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With Only A $1 000 Loan Legendary Subway Founder Fred DeLuca Began A Business Empire

Fred DeLuca started Subway at the age of 17 with a $1 000 loan from business partner Peter Buck. Today it’s the largest fast food chain in the world. Here are his lessons on building a successful business.

GG van Rooyen

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Vital Stats

  • Player: Fred DeLuca
  • Company: Subway
  • Established: 1965
  • Claim to fame: Subway is the biggest fast food chain in the world — bigger even than McDonald’s and Starbucks.
  • Visit: subway.com

On 14 September 2015, the fast food industry lost a legend. Fred DeLuca, the co-founder of Subway, passed away from leukaemia, which he had been diagnosed with in 2013.

His death wasn’t widely reported locally, because he was never that well known here, and that’s a shame – DeLuca deserves to be placed right up there in the pantheon of fast food legends alongside McDonald’s Ray Kroc and Starbucks’ Howard Schultz.

In fact, as a brand, Subway never really gets the respect it deserves. Do you know, for example, that it’s the biggest franchise in the world by quite some margin? It boasts around 44 000 stores in more than 110 countries. By comparison, McDonald’s has around 35 000 stores and Starbucks 24 000.

Related: Subway’s Co-founder Fred Deluca Dies at 67

It’s also the purest franchise company of the three. While McDonald’s owns quite a number of stores directly and is famous for dabbling heavily in real estate, and Starbucks has chosen to eschew franchising entirely, Subway is completely franchise driven. All of its stores are owned by franchisees, which has allowed it to scale very successfully (it went from 200 stores in 1982 to 44 000 today) and never feel the need to go public. Even today, Subway is a private company.

So DeLuca left behind a massive empire when he passed away. But he also left something else behind. A few years earlier, he penned a book titled Start Small, Finish Big: Fifteen Key Lessons to Start and Run Your Own Successful Business. As its name suggests, it offers advice on running a business — franchise or otherwise.

Now, there’s no shortage of business books out there, but DeLuca’s is refreshing for its practical and street-smart approach. He shuns talk of passion, legacy and ‘changing the world’ in favour of the nitty gritty realities of business growth.

Here are Fred DeLuca’s tips for building a business:

1. Start small book excerpt

Start-small-finish-big-book

“Most people think that starting a business is a complex proposition. Dynamic entrepreneurs with big plans and lots of resources are the type who start businesses. They have special training, brilliant ideas, unique strategies, and a cadre of sophisticated advisers at their beck and call. Most people don’t think that regular folks with ordinary ideas and limited resources can make much happen. Boy, would they be surprised at the way the real world works.”

The takeaway

As the saying goes, every 1 000-mile journey starts with a single step. Opening a franchise store can seem daunting, unattainable even. Purchasing a fast food restaurant, after all, can cost millions. But if opening one is your dream, there are ways to make it come true — to get a foot in the door. You might not be able to afford a large restaurant yet, but what about a food cart selling boerie rolls or hotdogs? There are brands out there that are actively trying to make franchising accessible to more people by growing franchisees within the system.

Related: Should You Purchase An Existing Franchise?

2. Earn a few cents book excerpt

“Odd jobs laid the foundation of my career. Whether it was Subway or some other business, or an entirely different profession, the value of my childhood work experiences cannot be underestimated. I believe that’s true for most people who start a business and succeed. Even though I wasn’t aware of it at the time, those odd jobs provided the foundational knowledge that I would need to take the next step toward building a real business.”

The takeaway

At its core, a business is about getting customers and bringing in money. It can be surprisingly easy to lose sight of this when dealing with all the different aspects of a store. It’s tempting to get lost in retail or website design, or to focus only on product. But having a great product or wonderful store is not enough. Only one thing makes a business successful: Having customers. So it’s important to focus on bringing in the cents.

3. Keep the faith book excerpt

“When you tell your relatives, friends, and neighbours that you plan to start your own business, some of them will go out of their way to convince you that you can’t do what you plan to do. They may say your idea will never work, or they may tell you to keep your job and play it safe. They might tell you it’s too risky, or you don’t have the background, the money, the knowledge, or the drive to succeed in business. I learnt this lesson within six months of getting into business. That’s when Pete and I realised our first sandwich shop was an economic failure. At that point, it would have been so easy to give up the belief in our idea, and our vision, and close our business. Fortunately, we didn’t take that approach.”

The takeaway

There will come a time when you want to throw in the towel — it’s a virtual certainty. Every business has its ups and downs, and there will be times when you think success is out of reach. That’s when it’s important to keep the faith and remind yourself why you’re doing this. Owning and running a business isn’t easy. On most days, it will be harder than working for someone else, but it’s a rewarding experience that’s worth fighting for.

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4. Ready, fire, aim! Book excerpt

“I learnt this lesson by opening the first restaurant without any experience. In other words, I learnt it by doing it and not just thinking about it. With clarity about the idea for Subway, and at least a glimpse of the vision, I went to work the next day! Someone else might have taken time to plot out the job requirements and to write a business plan, but doing those things may have prevented me from actually starting. There’s a good chance the planning process would have consumed my energy.”

