This is an English adaptation of a FoodBud historical article originally published on November 22, 2021.
Subway confirmed over the weekend that Peter Buck, its last surviving co-founder, died the previous Thursday at age 90. Buck originally invested $1,000 in the company, a stake that later became worth more than $1 billion.
Buck co-founded Subway with Fred DeLuca, who died in 2015 at age 67. The two were close despite their age difference.
In August 1965, 17-year-old Fred DeLuca had just graduated from high school and was worried about paying for college. He asked family friend Dr. Peter Buck for help. Buck believed DeLuca should start a sandwich shop instead of continuing his studies.
With Buck as investor, the pair launched Pete’s Super Submarines. Two years later, the business was renamed Subway.
The company’s early positioning was built around the idea that “this is how a sandwich should be”: a place where customers could buy quality food at a reasonable price. DeLuca and Buck also created Doctor’s Associates Inc. to focus on franchising and expansion.
Their initial target was 32 stores within 10 years. The franchise model became central to Subway’s growth and economics, although rapid expansion initially created tension with franchisees. In 1999, DeLuca set up advisory groups representing different stakeholders and provided franchisees with training, advertising, logistics and other support.
Unlike fast-food brands widely associated with “junk food,” Subway emphasized low-fat and low-calorie options. Its broad sandwich range helped the brand appeal to consumers who wanted convenient food while still caring about health and body weight.
After going international, Subway accelerated expansion. It opened its first UK restaurant in Brighton in 1996. DeLuca and Buck saw that many other fast-food chains had weak health credentials and promoted Subway as a higher-quality, more health-oriented quick-service option.
Subway also popularized an open-kitchen format in which customers could see fresh ingredients, choose what they wanted and watch the sandwich being made.
The chain was also one of the cheaper fast-food concepts to open. A Subway restaurant typically cost about $120,000 to $270,000 to launch, compared with an average McDonald’s franchise cost of around $2.2 million. This lower entry cost helped drive rapid unit growth.
In the 1990s, Subway’s global store count rose from 5,000 to more than 13,000 in 10 years, an increase of more than 260%.
At its peak, Subway had nearly 42,000 restaurants worldwide, more than any competitor; McDonald’s had about 39,000. But after roughly half a century of success, Subway’s growth came under pressure. In 2019, Subway closed more than 1,000 stores in the United States, while McDonald’s closed 68 in the same period.
Subway’s global position did not translate cleanly into China. The brand opened its first China restaurant in 1995, but sandwiches did not become as mainstream locally as other Western fast-food formats such as burgers, fried chicken and pizza.
Internationally, Subway’s proposition was clear: healthy and inexpensive. In China, both claims were harder to sustain.
The health message relied partly on sandwiches having more vegetables than burgers or fried chicken and on meat preparation that appeared healthier. In the United States, Subway also had a powerful marketing figure in Jared Fogle, who said he lost 200 pounds, or 91 kilograms, on a diet built largely around Subway sandwiches. He represented the brand’s health message until his child-sex-abuse scandal emerged.
In China, however, uncooked vegetables did not fit many consumers’ traditional views of healthy eating. Only a smaller segment of fitness-focused or calorie-counting consumers readily accepted Subway’s low-calorie sandwiches. At the same time, the in-store pairing of carbonated soft drinks, high-sugar cookies and chips weakened the health proposition.
Subway’s other well-known marketing idea, the “$5 footlong,” offered a 12-inch sandwich with meat and vegetables for five dollars, making it a relatively healthy and affordable American fast-food choice. In China, a 6-inch sandwich that many adult men would not find filling cost about RMB15 to RMB30, making the value proposition less compelling.
Subway’s rise into one of the world’s largest chains was closely tied to its almost fully franchised operating model, and China followed the same pattern.
Compared with the roughly $2 million initial investment required for McDonald’s, a Subway store in China required about RMB800,000. But Subway’s continuing charges amounted to 12.5% of revenue, made up of an 8% royalty and a 4.5% advertising fee, compared with 4% for McDonald’s.
That structure meant that when the market weakened, more revenue pressure was shifted to franchisees. The article links this dynamic to the large number of Subway closures in Western markets in recent years.
The China business also had limited budget available for brand education, even though consumer education was especially important in that market.
Subway’s focus on rapid store expansion also left it looking slow on product innovation. The China business sat under the Asia-Pacific headquarters in Singapore and had limited decision-making authority, with product development more closely following the Singapore market.
Since 2014, Subway’s operating performance had been in decline, and in 2016 the company recorded negative store-count growth for the first time. At the time of the article, Subway had 663 stores in China, and its earlier momentum had faded.
Note: Investment, franchise-cost and store-count figures are historical and reflect the article’s 2021 context.