View From the Top
Subway takes the title of the #1 franchise for the 13th time. So what's it really like to wear the crown?
If you ask Fred DeLuca what it's like to be franchise royalty, he'll humbly refer to the entire Subway team as the reason for his company's enormous success. Flattered by the attention and proud of Subway's accomplishments as a whole, DeLuca would probably demur at the regal analogy, but we at Entrepreneur are unrelenting. We want to know-how does it feel to be king?
"When I get a call from Entrepreneur about [our] positioning [in the Franchise 500®], I tell my people it feels like winning the Super Bowl-but this league is a lot harder," says DeLuca. "In football, they only have 32 teams, and you've got 500 teams in your rankings. So it really gives us a good feeling for all the work we put in over the past year."
In the past year, Subway hit 21,444 franchises worldwide. DeLuca has led Subway not just to astronomical business success, but also to cultural-icon status. Today, businesses want to emulate Subway's success. Franchise industry insiders don't ponder who will be the next McDonald's, but who will be the next Subway. And the franchise has even become a pop culture reference-the famed Jared Fogle, aka The Subway Guy, who lost over 200 pounds on the Subway diet, is perhaps one of the more ubiquitous Subway reference points.
|Can't get enough of Fred DeLuca? Click hereto read our extended interview with the Subway founder.|
Still, even after catapulting the franchise into the stratosphere as he has, DeLuca's perspective is decidedly unassuming. According to DeLuca, his responsibility as the leader of the number-one franchise in the world is to stay focused. "I see a limited role. From my point of view, my job is just to work hard for our franchisees so they can maintain the position they're in and to grow market share," he says. "I want to make sure that all the people who have invested in Subway have [representatives] working at headquarters who are concerned about the success of the company. I don't really think much beyond that."
The Rise to Success
This all-for-one attitude makes sense when looking at Subway's rise to success. DeLuca notes that he didn't necessarily set out to make Subway the number-one franchise in the world. "I was focused on understanding how much we could accomplish," he explains. "What I would always do is say, 'OK, what's possible five years from now? Ten years from now? How many stores might we have? What rate of growth is attainable?' It was like the art of the possible-trying to figure out what's possible and going ahead and doing it."
The lure of possibility that helped Subway claim the top spot in our Franchise 500® for the 13th year and counting is the same driving force that will build the system's future. DeLuca notes that one long-term goal that Subway hopes to achieve by 2010 is growing to 30,000 locations worldwide. In addition, Subway has opened regional offices around the world to spark international growth, and hopes to grow to 7,500 international stores by 2010.
The domestic agenda is a continual focus on individual store profitability as well as adding stores in nontraditional locations such as convenience stores, airports, hospitals and schools-Subway already touts about 4,300 of these nontraditional units.
While DeLuca confesses that the Subway team feels pressure to maintain their tradition of excellence, he notes that the company's strength is largely due to the franchisees. "It's the entrepreneurial spirit of the franchisees," says DeLuca. "It's a bit like representative government; it's a system of a lot of people working together, making a lot of decisions, doing some things incorrectly but making more right decisions than wrong ones."
Subway's decisions on distribution and growth have had a large impact on the franchising community as a whole. "With so many outlets in so many places, we give people a different perspective on distribution and [on] how large a company can become," DeLuca says. "The distribution patterns we're following create new learning [models] for other people."
Learning, growth, possibility, goal-setting-it's the way DeLuca is shepherding Subway into the 21st century. And why not? It is, after all, his personal philosophy as well. "After 39 years of business, I'm still learning. I go through this every year-identifying new strategies that are extremely important. And when you're finally ready to invent it, you hit yourself in the head and say, 'Why didn't I do that before?'" he says. "I'm amazed that, wow, we've really accomplished a lot, and I'm also amazed at how much more there is to learn all the time." Spoken like a true king.
Over the years, Subway has grown by leaps and bounds to become the No. 1 franchise. See how the company's franchise numbers have increased since 1979.
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 Entrepreneur.com about secrets to his entrepreneurial success.
Entrepreneur.com: 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.
Entrepreneur.com: 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.]
Entrepreneur.com: 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.
Entrepreneur.com: 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.
Entrepreneur.com: 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.
Entrepreneur.com: 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.