Subway Keeps Phelps

One day after Kellogg's decided it would not attempt to renew its deal with Michael Phelps, which expires at the end of the month, Subway has decided to keep the most decorated Olympian on their roster.

Subway, like Kellogg's, did not issue a comment after the controversial photo of Phelps surfaced, leading many to believe that they were seriously considering ending the deal. Rumors also circulated when they pulled Phelps' name from their Web site today.

"Like most Americans, and like Michael Phelps himself, we were disappointed in his behavior," Subway said in a statement, posted first by Ad Age. "Also like most Americans, we accept his apology. Moving forward, he remains in our plans."

Sources tell CNBC that it's expected that the spots starring Phelps will be delayed, but that they were going to be delayed before the bong photo emerged thanks to the success of the $5 footlong spots as well as a bunch of other commercials with sports stars that were in line to run.

If Subway dumped Phelps it likely would have had to "eat" much of the contract, which runs through the 2012 games, and pay Phelps the full value.

Not only has Phelps not been convicted of smoking marijuana (though South Carolina might file criminal charges based on the photo), Phelps' only admission to smoking has come through a non-denial, which means he legally hasn't admitted to smoking from the bong.

A host of restaurant chains offered deals to Phelps, who was open about his love for McDonald's in Beijing, but Subway won the rights with promises to market him worldwide.

Subway also has partnerships with Laila Ali, Reggie Bush, Ryan Howard, Michael Strahan and Carl Edwards. Subway is the highest-grossing fast-food sandwich chain in the U.S., with $8 billion in annual revenue.

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