From the January 2001 issue of Entrepreneur

Once upon a time, in the land of hamburgers and pizza, a submarine sandwich came on the scene--charming everybody in town with its fresh-baked bread and savory meats. Steadily, the submarine sandwich grew to prominence in the land and proved itself to be a formidable competitor to typical fast-food fare, all while courageously defeating the evil queen.

Sound like a beautiful fairy tale? It really happened to Subway, the leader in the submarine sandwich franchise business (OK, everything except the evil queen part).

It was 1996 when Subway last found itself in the coveted No. 1 position in our listing. At that time, when founder Fred DeLuca was asked to look into the future and predict where he thought Subway was going, he said, "We'll see truly explosive growth." And from the looks of it, DeLuca was right on the money.

So what is Subway doing to ensure a bright future five, 10, even 20 years from now? "We're focused on building our customer base further through product improvements and increased store distribution," says DeLuca.

Explosive growth has indeed occurred: Subway saw the addition of more than 600 new franchises last year, as well as a 16 percent increase in store sales volume. "We made our menu more exciting than it's been in years," says Subway director of franchise sales Don Fertman. "[We have] our new Subway Select line of gourmet sauces and sandwiches and our low-fat line of sandwiches, as well as the increased [presence] of our advertising, which has made people notice Subway all over again."

Nobody could have possibly missed, for example, the prominent Subway ad that ran last year featuring Jared Fogle, who lost 245 pounds eating Subway sandwiches. "We're the kings when it comes to eating healthier," says Fertman, "and [the food] tastes good." With the popularity of the "7 Under 6" menu (seven sandwiches with 6 grams of fat or less), many see Subway as a fresh and healthy alternative to greasy burgers.

Growing Strong

Still, serving good food is just one part of the puzzle--one can't underestimate the growth. Subway restaurants are expanding in places like Boston, New York, Philadelphia and San Francisco. "We're starting to make inroads in areas where it's been difficult to develop stores in the past," says Fertman.

Not content to stop in North America, Subway has seen its international presence increase enormously as well; most recently, it's moved into England and Germany. "What we're trying to do," says Fertman, "is follow the same [rules] that made Subway what it is today in North America: Keep the investment low and the operation simple, and make it appealing to a lot of people who couldn't get into business before--people who wouldn't have a shot at something larger and more expensive."

Serving about 731 million customers worldwide, Subway has made the kind of impact any business would naturally envy. Domestic franchisees can join the North American Association of Subway Franchisees (NAASF), an independent organization of franchise owners that meets regularly with Subway management. Taking care of advertising at both national and local levels is the job of the Subway Franchise Advertising Fund Trust (SFAFT), another franchisee group. And if franchisees have something on their minds they'd like to share with the company founder himself, they can call a toll-free, franchisee-only number to leave a voice mail for DeLuca or anyone else in the company. "We're talking about how every franchisee counts," says Fertman. "Any franchise owner can talk to Fred and make his or her ideas known."

In fact, strong internal communication and franchisee input spawned the Subway Club sandwich--it was a franchisee's idea that eventually went systemwide. "Everybody matters," says Fertman. "That's how our system works." Subway also greatly encourages franchisees to open multiunit stores by reducing the franchise fee and providing financing programs for owners to expand into more restaurants.

In recent years, Subway has also met with its fair share of negative press detailing the dissatisfaction of some franchisees. Fertman strongly advises potential franchisees to investigate both negative and positive publicity by talking to real franchisees and getting their take on things. "In a franchise system, you can't make all the people happy all the time," explains Fertman. "The question is, How is the company doing? How are the majority of franchisees doing? [If someone] talks to franchisees and finds one unhappy person--he could make a story about that. But what about the other 99 people? Happy people simply aren't news."

The Subway Series of Success

"This is the most exciting time in Subway's history," says Fertman. "With the new menu, the current advertising program, the awareness people have of Subway, the way our average unit volumes are growing . . . to see our franchise owners become more and more successful, what could be more exciting than that?"

No fairy tale can even compare.

Want to know more? Learn how we choose the top franchises in Entrepreneur's Franchise 500®

The Contenders

Though Subway claims the No. 1 spot on the Franchise 500®, there are other sandwich-makers climbing up the ranking. Assuming these franchisors would like to win the great submarine crown, we asked each of them what they're doing to compete.

The Quizno's Corporation, ranked no. 6

Thanks to an explosion of franchise locations, Quizno's jumped from No. 47 in 2000 to No. 6 this year. With 868 franchises open, Quizno's has a strong presence in the Southwest--especially in its home state, Colorado. The year 2000 also brought the introduction of some popular menu additions--like the Black Angus Steak Sandwich (so popular as a limited-time offer, it was added as a permanent menu item). "We've always felt our product was very distinctive, primarily because we toast all our sandwiches--that really sets us apart from our competitors," says Sue Hoover, executive vice president of corporate communications. "It's really our product that sells [our franchisees]."

Blimpie International Inc., ranked no. 28

In addition to a new franchisee training program called Blimpie University, Blimpie's Kelly Gray says the company is also differentiating itself in the use of its advertising dollars--half the ad budget is spent nationally; half is spent regionally. "We have a new advertising strategy that's more focused on our products," says Gray. The company's new slogan: "Simply Blimpie." What Blimpie is offering its more than 2,100 franchises worldwide is simply growth: It hopes to raise store sales volumes 20 percent over the next five years.

Jersey Mike's Subs, ranked no. 90

Jersey Mike's Subs has seen its numbers grow to almost 200 this year. It boasts a strong presence east of the Mississippi--franchises can be found in states including Ohio, Tennessee, North Carolina, Virginia and, of course, New Jersey--with an eye on expanding internationally. "We're authentic subs," says president Peter Cancro. "We differentiate ourselves by the quality and quantity of our product. No one else is doing what we're doing. We cut our bread all the way through, so [we] have to put a lot more meat on."

Cousins Subs Systems Inc., ranked no. 147

A focus on building out existing markets has been Cousins Subs' plan of attack this year. With a strong presence in the Midwest, Cousins' growth strategy involves creating local markets of 10 or more franchises under area developers. "Our business model provides for a higher reward to our area developers. We split the royalties 50/50 with [them] as they build out these markets," says executive vice president Dave Kilby. "That's probably one of the best reward systems in all of franchising."