The takeaway

Taking the leap and actually opening a store is always a big and risky move, which is why it’s easy to get stuck in the planning phase — never quite feeling ready to take the plunge. The timing will never be ‘perfect’. There will always be a reason to delay things a year or two. You’ll never feel ‘ready’. At some stage, though, you will need to just go ahead and do it. Most lessons can only be learnt in the thick of things.

Related: Franchise Or Start-Up?

5. Profit or perish book excerpt

“Early in Subway’s development I found out that it’s easy to make a lot of sales and still not make a profit! That’s when I learnt about ‘profit or perish’. One day my accountant congratulated me for generating annual sales in excess of $1 million for the first time. But in the next breath he also explained that unfortunately I had lost $100 000 that year! How could that happen? It didn’t take me long to figure out there are only two ways to make money: Increase sales and decrease costs. Believe me, this is a lesson worth learning as soon as possible. It’s a lesson that we teach our franchisees at Subway.”

The takeaway

An awful lot of businesses fail because they lack financial controls. Just because money is coming in doesn’t mean a business is profitable. The focus of every business should be on reducing costs and increasing sales. And this can only be done if the financial state of the business is constantly being monitored. Know exactly how much money is in your bank account, and make sure more is coming in than is going out.

6. Continuously improve your business book excerpt

“This is a lesson that may not become apparent until you’re faced with competition. Businesses do not stand still. They may fall behind some times, but those that succeed do so by continuously improving their operation. Progress requires that they introduce new products, new ways to serve their customers, new ways to market, new ways to get ahead of everyone else. This is not a once-and-done experience. It’s continuous. Even today, when we introduce new ideas at Subway, our competition won’t be far behind. The only way to stay in business is to continuously make these improvements.”

The takeaway

It’s important to join a franchise organisation that is forward-thinking and focused on innovation. Even a market leader can die if it refuses to move with the times. It is also important, however, to always try and improve your own store. ‘Good enough’ is never, well, good enough. Success comes from always trying to be better.

7. Believe in your people book excerpt

“If you want something done as well as you can do it, do it yourself. But if you want it done even better, let someone else do it. That’s right! I think most jobs in my organisation can be done better by other people. Why? Sometimes they do a job better because of specialised knowledge, or because of their personality, or because of their problem-solving ability, or because of the way they focus on details, or because of their intelligence, or simply because of the amount of time they can devote to the job.”

The takeaway

If an employee can’t do something better than you can do it, you’ve hired the wrong person. It’s important to hire the right people, train them well, and then allow them to get the job done. You need to be able to trust your employees and know that they’re invested in the business.

Related: Assemble Your Franchise Team Like A Pro

8. Never run out of money book excerpt

“Here’s a scary thought. Even if your business does well, you may run short of money. Even worse, you may run out of money and fail as a result, even though everything in your business appears to be going well. How could this happen? How can this be avoided? Extra money is almost always needed in business. If your business is good and you attract new customers, cash may be tight as you wait for them to pay you. Also, you might need to add capacity, or you may want to open a second location. If business is bad you’ll need some extra money to tide you over while you correct the situation. That’s why the most important rule of business is to always have cash in the bank and to never, ever run out of money. Keep your expenses low, collect any money due to you as soon as possible, and borrow money before you need to.”

The takeaway

Liquidity is crucial. Many new franchisees fail to take into account the operating capital they’ll need once the business is up and running, and consequently find themselves running out of money early on. Don’t sink all your capital into the set-up of your store. Save enough to keep things afloat for a while.

9. Attract new customers every day book excerpt

“When I travel around the world and meet with Subway franchisees, one of them will sometimes say to me, ‘My sales are lower this year than last year. Why do you think that’s happening, Fred?’ My standard answer is: ‘Because you have fewer customers this year.’ As simple as it sounds, the idea that more customers equals more sales, and fewer customers equals fewer sales, often escapes many entrepreneurs. For some odd reason— maybe because it is so simple— it’s a rule that’s easy to overlook. But if you want a lot of sales, you need to attract a lot of new customers and to keep them coming back. That’s why it’s important to learn how to create Awareness, to gain Trial, and earn Usage (ATU).”

The takeaway

Customers are key. Any business lives or dies by the amount of customers it manages to attract. Every action in the business should be aimed at attracting first-time customers, and making sure they keep coming back.

Remember this

A franchise is a business like any other, and, in many ways, it requires the same attitude and approach as a start-up.

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Franchisors

Osteostrong: An Exploding Global Movement Of Positive Change

A Kyle Zagrodzky Article by Dirk Coetsee.

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Kyle Zagrodzkys’ sincere passion for what he does made me smile in recognition of traits that I am always searching for in a leader, which is a love for people that is drastically enhanced by the positive multiplication factor of having the heart of a servant.

The climate of the interview was one of tangible enthusiasm as the author witnessed a serial entrepreneur at the cusp of global expansion, share his thoughts on his company with refreshing transparency.

