Cold Cuts, Buns and Money: Subway's Boom

Aug. 6, 2009 -- We all need to eat in boom times and busts. We all get hungry no matter what happens to home prices. And when the dust settles from this recession, there will still be lunch.

So what does this economy taste like?

It tastes fast. Fast food sales are projected to increase 4 percent in 2009. For Subway, the chain of sandwich stores, that could mean opportunity for further growth.

"That $5 foot-long program has done phenomenally well," Jeff Moody, CEO of Subway, told "Nightline." "We've grown double digits last year despite the economy and we're up again this year on top of last year. So we've been very very fortunate."

Watch the full story on "Nightline" TONIGHT at 11:35 p.m. ET

Chances are, there is a Subway near you right now. Having added more than 1,000 new stores already this year, the chain boasts 22,000 outlets in the United States alone. That's more than McDonald's.

"We can get into more smaller locations than [McDonald's] could -- we're in convenience stores, truck stops, we can get in more different kind of small footprints than they can," Moody said.

Not needing big kitchens, Subways fit almost anywhere. Not even the president can escape the chain's reach.

President Obama was approached by a Subway employee during a recent visit to the D.C. burger joint Five Guys.

"What are you doing in here? You can't be in Five Guys," the president joked. "You're going to get in trouble!"

"No, we're fine," said the sandwich man. "Thank you, sir."

The chain is more than fine. It has experienced explosive growth since the first Subway restaurant opened in Bridgeport, Conn., in 1965. Last year Subway sold 2 billion sandwiches.

And it's not just because Subways can fit anywhere.

The chain runs a lot of ads.

"We do TV, radio, we do print, we do digital, we pretty much do anything we can think of," said Moody. "You need to bring it to the consumer in a compelling way that breaks through and gets them to change their behavior and come and visit us. So advertising is that last piece that gets people to come to us versus someplace else, so it's critical."

Subway: The Infamous Jeans

Any discussion of Subway's success invariably drifts back to its knight in shining armor, wielding not a sword but a pair of very big pants: Jared.

"I never expected to be doing this when I was in college and I weighed over 425 pounds. And had you said, 'Hey, in 10 or 11 years you're going to be the face of Subway. Not only will you have lost 245 pounds by eating their product, but you're gonna become the face of the brand,' I would probably have thought you were absolutely crazy," said Jared Fogel, whose smashing weight-loss success on a Subway diet led to his becoming a mainstay of the chain's ads.

Fogel's story is the stuff of advertising legend. As a student at Indiana University, he claimed he lost more than 200 pounds on a diet that consisted of Subway sandwiches. So Subway put him on TV, and hasn't taken him off. That was 10 years ago.

"I have the pants, of course!" said Fogel, brandishing a lot of denim." "These are the infamous jeans that, as I said, have become pretty much more famous than I am. If I don't make an event, it's OK, as long as the pants make it. ... These are the actual pants. You know, the ones I actually wore when I was at my largest."

Fogel takes his pants on the road 200 days a year, speaking to kids about nutrition, and of course throwing in some plugs for Subway.

"By me eating Subway twice a day, in the first three months alone I lost 94 pounds," Fogel told a group of students in Brooklyn, N.Y. "Which is more than a lot of you guys weigh entirely. I lost you entirely. Vanished."

Moody called Fogel the "absolute cornerstone" of Subway's success.

"I believe the company would have been successful without Jared," Moody said, "but not nearly to the degree we are, because he took these healthy products and gave them a face that people could relate to. He's not a celebrity because he set out to be, but he's a celebrity because he resonated with people who had similar issues to him. And they said well, if that guy can do it, then I can do it."

Subway: 2 Million Options

Subway is pushing the nutrition angle harder than any other. The company wants to be seen as the healthy fast food place. If Fogel is the face and body of the nutrition operation, Lanette Kovachi is the brains. She is Subway's corporate dietitian.

"So we offer a choice, and we make sure that there's a good amount of choices that are low in fat so that people can make the right choice if they want to," Kovachi told "Nightline." She said a low fat sandwich contains 3 grams of fat from vegetables and bread, "so that leaves three grams of fat for all the rest of the things. We achieve that by making our meats extra lean and working with sauces."

The company believes promoting healthy food is particularly good business right now.

"Some things, people are still willing to spend what discretionary money they have, and one is actually health," said Moody. "They want to feel good about what they are buying with less disposable income, so we fit that niche nicely."

Of course, you don't have to eat healthy at Subway.

"There's five different kinds of bread plus flatbread," said Moody. "Four or five different kinds of cheese. When you get to the vegetables, he has 13 different kinds that you can get in whatever combination, and then you've got a whole array of different sauces. You can create 2 million different sandwiches.

"And I'm only halfway through them."

The chain likes to say its stores have something for the whole family. Obviously, Subway does have some of what Fogel refers to as "high-taste" sandwiches. "When you want to splurge you can have the meatball sub or the steak and cheese sub," said Fogel. "That's great. It's all about giving people the choices they want anyway."

"High taste" -- meaning flavorful, or fattening?

"Well, you know, we still say it's a lot better for you than a burger and fries," said Fogel.

And that distinction, Subway hopes, will carry the company into the future.