Growing Your Business <i>Your</i> Way

They have built two of the best-known and most successful businesses in the food and beverage industry. Their brands have become household names in America, rivaling longer-established companies. They've delivered large profit margins in an industry where margins are historically tight and competition is extremely fierce. They've brought their companies overseas, and now there are new words for their products in Japanese, Hindi and even more exotic languages.

But Fred DeLuca, founder of sandwich supremo Subway, and Howard Schultz, founder of coffee conglomerate Starbucks, each did it his way. Indeed, their roads to profit diverged on one key point: Schultz has kept his chain company-owned, while DeLuca has built his corporation through franchising. (In fact, Subway retains only one company-owned store.) In both cases, the decision to franchise or to remain company-owned was perhaps the critical element in building the business. And in both cases, the decision paid off. Earlier this year, Subway, which DeLuca founded in 1965 with a $1,000 loan, opened store No. 18,000. The sub chain now has more outlets in the United States than McDonald's, yet it has continued to post growth rates higher than most other food and beverage chains. It has also opened outlets in more than 70 countries. For its part, since its founding in 1971, Starbucks has grown into a company with over 7,000 outlets worldwide and sales topping $2 billion per year. In an exclusive interview with Entrepreneur, DeLuca and Schultz explain why they chose the roads they did, examine the advantages and disadvantages of their strategies, and consider whether other entrepreneurs should emulate their paths.