The CEO and founder of OsteoStrong speaks with a sense of awe, visible in his eyes, of his business relationship with Tony Robbins and his mission to change lives through this innovative franchise system.

Yes, you read correctly, the iconic performance coach and entrepreneur Tony Robbins who authored Awaken the Giant Within and recently Money Master the Game: 7 Simple steps to financial freedom, is a very enthusiastic and committed advocate for OsteoStrong and Kyles’ business partner. Sincerely and truthfully sharing the same value system is often the rock on which sustainable, successful and world-famous business partnerships are built.

Related: Start A Service Franchise: Cash In On These 3 Successful Models

The franchise system OsteoStrong, is the collateral beauty emanating from Kyles’ most highly regarded value of giving to others and is set to become a global phenomenon within the next couple of years.

OsteoStrongs’ patent-pending robotic technology is based upon the research of Dr. John Jaquish, PhD who’s journey in life sciences started when his mother told him that she was diagnosed with osteoporosis. He invented a device that’s purpose is to trigger the effects of high impact loading without the risk of injury. The result of a once-weekly treatment utilising this device is over 14% gains in bone density in both the spine and hip over a just 6 months!

The reader, at first glance might have the same impression as the authors initial paradigm of this systems’ value offering, that is simply put, that OsteoStrong is the most effective cure purely for those at an advanced age with the focus of combatting or preventing osteoporosis.

The above assertion is however a dramatic deviation from the whole truth. Although this system is proving itself to be the most advanced and effective cure for osteoporosis, any athlete engaged in any discipline and of any age can receive a vast range of performance enhancing benefits from this innovative system.

When you increase your skeletal strength, it dramatically impacts your total strength output. As an example, during a four-year case study that engaged 500 subjects, the average strength gains were increased by a whopping 290%. These results were achieved through a total of 1 session per week at seven minutes per session.

osteostrong

The author was amazed to learn from Kyle first-hand that the awe-inspiring and very typical results are achieved with virtually no effort on the clients’ part. Your total commitment as a client is to go to a facility once a week for seven minutes, engage in four extremely safe “trigger events” (high impact loading) dressed as you are to receive a plethora of benefits over time.

Related: 7 Laws Of Great Pricing

It is common for clients to see a rapid and vast improvement in speed, agility, and balance. Clients also in general report that general niggles such as shoulder, lower back and knee pain disappear. A compound effect of the combination of all the benefits mentioned is a much-improved general sense of wellbeing.

OsteoStrong does not compete with anyone in the gym or wellness industry. Instead, its highly unique value proposition compliments the offering of all businesses related to fitness and health.

This cutting-edge innovation is a franchise system, a business, yet more importantly it is exploding as a global movement of positive change. Commitments for the development of over seven hundred and fifty franchises have been signed and the franchise management team is working overtime to keep up with the amount of franchise enquiries. They do keep up though, as their commitment to positively affect as many lives as they can, is unshakeable.

As the author was about to end the interview with Kyle he recognised a certain peaceful look on this business leaders’ face that can only be derived from a sense of knowing that he is changing lives and making a difference through sincere giving. We are all heartily invited to take part in this movement of positive change that is OsteoStrong, and for the sake of our own general wellbeing we should not turn down the invitation.

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Franchisors

What Franchise Model Is Right For You?

Learn what factors determine which franchise model is right for your business.

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Franchise Model

Many years ago, the most common franchise was the traditional brick-and-mortar location such as fast food restaurants and storefronts. Modern technology has brought a variety of business models to the marketplace that offer several different models to choose from.

Related: What Is The Future Of The Franchise Model?

Home-based businesses

Home based businesses are very popular these days since technology has made it possible to perform many business activities remotely. These businesses include accounting and professional services, consulting, digital and other marketing services and a variety of other models.

These franchise models offer owners many benefits including lower operating overhead costs, fast and easy startup and the convenience of working from home. Consider the following when evaluating a home based franchise business:

  1. Are you a good time manager? Working from home allows you to live and work in the same place, which is great for some but a nightmare for others. Many have a hard time concentrating on work with the distractions of home such as children, pets, spouse or even TV or home projects. On the other hand, many struggle with stopping the work to enjoy family time.
  2. You should give yourself specific starting and ending times to create a regular work schedule.
  3. Have a door with a lock. You will need to have a private and professional workspace. Additionally, it is equally important for you to be able to shut the office door at the end of the day and focus on home life.

Related: 5 Strategies For Franchise Leadership Development

Mobile businesses

Mobile businesses

Some business owners prefer to work out in the field as opposed to being tied to an office or storefront. Mobile businesses can be flexible and offer lower startup costs. These businesses include food trucks, home and business repair and maintenance services, pet grooming and other creative service models. Here are a few things to consider:

  1. Make sure that your franchisor offers a strong marketing programme. Mobile businesses do not have the benefit of walk-in traffic so they must generate all of their business with outbound marketing efforts.
  2. Use technology to maximise your efficiency. