Subway modernized a stale menu and built missing tech ahead of its $10B sale (interview)
In a Fortune interview, CEO John Chidsey describes modernizing a chain that had closed a quarter of its US stores; digital's sales share quadrupled.
What was changed
When John Chidsey — the former Burger King and Avis CEO who came out of retirement — took over Subway in 2019, the chain had been run by its founding family since 1965 and, he told Fortune, hadn't updated its menu or invested in technology in the decade before his arrival. Between 2015 and 2021 Subway closed 6,000 US stores, almost a quarter of them, while losing ground to McDonald's and Panera. The owners were by then eyeing a private-equity sale reportedly worth $10 billion.
The fixes started with governance and compensation: a professional management team, a board with independent directors, and an equity compensation plan — all absent under founder Fred DeLuca, who had no succession plan through his illness and death, didn't pay bonuses until he passed, and whose biggest bonus was 5%. On the product side came deli-style items and set-recipe sandwich series, plus a digital push: 'We had all the money in the world, but the brand didn't choose to focus on digital.' Digital sales have since quadrupled as a share of total sales.
The results, self-reported since Subway is private and doesn't disclose financials: sales per restaurant, excluding newly opened or closed locations, are close to 2012 levels but have risen in each of the last ten quarters — the best streak in over a decade — and the company has resumed opening stores after the long closure run. Chidsey sees room to 'double or triple' digital again, plus a catering business Subway never built.
Why it worked
A decade of founder-family drift left the menu, in Chidsey's word, 'stale and static' while quick-service rivals invested.
No succession plan through DeLuca's illness and death meant years without menu innovation at the world's largest chain by store count.
Founder taboos — no equity program, minimal bonuses — made it hard to attract the professional talent a turnaround needs.
Digital neglect was a choice, not a budget problem, and closing the gap was cheap: Subway could copy what already worked at rivals.
What can be applied
Companies run for decades on founder rules inherit the rules' blind spots: Subway's first fixes — equity pay, bonuses, independent directors — were all founder taboos.
Aftermath
As of the July 2023 interview, the modernization was running ahead of the reported $10 billion sale to private equity: ten straight quarters of per-restaurant sales growth, a quadrupled digital share, and store openings resumed. Chidsey, who had led turnarounds at Burger King and Avis, described the license a broken incumbent gives its fixer: 'I have license to try anything and everything.'