Franchise Buying Guide

Franchise Gurus Speak Out

Sub Master
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

Fred DeLuca was just a 17-year-old kid when he started his first small sub shop, Pete's Super Submarines, with a $1,000 loan from family friend Peter Buck in 1965. But now that his sub shop, today called Subway, has become internationally recognized and has topped our Franchise 500® list 14 times, it's obvious that what he did in 1965 was anything but child's play. DeLuca is no longer a teen, but he is still going strong and has a lifetime of wisdom to pass along.

Wilson: When entering into a franchisesystem as internationally recognized and successful as Subway, what do franchisees have to keep in mind?

Fred DeLuca: You have to be cognizant of the importance of customers and providing the right product and service for the customers. You have to realize that the customer really is king. People who go into more establishedbusinesses probably have to be careful not to be casual about that. When you have a brand-new business and nobody knows who you are, you know you have to work really hard for your customers. On the other hand, if you enter a franchise where everyone knows [your brand name], it's possible to think you sort of deserve the customers, and that can lead to complacency toward the customer.

What is the biggest challenge prospective subway franchisees face?

DeLuca: If someone wants to get into a Subway business today, it's particularly hard, because a lot of people who already own Subway stores are building additional ones. So, in many markets, it's [difficult] to find places to build new stores that existing franchisees aren't ready, willing and able to take.

What have been some of the most important lessons you've learned since starting Subway?

DeLuca: One of the earliest things we learned is that it's very important to set a long-term goal. [Having a long-term goal] continues to keep the team focused on a mission. I also learned the importance of persistence. Even if you set a long-term goal, that doesn't mean it's a straight-line journey. Often, there are problems and obstacles along the way. Sometimes the obstacles are big ones. How you handle the obstacles has a big impact on how you do. If you give up, then you obviously don't get there, but if you're persistent and you keep thinking of new ways to approach the business, you're more likely to reach your goal.

If you were starting Subway today, what would you do differently?

DeLuca: In my [very] first decision, I made an error. When we talked about opening the store, the location criterion Peter Buck described to me was to rent a little store, and that's exactly what I did. But the location was horrible, and that, in and of itself, could be death for a business. You could have everything right but be in the wrong place. You think your business is no good, but really the problem is your place is no good. If I was counseling a relative or a friend, I would say, "Before you pick your location, make sure you understand where your potential customers are going to come from, then make sure you position yourself in such a way that they can easily find you, so you're on their mind. You should not be hidden somewhere."

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: Show Me the Way.

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