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Neck and Neck

Being No. 1 in the franchise race has its advantages, but there will always be others nipping at your heels.

For so long, McDonald's has been known by millions of children, busy parents and working stiffs around the world as the king of franchises. Who'd have guessed that one day, another franchisor would consistently challenge the burger giant's title?

In 1988, Subway dethroned McDonald's as No. 1 in Entrepreneur's Franchise 500®, touching off a virtual tug-of-war for first place. Subway had done the unthinkable. And it soon became the only other franchise to prove it wouldn't give up the top spot so easily. For the twelfth time in the past 17 years, Entrepreneur has ranked Subway as the No. 1 franchise, once again keeping the crown away from McDonald's (which has only ranked No. 1 eight times). There's good reason for Subway's dominance. Its enterprising approach made Subway explode onto the franchising scene, and in 2004's Franchise 500®, it outnumbered McDonald's U.S. locations 15,874 to 11,533. Subway has risen to glory armed with an aggressive development plan that has let it capitalize on society's appetite for healthy dining and catapulted it ahead. But for every new victor, a contender waits in the wings.

Subway set out from the beginning to become No. 1 in 1965, when Fred DeLuca founded the submarine sandwich shop with a goal of 32 stores, because the only other sub chain had 31. "Goal-setting has always been important," says Don Fertman, director of development for Subway. "Besides being No. 1 in every market we serve worldwide, our main goal was to look at what the possibilities can [lead to]."

Subway's expansion has covered North America, and the chain has leapt overseas to 73 other countries. "It was a combination of 'if you build it, they will come,' and 'come one, come all to Subway,'" Fertman explains. "We'll teach you the business, and you make it work in your market."

Strong expansion and successful campaigns ultimately helped Subway overtake McDonald's top spot, possibly setting the mold for aggressive No. 2 franchises. Stephen J. Spinelli Jr., founder of Jiffy Lube International Inc. and director of the Arthur M. Blank Center for Entrepreneurship at Babson College in Babson Park, Massachusetts, weighs in: "They created an expertise in a method of franchising that was not effectively used by many franchisors prior to Subway: development agents. That put in place a franchise infrastructure that allowed for dramatic scaling of the concept and selling additional franchises as they came in, so they had this dual-pronged approach that was extremely effective."

And although Subway has long touted itself as the "fresh alternative" to greasy fast food, the successful Jared Fogle campaign took Subway's low-fat offerings and brought them to consumers' attention. "You can lose weight eating Subway's sandwiches!" everyone cried, and the rest was history. But Quizno's, another purveyor of the art of submarine sandwiches, has moved in and gained ground in the sub wars, and the battle is far from over.

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This article was originally published in the January 2004 print edition of Entrepreneur with the headline: Neck and Neck.

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