ambitious Goal That Changed Everything

In 1968, they rebranded to the simpler name “Subway” and set themselves an audacious goal: 32 restaurants in 10 years.

Remember, they’d barely kept their first two locations alive. But Fred was determined to prove this concept could work on a massive scale.

They focused obsessively on visibility and marketing. Instead of tucking restaurants into cheap, hidden locations, they paid more for prominent spots where people could actually see them.

By 1974, they had 16 locations throughout Connecticut. They were finally profitable, but they had a problem: they were only halfway to their 32-restaurant goal with just two years left.

At this rate, they’d never make it. That’s when Fred had the idea that would change everything.

 The Franchising Breakthrough

Instead of directly owning and operating every restaurant themselves, what if they let other entrepreneurs pay for the privilege of running their own Subway?

Franchising solved multiple problems at once:

- Other people’s money funded expansion

- Other people handled day-to-day operations

- Subway got upfront fees plus ongoing royalties

- Every location followed the exact same format

Fred and Peter signed up 15 franchisees in 1974. By 1981, they had 200 locations across America. By 1982, they had 300.

This wasn’t just growth - this was explosive expansion that would have been impossible if they’d tried to own every location themselves.

 The Secret to Subway’s Dominance

Subway’s franchising model was different from McDonald’s or Burger King in one crucial way: it was cheap and flexible.

Setting up a Subway cost a fraction of what other fast-food franchises required. No expensive grills, fryers, or complex equipment. Just a counter, some refrigeration, and an oven for baking bread.

This meant Subway could go places other chains couldn’t or wouldn’t: gas stations, airports, hospitals, universities, military bases, even inside other stores.

There’s literally a Subway in a fake FBI training town in Virginia. There’s a kosher Subway in Ohio. There’s a Subway on a German river cruise ship.

No location was too weird, too small, or too unconventional. This strategy let Subway expand faster than any competitor in history.

 The Golden Age of Growth

By the peak in 2016, Subway operated 44,000 locations worldwide - more than McDonald’s, Starbucks, and KFC combined.

Fred was receiving $7 million in royalty checks every Monday from all those franchisees. Not bad for a kid who started with six dollars and no sandwich-making experience.

But Subway’s success came with a dark side that was about to explode into public view.

 The Franchise Hell

While Fred was getting rich, many Subway franchisees were struggling. The company was accused of deliberately over saturating markets - opening multiple Subways in small areas so they competed with each other.

When asked about franchisees losing money, Fred’s response was chilling: “It bothers me that people lose money, but I don’t lose sleep over it. This is America.”

Former employees revealed that 30-50% of franchisees were immigrants who struggled to understand the complex contracts written in their second or third language. When executives suggested comprehension tests to ensure people understood what they were signing, management rejected the idea.

The franchise agreements were so one-sided that several states declared parts of them illegal. Fred could seize any franchise for almost any reason, force franchisees to compete with each other, and ban them from talking to the media.

One former Subway employee said: “I’ve seen over 300 franchise agreements, and Subway’s is the worst.”

 The Health Marketing Genius

In the 1990s, Subway found its marketing goldmine: positioning itself as the healthy fast-food option.

Unlike McDonald’s with deep-fried everything, Subway’s ingredients looked fresh, they baked bread on-site, and customers could see exactly what went into their sandwich.

Then in 2000, they hit the marketing jackpot with Jared Fogle, a customer who claimed to have lost 245 pounds eating Subway sandwiches twice a day.

Jared became Subway’s spokesperson, appearing in commercials holding up the giant pants he used to wear. Sales increased 20% after his first commercial. Subway’s marketing chief claimed Jared was responsible for up to half their recent growth.

For over a decade, Jared was the face of Subway, the living proof that their sandwiches were healthy.

 When Everything Fell Apart

In 2015, everything went horribly wrong in the worst way possible.

Jared Fogle’s home was raided, and investigators found evidence of child abuse. He was convicted of possessing and distributing illegal images and grooming minors. He got 15 years in prison.

Subway immediately cut ties, but the damage was catastrophic. The face of their brand for over a decade was now associated with horrific crimes.

Then it got worse. Jared’s ex-wife sued Subway, claiming the company had been warned about Jared’s behaviour but ignored it because his ads were making them too much money.

The Scandals Keep Coming

As if the Jared situation wasn’t bad enough, Subway’s health claims started falling apart under scrutiny:

The Yoga Mat Bread: Subway was accused of using a chemical found in yoga mats to make their bread. They eventually agreed to phase it out.

The Fake Tuna: Lab tests suggested Subway’s tuna might not actually be tuna, or at least not entirely tuna.

The Footlong Fraud: Customers discovered Subway’s “footlong” sandwiches were often only 11 inches long.

The Sugar Bread: When Subway tried to get a tax break in Ireland by claiming bread was a staple food, the government analysed their recipe. It contained five times more sugar than normal bread - so much that it could legally be taxed as dessert.

Subway’s reputation as a healthy choice was in tatters.

 The Decline and Fall

Fred DeLuca died of leukemia in 2015, worth over $3 billion. But he’d never prepared a succession plan or trained anyone else to understand the business like he did.

Without its obsessive founder driving expansion, Subway began to crumble. The company has lost locations every single year since Fred died.

By 2018, business reporters found that one-third of US Subway locations weren’t profitable. Fred’s lifelong obsession with growth had created too much competition between franchisees.

The brand was damaged by scandals, ingredient controversies, and the loss of its health halo. Prices were rising, quality was questioned, and the Jared association was impossible to fully shake.

 What Went Wrong?