Fred DeLuca is co-founder and President and of the SUBWAY® restaurant chain. With more than 36,000 stores in 96 countries, many believe Subway is now the largest fast food franchise in the world, as they just passed McDonalds, which was actually predicted by Mitch on Let's Talk Business radio with Fred Deluca when Subway had about 8,000 units.
The Subway "system" utilizes thousands of owners, store employees and vendors providing the system a net worth in the billions!
Entrepreneurship at an Early Age
Fred started with a single sandwich shop in 1965 at the age of 17. Fred needed to find a way to make money for college. Fred discussed his dilemma with family friend, Dr. Peter Buck. Dr. Buck, a nuclear physicist, suggested that Fred open a sandwich shop as he saw that such a business had been quite successful in his home town.
Fred knew he needed some capital to finance the shop and Dr. Buck provided Fred with $1000 in capital and thus the partnership was made. The shop was even called Pete's Super Submarines after Peter Buck!
About Subway and franchising
For Fred and Peter, it wasn't a free lunch! In fact, the first store was struggling when the 2 decided to open a second store. This second store struggled as well. Instead of throwing in the towel, in a bold move many experts would think ludicrous, a third store was opened in a highly visible location. Three was a charm for the partnership.
The rest is history with the first "franchised" store opening in Wallingford, CT in 1974. The first international franchise came 10 years later in Bahrain, off the coast of Saudi Arabia.
Franchising was the plan created to provide exposure to the brand, business expansion, and opportunity for individuals wishing to open a "business system" themselves.
Franchising is most notably associated with large organizations such as SUBWAY®. But each of these businesses started with a sound product that will be nationally and internationally sought after. Of course, there are very successful regional franchises as well.
The key is the KISS principle (Keep It Simple Stupid).
A franchise system must allow an owner to "stick to the knitting" of the business. A successful franchisee at SUBWAY®, for example, must be able to provide an optimum eating experience for it's customers as defined by the guidelines of the company. While there are costs to franchise systems, franchising is the most successful means to start a business and franchise systems constitute more than 42% of all retail sales.
"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".
"My parents didn't deprive me but we were poor- poor isn't the right word. Back then I don't think there was alot of expendable income, so kids pretty much figured out how to make their own way"
Fred did make his own way even as a youth servicing 95 of the 108 customers in his paper route territory.
"I passed by lots of doors that were not my customers. I have to sell to these people because it doesn't take any more time to drop the papers in front of these doors-I'm walking by anyway".
Key thoughts for entrepreneurs
Each one of us has the opportunity to be a Fred Deluca or Peter Buck. We can each chose to set and reach lofty goals. Fred could not have imagined that after store number 1, 2, or 3 that Subway would become the enterprise it is today. Not only should we understand our own goals but we must also be open to the passion and entrepreneurial drive in others. Fred Deluca needed a start to pursue his vision. Most small businesses, including SUBWAY® was financed by friends, family, and personal funds.
The true “golden nugget” of knowledge inside the estimated more than $10 billion in annual sales at the SUBWAY® restaurant chain is the concept above…
A member of Let's Talk Business Network was talking about his service business and astutely made the comment, "I charge extra for simplicity".
SUBWAY® developed a "system" such that barrier to entry is relatively simple 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 franchisor to give the franchisee the best opportunity for success.
Many entrepreneurs simply spend too much time on tasks not associated with their overall mission. When thinking about a franchise, buying an existing business or starting from scratch, you must consider what truly interests you! Franchise systems for instance, are not for entrepreneur's who want to "create". The franchise system as a whole is a turn-key system designed for those who enjoy the products or services (making and selling sandwiches in this case) and desire a business with a track record for success. Keep in mind that franchises demand tremendous effort no different from any other business endeavor.
The next time you walk into a franchise or a business that has stood the test of 12-20 years such as a SUBWAY® Restaurant, notice the similarities. Value is seemingly provided accurately, easily and consistently. To the trained eye, such value is learned over many years, countless failures, experience, knowledge and intense effort.
Books by Fred Deluca:
Start Small, Finish Big : 15 Key Lessons to Start--And
Run--Your Own Successful Business by Fred Deluca,
John Phillip Hayes
Chicken Soup for the Entrepreneur’s Soul, Advice & Inspiration for Fulfilling Dreams. - contributing author