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Inspiration from Fred Deluca

Estimated Lesson Time: 3 minutes

Fred DeLuca (1948–2015) was the founder of Subway sandwich shops; the most successful franchise ever. At the end of 2010, Subway became the largest fast food chain worldwide, with 33,749 restaurants–1,012 more than McDonald’s.

Success is often a side effect of a “problem.” In the summer of 1965, the ambitious 17-year-old Fred Deluca wanted desperately to attend college but did not have enough money. Opening a sandwich shop was the solution.

Success is seeking help from others when needed. Fred sought assistance from a long-time family friend, Dr. Peter Buck, who offered him the idea of starting a sandwich shop, and the financial backing ($1000) to do it.

Success is “learning how to fish.” While Dr. Buck could have easily loaned Fred the money for school, he loaned Fred a much smaller amount that would be used to help Fred create his own source of income to pay for his own school.

Success is setting goals and striving to reach them. Over the years, both Dr. Buck and Fred worked very hard at making their sandwich shops (Subway) succeed. They had a goal of opening 32 submarine sandwich shops within ten years. By 1974, eight years after their first store, they owned and operated 16 units throughout the state of Connecticut. Although it seemed unlikely that they would double that number in two years, DeLuca focused on reaching his goal.

Success is making deals when needed that others can’t refuse. DeLuca figured that the fastest way to expand the business was to go out and find a franchisee. He approached his friend Brian Dixon with the opportunity and even offered to loan Brian the money to buy their restaurant in Wallingford, Conn. DeLuca even said that if Brian didn’t like the business, he could return the store to them and owe them nothing. Dixon refused at first but eventually moved forward becoming the first Subway franchisee.

Success is being flexible. “It’s not necessary to be so structured in this world. With all the people who work here (Subway), whether you are real structured or not, it is not going to affect how much work they do. People have inside of them a certain work ethic, and, if you appeal to them nicely, they’ll respond and give all they can give.”

Success is in the business system, not necessarily the product. Subway developed a business system such that the cost of starting a franchise up is relatively small compared to other franchises and business in general. Through economies of scale, the system is able to provide tremendous cost savings passed on to franchisees. The cost of the franchise was relatively low per average store. The equipment, financing, supplies, training, and more, is supported by the franchiser to give the franchisee the best opportunity for success.

Success is often learning along the way. “We didn’t really know the franchising business, and it’s [a very] different business from the store operations business,” Fred Deluca says. “Just because we knew how to run stores didn’t mean we knew how to run a franchising company—at that point, we were in the beginning stages of learning how to be a franchiser.”

[Sources: http://www.subway.com, http://www.qsrmagazine.com, http://www.ltbn.com, http://www.entrepreneur.com]

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