Three Chains Want To Topple Subway

Subway opened up its 40,000th store worldwide last month, putting any doubt of its seat as the sandwich shop king to rest (even McDonald's counts less than 35,000). But that doesn't mean there aren't a few challengers looking to loosen its grip.

The would-be successors to the throne run the gamut when it comes to size, with Potbelly Sandwich Shop the smallest. The Chicago-based chain just filed for a $75 million IPO and has just 286 locations across the U.S., but that hasn't put a damper on its plans. The chain saw a 15.5 percent jump in revenue to $274.9 million last year and plans to grow its number of locations by at least 10 percent annually.

The other two upstarts are not only bigger, but were the two fastest growing restaurant chains in the country last year, according to Nation's Restaurant News. Firehouse Subs, based in Jacksonville, Fla., grew by 34 percent last year and has more than 630 locations (with plans to expand to 715 this year), while Jimmy John's Gourmet Sandwiches, headquartered in Champaign, Ill., numbers 1,500 stores and grew by 25 percent.

So what's the key to taking a bite out of the world's biggest fast-food chain? Location, location, location.

"We consider the location of a shop to be a critical variable in its long-term success, and as such we devote significant effort to the investigation and evaluation of potential locations," Potbelly noted in its Securities and Exchange Commission filing. For all their bluster, though, Subway's chief development officer Don Fertman doesn't seem that worried about rival chains.

"If we go back five years, we added about 4,200 units," he told Bloomberg Businessweek. "All the other sandwich chains together lost 1,800 stores."

In fact, he adds that their efforts to move in on Subway's turf might even benefit the the reigning champ.

"We're happy to have others advertise sub sandwiches, and we all benefit from that," he said.

For more:

- See this Bloomberg Businessweek story

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