Fred DeLuca King of franchising

Fred DeLuca is a franchising legend whose simple formula for a sandwich has made many of his 'franchise partners' successful entrepreneurs over the years. Jane Denny caught up with the king of franchising.

Considering Subway is one of the fastest growing franchises in the world with almost 40,000 restaurants in more than 100 countries and world territories and an end year sales figure of $18bn, it’s hard to believe that its founder Fred DeLuca nearly gave up after his first six months.

What’s also staggering, given the reality of a teenagers bid to get together some college funds, is that Fred’s vision for his enterprise’s growth was just 32 outlets in a 10-year period.

What happened to his idea in the ensuing years is a franchising tale of such significance it’s hard to believe that it started as a humble sandwich shop on 3851 Main Street, Bridgeport, Connecticut “tucked behind Ann’s bakery” says Fred.

It was right after Fred graduated from high school in 1965 that he asked family friend, Dr Peter Buck, if he had any ideas on how he could earn enough money to pay for college.

“To my total surprise he suggested that I open a sandwich shop. I asked him a few questions about that and within 10 minutes he offered to be my partner.

The very first store opened on August 28, 1965, which Fred says he “proudly named Pete’s Super Submarines”.

It certainly wasn’t plain sailing but the problems Fred faced on his first day of trading was actually quite promising. “We had to close early that day because we ran out of bread. The lines had been out the door all day, and we were really excited that everything had gone so well,” explains Fred.

Bolstered by the popularity of his sandwiches, Fred pushed forward and kept his eye firmly on the future.

“From the beginning our goal was to have 32 stores in 10 years. We set that goal because we knew of a sandwich chain from Albany, New York that had opened 32 locations in 10 years,” reveals Fred.

But perhaps thankfully, when Fred spoke about ‘Pete’s Submarines’ people would often ask him about seafood pizza!

“It’s because they were hearing ‘pizza marines’ instead of ‘Pete’s Submarines’. From those experiences we learned that we needed a name that was easier to understand and difficult to mispronounce. In the late 1960s we transitioned to ‘Pete’s Subway’ for a year, and then to just ‘Subway’.

In the early days Fred’s parents helped out every day as well as his father’s friend Dick Pilchen. “He helped us to promote our tiny business. In fact, Dick painted our first Pete’s Submarines store sign, designed the Subway logo, and he still works with us to this very day.”

For Fred, the biggest challenge was the steadily declining sales trend during the first six months in business. “It got so bad that we almost gave up in February, 1966. Fortunately, we decided to focus on solving the problem rather than quit. However, our goal of 32 stores in 10 years kept us focused and enabled us to overcome the many obstacles we faced along the way.”

In the end, it actually took Fred and his team seven years and 14 stores to put all of the pieces together enough to satisfy the standards of a franchise package. This was the key moment that led to Subway growing to the current recorded outlets (at the time of going to press) of 39,282.

“In our 8th year of business it was clear that we wouldn’t reach our goal of 32 stores in 10 years without a change in strategy, so we decided to franchise.From the beginning Fred says he and his team knew they needed legal assistance for our franchise agreement, but most of their franchising knowledge was gained through trial and error. “It took us many years to realise how little we knew about franchising.”

Today Fred employs more than 100 staff for Franchisee Services and it is the company’s largest department. To put that in perspective, Subway employs 800 employees in Connecticut, plus another 300 work from 15 regional and country offices.

The number of people employed by his franchise owner must surely be hundreds of thousands by now.

Every franchise owner is assigned a Franchisee Service Coordinator to provide primary support because it is Fred’s “greatest desire for Subway franchise owners to be able to run profitable businesses so that they can provide for their families”.

The future looks good for Subway. The franchise is on track to reach 50,000 restaurants by 2017, and if all goes according to Fred’s plan there may well be 100,000 within 20 years.

Fred’s checklist:

  1. Set high but achievable goals for your business.
  2. Provide your franchise owners with good systems with which to run their businesses.
  3. Listen to input from your franchisees, your staff and your customers, and make changes as needed.

Chose a franchise system that you can believe in; learn the business well; and focus on building your customer base.