View From the Top

Online Exclusive Q&A With Fred DeLuca

Helming the number-one franchise is not an easy task, but Fred DeLuca, founder of Subway, took time out of his schedule to talk to about secrets to his entrepreneurial success. Do you feel any more pressure being the number-one franchise in the world?

Fred DeLuca: In a sense, we feel the pressure to maintain our tradition of excellence. That said, somebody might think, "Oh my God, those folks at Subway do everything perfectly well." And that's not really true. As with all companies that are strong, there are things we do well and things we do less well. Actually, what gives us our strength-and maybe it's common in franchising-is this entrepreneurial spirit of the franchisees. We've got a lot of relatively new franchisees [who are] very focused on their business, and there's an extraordinary amount of franchisee involvement in our decision-making. We want to continue the tradition of excellence, but as I see it, it's a system of a lot of people working together, doing some things incorrectly but making more right decisions than wrong ones. In September 2004, Subway added 175 restaurants-many in nontraditional sites like convenience stores, airports and even schools and hospitals. Describe how Subway has approached this expansion into nontraditional venues? How has this strategy of expanding into nontraditional venues fueled your growth?

DeLuca: It's interesting-years ago, we didn't think about it very much, then we found that the few stores we opened in these nontraditional venues worked particularly well for the venues themselves ... and for us. When we started getting [positive] feedback from the people we worked with, such as convenience store owners or hospital administrators, we got more focused on it. We developed a team to help them to bring Subway into their organizations. [Editor's note: The number of nontraditional Subway locations at press time was around 4,300.] How do you view the competition in the franchising community?

DeLuca: If you talk about franchising in general, it's more competitive than ever, because there are more franchise companies than ever. But, on the other hand, franchising has gained a tremendous amount of credibility over the past 30 years, and that means more people than ever are interested in becoming franchisees. From my point of view, what I really like, what I think is really terrific about my work, is that the company's had the opportunity to train literally thousands and thousands of brand new franchisees to successfully run their very first business. That gives me a very good feeling, because we take people who are bright and hardworking but don't have business experience and teach them certain steps and enable them to harness their skills and energies, and be in a business that they themselves own and control. What is your perspective of Subway's impact and effect on franchising-and on U.S. business and society at large?

DeLuca: We have so many outlets in so many places-that gives people a different perspective on distribution and how large a company can become, and that will affect the strategies of many companies. I recognize that for our particular business, it's important to get our stores in locations that are extremely convenient to customers. Back when I was a kid, people would drive 10 miles to get fast food. It was such a novelty. Now, in most cities, you don't have to drive 10 blocks, and you've got many choices. I just know that in our kind of business, it's very important to have good, solid distribution, to be close to the customers. And the distribution patterns we're following are creating new learning [opportunities] for other people. When you think of Subway's place in the larger culture, being a pop culture reference, how do you see that? Does it amuse you when you see yourself or your company referenced?

DeLuca: Actually, it's kind of flattering, but what's amazing to me is that it doesn't affect me very much. I feel like the same old guy I was a long time ago. I go off and do normal things like everybody else. I went to see The Incredibles last night and got my hair cut today. You know, I think normal people do these things (laughs). It seems like a very typical, average lifestyle in the sense that I work every day, and it seems like I'm just one of the guys here. So it seems you view those kinds of pop culture references as flattering, but separate them from who you are and what your day is.

DeLuca: Yeah, on the one hand it's like, 'gee, what's the big deal?' I'm just doing what I always did. But I think what is hard to understand, for me, is [realizing] that indeed the company is very, very big. I see it when I go out on a road trip. A couple times a year, I get in the car and I'll drive 1,000 miles cross-country, going through side streets. I'll stay off the highways as much as possible. And I realize it's a huge country, and for us to be in so many places in the country is an amazing thing. So I do realize we've really accomplished a lot, but on a day-to-day basis, a day today feels very much like a day did 10 years ago or 20 years ago. It doesn't feel different.

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: View From the Top.

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