I grew up in New York.  So, as far as I am concerned, every underground city transit system is a subway.  Sure, I know the system in San Francisco is called BART (Bay Area Rapid Transit), in London- it’s the Tube, and le Metro in Paris.  I still say I am taking the subway.

Which is what my friend and I said when we were expecting a ride to the DC transit (sic) system the other day.  And our ride left us, thinking we had elected to get a bite to eat next door.  Yup.  That Subway.

And, like McDonalds, Subway, the world’s most ubiquitous restaurant (almost 44000 shops in 110 countries), is feeling the pain of no gain.

I admit to having affinity to the chain.  First of all, they have some pretty decent vegetarian alternatives.  (Keeping kosher means this is an important factor determining whether I can can eat a chain’s food.)

And, as I’ve mentioned before on this blog, I was very active in the Association of Venture Founders (in the 80’s, when Venture Magazine, was under the direction of my friend and mentor, the esteemed Arthur Lipper).  I recall the day Fred DeLuca joined our group.

Like Ray Kroc and McDonalds, Fred didn’t start the eatery chain.  He acquired Pete’s Sandwich Shops, which started with its Bridgeport (CT) location in 1965. In 1974, the chain name became Subway.  And, it’s “healthy” fare has helped it maintain a reasonable market share through the years.  But, not really- since the average shop grosses less than $½ million each year (that’s food, pop, and snacks).  In contrast,  McDonald’s averages $ 2.4 million per store.

Of course, the return to the franchisee is pretty good.  It can cost $ 1 million to open a McDonalds- but only $ 115K to get that Subway franchise.  Of course, there’s also a 12 cent bite on each dollar of revenue that Subway takes.  Given the volume of sales, we can guestimate that Subway has about 220 customers a day- versus more than 1600 for McDonalds.

But, like the other  food chains, Subway’s sales are slowing down.  Both per store- and with new store growth.  Part of Subway’s problem is generational.  We (I know who’s old!) used to consider “healthy” foods as those with fewer fats and lower caloric content.  But, the Millenials are attached to “organic”, “natural”- and even local.  (Hmm.  Healthy hasn’t changed it’s definition.  It’s still fewer fats and lowered calorie levels.)

Now, the chain is considering removing all artificial ingredients.  Which can’t hurt sales. But, it’s not clear this is the answer Jeff needs to get his shops to the top of the line.  At least he is trying to make more changes than McDonalds seems to be considering.

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