Frederick "Fred" DeLuca (born 1948) is an American entrepreneur, best known as the co-founder of the Subway sandwich shop franchise restaurants. He was born in Brooklyn, New York, and after several moves, the family landed in Bridgeport, Connecticut.
Before attending the University of Bridgeport, Fred needed to make money for school where he planned to study medicine. He sought out an old friend of his parents, Dr. Peter Buck, a physicist. Buck liked the idea of a shop that offered healthier food because at the time, burgers and pizza were the standard on nearly all fast-food menus. DeLuca seized the idea of submarine sandwiches - a novelty food named because the long oblong bun shape.
Buck loaned DeLuca $1,000 in 1965 and they owned the new business together, named Peter’s Submarines. DeLuca was 17 years old. By the end of the summer, the shop had netted $6. Buck was not discouraged and they opened a second store to create the image of success and it had nearly exactly the same results. Disaster! They decided to change the name from Pete’s Submarines to the catchier name Subway and paid more attention to the location. The third store actually earned a $7,000 profit.
DeLuca did earn his degree from the University of Bridgeport, but was hooked on the entrepreneurial life. They had hoped to have 30 stores opened in the first 10 years but they fell short by half. In 1974, they decided to start franchising. The goal was 32 stores and franchising would let them open stores farther away. They knew nothing about franchising. First they asked $5,000 for a franchise but when there were no takers, they lowered the fee to a $1,000 (they raised it back when they had more success).
In eight years, they had grown from 16 stores to 200. DeLuca set a goal of 5,000 stores by 1994. They set up a program for a select group of franchisees where they paid them for getting new stores open and supporting other franchisees in their region. It worked! They had 1,000 stores in 1987 and by 1990, they had 5,144 locations, with a goal of 8,000 by ’95. They had 10,000 stores by then.
There were some hiccups during this time. There were complaints to the Federal Trade Commission about who they could and could not sell a franchise to. There were complaints that they would sell to anyone, whether or not they could read or write English and were doomed to fail. There were also issues with cannibalization. These problems were solved with a review process to that let existing owners speak up if a new store was planned close by.
Innovation has been ongoing, like reducing salt, adding spinach and adding egg-white patties, which made a terrific sandwich. The Jared Fogle campaign where he lost 245 lbs. eating at Subway was a huge success.
Visiting stores is an integral part of DeLuca’s job. He is known to drive cross-country for a tour of anonymous visits, in which he simply orders a sandwich. Owners or employees rarely recognize him. With over 10,000 outlets in the United States alone, he tries to pack in as many visits as his day permits and sometimes eats a half-dozen subs a day. He says, “If the sandwich is made properly, I can eat one for every meal and never get sick of them.”
Subway is one of the fastest growing franchises in the world with 39,517 restaurants in 102 countries and territories as of June 14, 2013. They had nosed out McDonalds in 2010 for the most stores Worldwide.
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We didn't really know the franchising business, and it is a very different business from the store operations business. Just because we knew how to run stores did not mean we knew how to run a franchising company.
I did not know enough about business to realize how bad we were doing. And I did not have the concept that you should quit at something. I can think of so many reasons why we should not have made it. We were on the edge continuously. So never quit.
We have good market acceptance and that’s why Subway is growing very nicely. We win markets one customer at a time – that’s been our simple formula since the beginning.
Dr. Peter Buck