McDonald's vs Subway

Richard and Maurice McDonald opened a barbecue restaurant in San Bernardino, California in 1940. After analysing their sales data, they discovered that hamburgers, french fries, and milkshakes accounted for 80% of their revenue. In 1948, they closed the restaurant for three months, fired their carhops, and reopened with a radically simplified menu of nine items. The Speedee Service System — an assembly-line kitchen based on Henry Ford's manufacturing principles — could produce a hamburger in 30 seconds. Prices were cut by 50%. Lines formed around the block.

Ray Kroc was a 52-year-old milkshake machine salesman when he noticed that a single McDonald's restaurant in San Bernardino had ordered eight of his Multi-Mixer machines — enough to make 40 milkshakes simultaneously. Curious, he drove to California and was astonished by the operation he found: fast, consistent, and enormously popular. He proposed franchising. The McDonald brothers were content with their single successful restaurant. Kroc eventually convinced them and signed a franchise agreement in 1954.

Kroc bought the McDonald's name and concept from the brothers in 1961 for $2.7 million. The brothers retained their original San Bernardino restaurant, which they renamed "The Big M." Kroc opened a McDonald's directly across the street and drove them out of business. He later said he was not proud of it. Richard McDonald died in 1998 with a net worth of approximately $1.8 million — a fraction of what his name had generated. The original brothers received nothing from the subsequent growth of the McDonald's empire.

Morgan Spurlock's documentary Super Size Me, released in 2004, depicted the health consequences of eating McDonald's three times a day for a month and triggered a global conversation about fast food and obesity. McDonald's discontinued the Super Size option within six weeks of the film's release. The company subsequently invested heavily in menu diversification — salads, wraps, fruit, and coffee — transforming from a burger-only operation into a broader fast food restaurant. The McCafé concept, launched in Australia in 1993 and expanded globally, made McDonald's one of the world's largest coffee retailers.

McDonald's reported full-year 2025 revenues of $26.9 billion — up 3.7% — with systemwide sales growing 7% across its 43,000+ locations in over 100 countries. Global comparable sales increased 3.1%, with the U.S. increasing 2.1% and International Operated Markets increasing 3.2%. The company had 175 million active loyalty members across 60 markets, with systemwide loyalty sales of approximately $30 billion in 2024 — growing 30% year-over-year. Q4 2025 saw U.S. comparable sales increase 6.8%, reflecting recovery from a prior-year period that had been hurt by a widely reported E. coli outbreak linked to the Quarter Pounder. The company that Ray Kroc had built from a milkshake machine discovery was serving roughly 70 million customers per day across the planet.

Fred DeLuca was 17 years old in 1965, working minimum wage at a hardware store in Bridgeport, Connecticut, trying to figure out how to pay for college. He asked a family friend — Dr. Peter Buck, a nuclear physicist — for advice. Buck didn't offer tuition money. He offered $1,000 to open a submarine sandwich shop together. They shook hands. On August 28, 1965, they opened Pete's Super Submarines in Bridgeport, selling 312 sandwiches the first day. The first location failed. DeLuca's biggest regret was choosing a bad spot. The third location, in a high-visibility position, worked. The name changed to Subway in 1968.

By 1974, DeLuca and Buck had opened 16 Connecticut locations. They began franchising — a decision that launched extraordinary growth. The Subway model was built for replication: low startup costs ($15,000-$30,000 vs. hundreds of thousands for McDonald's), simple operations, a customisable assembly-line sandwich that required no cooking equipment beyond a toaster oven, and aggressive international expansion. DeLuca was known for pushing franchisees to open additional stores near their existing ones — sometimes across the street — creating a density that no competitor matched.

In 2002, Subway became the largest fast-food chain in the United States by number of outlets, surpassing McDonald's. At its peak, Subway operated nearly 44,000 locations across more than 100 countries — more restaurants than any chain in history. The growth was built on a simple value proposition for franchisees: lower investment, lower risk, and a brand that had become synonymous with "healthy fast food" through years of effective marketing, including the famous "Jared" campaign featuring a customer who claimed to have lost 245 pounds eating at Subway.

Fred DeLuca was diagnosed with leukaemia in 2013 and died on September 14, 2015, at age 67 — just weeks after Subway's 50th anniversary. Control passed to his sister Suzanne Greco, then to John Chidsey, the first non-family CEO, in 2019. Net store count had been falling since 2015 — approximately 7,000 locations closed between 2015 and 2023, primarily due to poor unit economics for franchisees in a market where Chipotle, Jersey Mike's, and delivery platforms were taking customers. The Jared scandal (his conviction for child sex offences in 2015) had damaged the brand's marketing legacy.

Subway was sold to Roark Capital Group — a private equity firm specialising in franchise brands (also owning Dunkin', Arby's, Jimmy John's, Sonic, Buffalo Wild Wings) — for $9.6 billion in a deal completed in April 2024, ending 60 years of DeLuca family ownership. Subway operated approximately 37,000 restaurants globally and generated about $9.5 billion in US systemwide sales in 2024. The "Fresh Forward 2.0" restaurant redesign was unveiled in late 2024, with a global rollout planned for 2025. The 17-year-old who had borrowed $1,000 to pay for college had built a restaurant system now owned by private equity.