In all, 21 sandwich shops made this year's rankingsmaller chains scattered across the country. Charley's Grilled Subs has 120 new outlets; [image-nocss] Jimmy John's, 170; Jersey Mike's, 42; and Firehouse Subs, 30. Meanwhile, Subway opened 1,833 new locations last year, said the report.
"It's been kind of astounding. Our growth has been enormous," said Fred DeLuca, who co-founded Subway in 1965 at age 17. The company, which had 250 restaurants in 1982, grew to 11,000 in 1995 and jumped to more than 32,000 worldwide in 2009. The pivotal moment, DeLuca told the magazine, came about 10 years ago, when Subway positioned itself as a healthful, quick alternative to burgers and fries, created a strategy for major expansionand got lucky when Jared Fogle discovered the company's low-fat subs.
But Subway's decade of growth was also the result of sticking to its winning concept: The footprint for a Subway can be as little as 600 square feet, initial costs can be as low as $84,000, and a lack of griddles, fryers and drive-thrus means franchisees can open their restaurants almost anywhere. In fact, more than 7,000 nontraditional Subways have popped up in convenience and department stores and at racetracks and one mega-church, the report said.
The idea that is getting the company through the recessionthe $5 Footlongactually came from a south Florida franchisee, who began pricing certain sandwiches at $5. Other Subways soon followed and by the time the $5 Footlong was introduced nationally in 2008, the country was heading into recession and pricing was on everyone's mind.
"People are trading down from full-service restaurants to fast food," DeLuca said. "There's value in tapping into the mass market and being a business that thinks of and sells to everyone."
The $5 program has helped push same-store sales increases into double digits and created a new benchmark for fast-food marketing, the report said. Other sandwich and fast-food chains have followed with their own $5 deals.
For 2010, Subway has its sights set on Boston and other areas with lower saturation, it told Entrepreneur. But the big news is breakfast: Subway is planning to roll out a national morning menu in partnership with Seattle's Best coffee in the coming yeara move that seems destined to rock the fast-food status quo.
As for the rest of the Franchise 500 list, in fast food, while higher-priced restaurants struggle, takeout and fast-food franchises are more than holding their own: 22 of this year's top 100 franchises are quick-service restaurants, including three of the Top 10 (Subway, McDonald's and Dunkin' Donuts). McDonald's and Dunkin' are also benefiting from the weakening of Starbucks and other premium coffee sellers.
And in the c-store sector, although it runs counter to the dominance of low-cost franchises, three convenience chains landed in magazine's top 25, thanks to impressive growth. At the top of the category, 7-Eleven leaped back into the Top 10, with net franchise growth of almost 1,800 units. As the largest company on the list, 7-Eleven could have just hunkered down and comfortably weathered this recession, but the company has pursued an aggressive growth plan insteadtaking advantage of lower real estate costs, encouraging independent c-store owners to convert to its system and selling off company-owned units to franchisees, said the report.
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