No Sub-Stitute

Any way you slice it, Subway comes out on top.
Magazine Contributor
5 min read

This story appears in the January 1996 issue of Business Start-Ups magazine. Subscribe »

Fred Deluca has been experiencing a bit of déjà vu lately. When the number of Subway stores operating overseas reached 270 a few months ago, a funny feeling came over the 48-year-old sandwich king: He realized Subway's international size is just about the same size Subway was in the United States roughly 15 years ago-when it began taking the country by storm.

"Our developments internationally are looking very much like what we've done in the United States," says DeLuca excitedly, "only now I have a very interesting perspective on it all."

Interesting, indeed. If all goes as planned, DeLuca anticipates duplicating the same phenomenal success Subway has enjoyed in the United States and Canada in countries throughout the world. And he's well on his way: Subway's zesty salads and sandwiches can now be found in some 27 countries across the globe, with 100 new stores opening internationally last year.

"The time is right for us to be entering these new markets," says DeLuca. He's setting his sights on adding up to 200 new stores internationally each year until 1,000 foreign outlets exist, and then "we'll see truly explosive growth," he predicts.

Will he reach his goal? Only time will tell-but given that Subway ranked number one in our Franchise 500 yet again, the answer is most likely yes.

In fact, it seems nothing is out of DeLuca's reach. What started as one struggling store in Bridgeport, Connecticut, is now a sandwich empire with $3 billion in annual sales. After a year of what DeLuca describes as "strong and stable growth" that included the addition of an astounding 1,300-plus units worldwide, the soft-spoken entrepreneur is taking on the future as boldly as ever.

Sharp Focus

But whether his attention is focused on international waters or operations at home, DeLuca's role within Subway's Milford, Connecticut-based organization remains the same. "My job is to lead the organization so it can be competitive in the future," he says. "I have to make sure the ship is always heading in the right direction."

Sometimes, he admits, this includes some rather unusual roles. While traveling in Georgia recently, DeLuca unexpectedly had some extra time on his hands. So he decided to rent a car for the week and drive across four states-stopping at every Subway store along the way. "My mission was to go in unannounced, buy a sandwich, review the operation, and eat the sandwich." He laughingly recalls, "I ate Subway morning, noon and night."

Aside from gaining a few pounds (and finding out most Subway employees don't recognize him), DeLuca also gained some rather invaluable information. After each stop, he shared his observations with franchisees, development agents and employees via Subway's 1,400-person voice-mail system. His personal store reviews were so well-received-and so informative-that DeLuca plans to continue the routine. "A tour like this is really eye-opening," he says. "While you see some great operations, you also see some terrible weaknesses."

The Home Front

Yet with more than 10,000 stores throughout the United States, Subway's presence is anything but weak. Its recognizable yellow, brown and white signs can be seen along nearly every major street in America. As more and more units open, the real question is: Where in the United States can Subway expand? As yet, DeLuca says he isn't worried-the continuing popularity of fast food is spurring plenty of opportunity.

In recent years, Subway's U.S. market strategy has focused on small rural markets. Within the last year in particular, DeLuca says there's been an "explosion of growth in small markets." He sees especially strong potential in the Northeast, where the fast-food market is fairly unsaturated.

Meanwhile, Subway is making big strides in nontraditional markets. Hospitals, convenience stores, stadiums and college campuses are some of the sites where franchisees are setting up shop. However, DeLuca says the key to Subway's future isn't just opening new restaurants-it's bringing in more customers.

In the competitive food-service industry of the '90s, fast-food restaurants are luring customers with meal deals, 99-cent burgers and five sandwiches for $5. To tempt more patrons away from fast-food heavyweights such as McDonald's, Burger King and Taco Bell, Subway will be getting tough on price, says DeLuca. In the coming months, the company's marketing emphasis will concentrate less on the presentation and variety of its sandwiches, and zero in on value.

"We haven't gotten into the value message in the past," says DeLuca, "but we see it's expanded the market even more, so we're going to be doing that in the coming year."

Customer satisfaction is also at the top of this year's to-do list. "We've titled 1996 'The Year of the Customer,' reveals DeLuca. "We want to bring more customers into the stores, and when they come in, we want to do a really good job so they come back."

Back To The Future

With a keen perspective on where Subway has been--and where it needs to go--DeLuca's eye is on the future. Ultimately, he says, the single most important factor in Subway's international success will be finding quality franchisees. That, coupled with his ability to focus on his long-term goals, will either make or break Subway's foray into international franchising.

As for the rest, says DeLuca, his plans are simple: "We're going to keep on doing what we've been doing, only a whole lot more of it."

Contact Source
Subway Sandwiches And Salads, 325 Bic Dr., Milford, CT 06460, (800) 888-4848, ext. 88.

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