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Do the Math

Subway is the No. 1 franchise in Entrepreneur's Franchise 500. . . for the 11th time. That translates to more than 17,000 locations in 75 countries. Are you impressed yet? We are.
January 1, 2003
URL: http://www.entrepreneur.com/article/58116

He speaks easily and calmly when he finds out his franchise system has claimed the top spot on our Franchise 500® for the 11th time. His unassuming demeanor and easy confidence shine through in his conversation--it's easy to forget I'm speaking to a business legend. But as I consider that Fred DeLuca, co-founder and president of Subway Restaurants, has managed to build the largest fast-food franchise in the United States while keeping the company entrepreneurial, I am in awe. DeLuca has been at the helm of the company from the first sandwich in 1965 to the 17,388 restaurants in 75 countries that Subway had at press time.

Still, humility echoes in his answer when I ask DeLuca how he's maintained that day-to-day involvement with Subway, even with its extraordinary growth. He's quick to note the team effort that factors largely in his company's success. "We have all the leadership working hard, working together as a team to improve the organization. It's kind of like getting everybody rowing in the same direction," he says, "That's provided me a great assist--it's not really me running the company so much as a whole team working together to move things in the right direction."

DeLuca speaks especially proudly about the five families of Subway: franchisees on the advertising board, the franchisee association, franchisees in the purchasing co-op, development agents and company representatives. They meet about every four months to discuss the direction of the company, says DeLuca. The system advisory council, in fact, was instrumental in creating the strategic plan for domestic growth just a few years ago. "We had never actually had a written strategic plan," notes DeLuca, "so we put one together."

Humility aside, the 54-year-old DeLuca does acknowledge that it is somewhat unique for such a large company to be privately owned, and for its founder to still run the day-to-day operations. But he's very matter-of-fact about it. "I've been fortunate. I've somehow been able to learn what I needed to learn along the way," he says. "I don't have any interest in cashing out or leaving the business or doing something else. I know a lot of people at some point in their business careers decide [to do that], but for some reason, I've never had that feeling."

He has had the feeling, however, to grow the company. And this feeling has led him to do something amazing. In 2002, Subway reached a milestone--they surpassed McDonald's in number of locations in the United States. As it stands, Subway has around 14,000 U.S. units, while McDonald's has about 13,000. "What's really exciting is to keep up with the growth in our segment of the business," DeLuca says. "Back when we started, people didn't even know what a submarine sandwich was. Now we've got a product that's sold across the country. The consumer demand for it is growing quite a bit."

What's Next for Subway

While he wasn't particularly surprised by the fact that Subway was Entrepreneur's No. 1 franchise of 2003 (he keeps a close eye on the company's franchise numbers in relation to competitors), DeLuca was pleased. "A couple of years ago, we put in a few changes to our operation that really boosted the store sales and profitability," he says. "Existing franchisees started building more stores, and a lot of new people wanted to join the company. It's just a fortunate set of circumstances. It's amazing how many people contact us every week now for franchise information."

The past few years of Subway's history have been hugely successful. DeLuca notes that in 2001, the number of new franchisee leads they received grew by 75 percent. In 2002, it grew another 40 to 50 percent.

And the Subway advertising machine doesn't appear to be getting ready to slow down, either. The Jared Fogle campaign has helped increase brand awareness and has spawned Jared's Friends, a group of people who've also lost weight eating the healthy 6-under-6 Subway sandwiches (the 6 Subway sandwiches with 6 grams of fat or less). "We're doing incredibly well [with our advertising]. What's great about our team is that they keep analyzing the marketing and the commercial contents--they do a lot of research and testing," says DeLuca. "I don't know if they're going to be able to improve much on where they are now, but they are working hard to do just that."

Now that Subway has conquered the U.S. market, is true worldwide domination its next milestone? DeLuca reveals that Subway has just created a strategic plan to manage its international growth. The plan calls for having 7,500 stores open internationally by 2010--right now, they have about 1,500 stores outside of the United States and Canada. "We're basically looking to lay a really strong international foundation," he says.

Laying a strong foundation appears to be a theme that runs throughout the DeLuca mystique. "I'm a regular guy and just have a very simple approach to business," he says. "I just love Subway, and I want to keep focusing on the company for the benefit of all our franchise owners. I'm kind of married to the job. I know this business; I know the people. It's fun. For me, it's very satisfying."

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