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STRATEGY

Five Tips from Subway's Founder
 

Fred DeLuca, whose sandwich empire now spans more than 25,000 locations, offers up his advice for entrepreneurs.
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You don't have to know everything.
On the morning of Aug. 28, 1965, when Fred DeLuca opened his first sandwich shop, he sat down to do something he had never done before: Make a submarine sandwich. Though he and his partner, Pete Buck, had made an extensive driving tour of other sandwich stores to see how their business operated, down to watching how they poured oil onto the meat, they hadn't yet put theory into practice. "You know," DeLuca admits sheepishly, "you start a business and you really don't have much of a budget." Not even enough to make a trial-run sandwich.

Set a goal.
Buck first approached DeLuca with the idea of opening a sandwich shop after reading about an operator in upstate New York who had a string of 32 such stores. From the beginning, Subway's goal was to match those 32 stores. "It was an extremely serious goal in that it never changed," DeLuca says. "We never had a discussion about changing the goal, we always talked about the goal, we always kept it in mind. We thought it was achievable because the other guy had done it." Even when their first store teetered on the brink of closing, they still planned to somehow make it to 32. They seemed to run out of steam when the stores numbered 16, but having that goal in mind pushed them toward the franchising strategy that made Subway the multinational behemoth it is today. "We would have not franchised if we didn't have this plan," DeLuca says simply.

Visibility is paramount.
DeLuca says the biggest mistake he made in setting up his first shop was its "crummy location." So he and Buck came up with an unorthodox solution: Don't close that first store, but open a second one anyway. "In February, the store was doing so bad that we were thinking of closing up," he says. "We talked ourselves into building the second store." Unlike the first store, the second had a more visible street entrance, in a Bridgeport locale more conducive to street traffic. "The business in that second store was good from the day we opened it -- and the business in the first store picked up also," DeLuca says. Emboldened by that triumph, they opened two more stores, until the fifth one, on a very prominent corner in Bridgeport, sealed the company's success.

You can learn about your business from anyone.
Even from people who are ripping you off -- maybe especially from people who are ripping you off. DeLuca tells the story of how, back when Subway had only three stores, his car broke down one afternoon, and he was hitchhiking to a junkyard when some friendly soul picked him up. "We passed by my store in Stratford," DeLuca says. "He says to me, 'That is a really great place to eat,' and I'm really proud. I say, 'Why's that?' He says, 'They make terrific sandwiches, and you get all the soda you want for free.' I said, 'How does it work?' He said, 'You go there an order some sandwiches, and when the kid' -- he was referring to me -- 'when the kid turns around to make the sandwiches, you just take a case of soda out of the cooler and sneak it out to your car." DeLuca quickly made what he calls a "correction" to the storage of his soda pop.

Build a relationship with your vendors.
When they first started out, DeLuca and his little Italian mother would drop in every Friday on their four main suppliers -- the people who sold them meat, bread, vegetables and paper. "It was a little five or 10 minute social visit," he says. "We'd come with a check and they'd say, 'How's business?" and we'd say a little something. And they'd be just fine with it. They knew we were always there to pay the bills, even though we never paid as much as we bought and balances always built up." But the vendors got to care about Fred and Mrs. DeLuca, and the amounts they borrowed were kept under control. "If we didn't drive around to deliver checks, which is a totally inefficient thing to do," DeLuca says, "I am positive that we would not have built the kind of relationship that allowed them to be as comfortable with us."

Last updated: May 23, 2006




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