Subway - Fred DeLuca

Most of us have us have heard of Ray Kroc, the man that franchised McDonalds and made it into a world-wide empire. But have you heard of Fred DeLuca? While his initial intent was just to earn some money to attend college, Fred's franchise has more outlets today than McDonalds.   Deviating from my traditional format of featuring the story of newer franchise owners, I thought it would be valuable to my readers to learn the story of how a major franchisor evolved into a top brand.   Congratulations go out to Fred DeLuca. He is our featured Entrepreneur's Story this month. Have you figured out his franchise yet? And now for his story.

Fred DeLuca

In 1965, Fred DeLuca was preparing to attend the University of Bridgeport, where he wanted to study medicine. He had gotten a job in a hardware store to put himself through college, and was only making enough to buy lunch at fast-food restaurants like McDonald's. This experience and his interest in medicine gave him the idea of a "fast-food venture that provided a healthier, less fattening bill of fare." At this point, Fred was only 17 years old and his primary focus was how to fund his college education.   Although Fred was born in Manhattan in 1948, he grew up outside Albany in Amsterdam, New York. While living there, his family met Peter Buck, a nuclear physicist. The DeLucas moved to Bridgeport, Connecticut, while Buck had a home in nearby Armonk, New York. The families became friends.   Peter had been invited to a DeLuca family barbecue where he and Fred got into discussions about his healthier fast food idea and his financial predicament concerning college funding. LeLuca was hoping that Peter Buck would reach into his pocket and pull out a big stack of hundred dollar bills. Instead, Buck offered something more valuable - a business propostion. Instead of a gift or loan, he would partner with Fred and give him the money to open up a sandwich shop so Fred could work his way through school.  The initial $1,000 investment was enough to open a sandwich shop in Bridgeport, which he named Pete's Submarines, after Buck. But in the radio ad he bought, people were confused and thought he was saying, "Pizza Marine," and were surprised when they showed up and saw a sandwich shop instead. The name was changed to "Pete's Super Submarines." Later, thinking of the transportation system in nearby New York, DeLuca changed the name to play-on-words "Pete's Subway."   The first shop opened on August 28, 1965 at a mediocre location in the city of Bridgeport, CT. The first year of business was a learning experience and a challenge. A year later they opened their second location, having realized that visibility and marketing were key factors to success. DeLuca believed that the biggest mistake he made was where he set up his very first shop as it was a "crummy location. The third outlet was in a highly visible location [and that location is still there today.   DeLuca continued to attend the University of Bridgeport while running Subway, and, making a bit of a shift from his original medical-school plan and getting his degree in psychology.   In 1978, Subway's 100th store opened, and reached the 1,000 store mark in 1987. Explosive growth continued with Subway opening over 1,100 units in 1993 alone. As of March 2012, the company counts over 36,400 franchised locations in 99 countries. Of these, Subway operates more than 8,000 "non-traditional" stores, including a car showroom, a Detroit school, and halfway up New York City's Freedom Tower, which is still under construction. Subway, however, doesn't actually own a single location but collects 8% of revenue from each franchisee. The chain is known for its popular ads featuring formerly obese student Jared Fogle and the ever-popular $5 footlong. While his partner and fellow billionaire Peter Buck's role has become less active over the years, DeLuca continues to oversee the day-to-day operations of the company. DeLuca drives a 10-year-old Lexus convertible and has identified Vege Delight and Turkey as his favorite Subway sandwiches. Subway generated revenue of $16.6 billion and added 24,000 jobs in 2011. Today, Fred is 65 years old, lives in Ft. Lauderdale, Florida is married with one child. Forbes magazine named DeLuca number 242 of the 400 richest Americans with a net worth of $1.5 billion. Today, Subway is one of the most popular franchise restaurants. So what can we learn from Fred's experience? A journey starts out with a beginning and in most cases a destination. Sometimes during this journey we may hit a fork in the road that may take us in an entirely new direction with a different and often better outcome. This is what happened to Fred. His journey started as a way to fund college and the sandwich shop was just a vehicle to help him get there. His initial destination was a college education and a degree in Medicine. But during his journey, he took a detour and created a sub shop empire.  When we at The Entrepreneur's Source work with a client, we take them on a journey of discovery. We have them start their journey with an open mind so they can discovery what type of business would be a good fit for them. Sometimes they start their journey looking for a job, but discover that a business of their own would give them a better and more secure career. The important point here is that it's beneficial to start your journey even when you're not sure of the destination.