Failure pattern · United States · 1965–2024
Subway: when more stores meant less profit per store
Subway grew to more than 44,000 restaurants by franchising aggressively. Stores cannibalised each other, promotions squeezed franchisees, and thousands of US outlets closed before its sale to Roark Capital.
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
by the numbers
- First store loan (1965)
- $1,000
- Peak locations (around 2015)
- over 44,000
- Sale to Roark Capital (2024)
- about $9.6 billion
What happened
Fred DeLuca opened the first sandwich shop in 1965 with a $1,000 loan from family friend Peter Buck. Subway's low-cost franchise model — small stores, simple equipment — let it grow faster than almost any restaurant brand, reaching more than 44,000 locations worldwide around 2015.
Because franchise fees were based on sales, the company benefited from opening more stores even when they took customers from existing ones. Promotions like the $5 footlong drew traffic but squeezed franchisee profits. Quality perceptions slipped, and a 2015 scandal involving its long-time spokesperson damaged the brand.
Subway closed thousands of US restaurants over the following years. In 2024 private equity firm Roark Capital completed its purchase of Subway for about $9.6 billion.
Timeline
- 1965
First shop opens.
- 2008
$5 footlong promotion launches.
- 2015
Peak store count; spokesperson scandal.
- 2024
Acquired by Roark Capital.
what went wrong
- Franchisor incentives misaligned with franchisee profits.
- Store density cannibalised sales.
- Discounts eroded margins and quality.
the lesson
If the brand earns on sales while franchisees earn on profit, the system can grow itself into trouble.
Apply it to your business
- 1Align incentives between you and your partners.
- 2Track sales per outlet, not just outlet count.
- 3Use discounts sparingly.
Laws at work in this story
Figures are rounded and drawn from public reports, company filings and widely cited coverage at the time. Check the company's latest filings before relying on any number.