The story of Subway’s explosive growth lies in its franchise business model, which was born of founder Fred DeLuca’s struggle to keep up with demand for his submarine sandwiches. Forbes reports that the first Subway opened in Bridgeport, Connecticut, in 1965. Only three years later, DeLuca managed five locations – a challenging endeavor, especially for restaurants further away from the Bridgeport location.
Thanks to DeLuca’s decision to allow folks to buy the rights to open and operate their own franchises, by 1975, Subway had become a regional fast-food chain with locations across Connecticut and New York. By 1978, Subways were popping up on the West Coast, with more than 100 total locations, and in 1984 the first overseas franchise opened in the Middle Eastern country of Bahrain (via Franchise).
The prevalence of Subways around the world can be partially attributed to how cheap they can be to operate. According to Franchise, Subway has some of the lowest franchise costs in the industry, with an initial $15,000 franchise fee and an estimated total investment between $116,000 and $263,000 in the U.S. Franchise owners are charged a 12 percent weekly rate, which comprises of payments for royalties and advertising.