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Franchise Prospector » Success Stories
Subway Piles on Success
Fred Deluca has propelled submarine sandwiches to the forefront of the fast-food industry, taking Subway Restaurants from a single store to nearly 28,000 franchises worldwide.
Fred Deluca failed to achieve his goal of becoming a medical doctor. While trying to earn money for college, however, he stumbled into a business opportunity that has become one of the country's leading fast food franchises. With a $1,000 loan from family-friend Dr. Peter Buck in 1965, 17-year old Deluca opened his first sandwich shop in Bridgeport, Connecticut. Initially called Pete's Super Submarines, Deluca eventually changed the business' name to Subway Restaurants. Forty-odd years later, Deluca has parlayed this small store into a company with nearly 28,000 franchises in 86 countries producing over $9 billion in annual sales.
Franchising Key to Phenomenal Growth
After their initial success, Deluca and Buck, a.k.a. Doctor's Associates, Inc., set a goal of opening 32 restaurants in their first 10 years. In 1974, with a store count of 16, they started to think about franchising. In a November 2003 Entrepreneur Magazine article, Deluca stated he quickly realized managers at remote company-owned stores lacked motivation. Franchising seemed to be the solution for stimulating management's interest at stores located away from company headquarters. Today, all 27,775 Subway Restaurants are franchised.
Deluca believes the company is strengthened by letting franchisees exercise their entrepreneurial talents. Two slots are kept open on each store's menu board for individual franchisee creations. A recent Subway store located in a Jewish community center features all kosher menu items. Franchisees are encouraged to think outside of the box when they decide where to locate their stores, which is why you find over 6,000 Subway Restaurants located in nontraditional settings--inside Wal-Mart stores, convenience stores, hospitals, and schools.
Low Initial Cost Opens Franchisee Opportunity to Many
Subway's growth strategy centers on Deluca's belief that initial franchise investment costs should be kept low enough to be affordable for a wide range of entrepreneurs. This approach allows people of limited means to realize dreams of owning their own businesses. Recent immigrants, who often cannot find employment opportunities appropriate to their skills and background, often benefit from the low investment costs of buying a Subway franchise.
Up-front franchising expenses vary depending on a store's location and size, but generally range from around $94,000 to $223,000 - a fraction of competing fast food franchise prices. Franchisees receive corporate financing and benefit from Subway's large-scale buying discounts on equipment and supplies. Corporate help with training and marketing supports new franchisees and gives them a solid foundation for success.
Deluca's leadership and beliefs have made Subway a proven leader in the fast food industry, earning the company the number one spot on Entrepreneur Franchise 500 an amazing 15 times.
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