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The Man Behind Subway's Success Meet the real Fred DeLuca, in our candid, exclusive interview.

By Nichole L. Torres

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Was it a surprise this year to become the largest fast-food franchise in the country?

We were kind of expecting to pass McDonald's, just by keeping count of the stores, seeing what kind of growth they've had.

To what do you credit your company's enormous success, this past year especially? The economy's been rocky, at best.

A couple of years ago, we made a few changes to our operation that really boosted the stores' sales and profitability, like developing a strategic plan. As a result, we started having lines to the door at lunchtime and a tremendous increase in franchise activity. Existing franchisees started building more stores, and a lot of new people wanted to join the company. So it's just a fortunate set of circumstances. And it's amazing how many people contact us every week now for franchise information.

Does that number continue to grow?

It's grown very steadily. We still haven't peaked yet. We track those statistics weekly and have gotten about the same number of leads every year between 1997 to 2000. In 2001, it went up by 75 percent. In 2002, it looks like it's about another 40 to 50 percent on top of that. So big, big gains.

Congratulations on being the Franchise 500's number-one franchise for the 11th time. How have you been able to grow this enormous company while still being a hands-on entrepreneur?

It's a lot easier nowadays. We've got a good team together, of course. It's a combination of providing the team a good vision to grow and also being fortunate enough to be in the submarine sandwich market--the demand for our product has increased dramatically in the last few years. So to a large extent, we're working hard to fulfill the consumer demand for Subway sandwiches.

Putting together that strategic plan helped a lot. We never actually had a written strategic plan. To get it done, we brought together people from all over the organization--not only headquarters people, but franchisees and development agents.

After the plan was announced, we put together a committee called the system advisory council. About every four months, we bring together the five families of Subway: the franchisees on the advertising board, the franchisee association, franchisees on the purchasing co-op, our development agents and the company representatives. We meet to discuss the direction of the company and any changes that need to be made. So what happens is, we have all the leadership of the interested parties working together as a team and working hard to improve the organization. So it's kind of like getting everybody rowing in the same direction. 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.

Do you have contact with your franchisees a lot?

Oh yeah. I have an awful lot of franchisee contact. I really focus on this. I'm involved with the franchisees every day. This weekend, for instance, I went to our franchisee association's Fall Forum in Chicago. I guess 300 franchisees from around the country came in to be educated. I just spent time with them and got a chance to talk to an awful lot of them. I participate and give presentations to the group. We had a town hall meeting, where we had a bunch of representatives up-front, a representative from each of those five families. The franchisees got to ask all kinds of questions--I pick up a lot of stuff that way, which is really very important.

So many entrepreneurs somehow lose the reins when their companies become very large-it just becomes impossible for them to manage such large companies and they bow out. And you've helmed this company all along. What is the difference between you and those other entrepreneurs?

Maybe they're a lot smarter than I am, I'll tell ya [laughs]. What am I working so hard for, you know? Well, different people have different approaches. Some people, either it's time for them to retire, because they're a bit older. One of two things happens. Either they want to cash out and not work anymore, or sometimes the business grows too fast for them, and they can't keep up with it. I've been kind of fortunate. I took this from making the first sandwich all the way to where it is today, and I've somehow been able to learn what I needed to learn along the way. So I feel comfortable with it. I don't have any interest in cashing out or leaving the business or doing something else. I just love Subway, and I want to keep focusing on the company for the benefit of all our franchise owners. So I'm kind of like married to the job.

And then I think to myself, well geez, what would I do? If I didn't do this, I would probably do something else that would just get me in trouble, you know. Here I've got this business, I know the business, I know the people. It's fun. Really, for me, it's very satisfying. I know a lot of people at some point in their business careers decide they'll just cash in and do something else, but for some reason, I've never had that feeling.

What keeps it exciting for you on a day-to-day basis? You've been doing this for quite some time.

I've been doing this since before you were born [laughs]. I started this 37 years ago. Right now, what's really exciting is to keep up with the growth in our segment of the business. Back when we started, people didn't even know what a submarine sandwich was. The product was only sold in a few markets. And now we've got a product that's sold across the country. And the consumer demand for it is growing quite a bit. And of course, we're not the only submarine sandwich company out there. Our job is to maintain and grow our market share, so we're busily at work right now on that particular aspect. Because there must be 40 or so other submarine sandwich franchises, many of which don't hit your radar screen. A lot of very small, localized franchises are working hard to grow their businesses, too.

What's on the radar for Subway this year? Now that you're the number-one franchise in America, do you intend to be number-one internationally?

The strategic plan we did a few years ago was for our North American stores. So this year we did a strategic plan for our international markets. We've got 12 strategies to reach the international goal of having 7,500 stores in operation by the year 2010. That's outside of the U.S. and Canada. Right now, we have 1,500 outside of the U.S. and Canada, so we're looking to add quite a bit. It's a huge goal, but it's not horribly huge. To put it in perspective, McDonald's has 15,000 stores outside of the U.S. We're basically looking to lay a strong international foundation.

In the U.S., basically there are two main things we're focusing on: Improving the food, and improving the advertising. That's something we've been working on continually for the past several years. Because the bottom line for the consumer is, what kind of food are they getting? So we've got to make it the best possible presentation and offering.

Is there anything people are surprised to find out about you, the mythical figure of Subway? Do people have sort of preconceived notions that you dispel when they speak to you?

They're surprised that I'm a regular guy and just have very simple approaches to business. The most common comment I get is, "Gee, you're kind of down to earth." I don't know what they expect. Someone coming in with bodyguards--I don't know. But I'm just a regular guy. I ride my bicycle in the morning. Kind of hang out and don't really get involved with what people might associate with a business tycoon. I like to keep it simple.

Part of your plan for the U.S. is to improve your food and improve the advertising. Your advertising has been very successful over the past couple of years, especially with the Jared Fogle branding. How are you going to improve advertising that's already very successful?

We look at our ad awareness numbers and how effective our advertising has been compared to competitors. We are doing incredibly well. What's great about our team is that they keep analyzing the marketing, the commercial contents, and do an awful lot of research and testing. 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. Personally, I've been amazed at how much advertising has improved in a few years.

And on the food side, they have a rigorous process of research and development. It's not something we've done before. Up until just 10 years ago or so, it was pretty straightforward. We'd try something to see if it worked, and if it didn't, we'd try something else. But now every idea gets tested thoroughly before it's released to the field. So the odds of a successful launch of any kind of improved food or any idea in the stores are really high. And that's been great for the franchisees. Even though everybody knows you can't be right 100 percent of the time, the franchisees really want you to be right a lot. We made a huge investment on testing and research, and it seems to be paying off quite nicely.

Anything else to share with our readers?

The one thing that's pretty amazing about Subway is that the tremendous growth we've had has always, every year, as far back as I can remember, been fueled by existing franchisees. Somewhere between 60 and 70 percent of the new stores we build every year are built by existing franchisees who are expanding. I feel really good about that. I think it's good for people who are joining a franchise company to look at the level of reinvestment by existing storeowners. The good news is that we have a lot of reinvestment; the bad news is that it's hard to let many new people into Subway because so many of the existing people want to build the new stores.

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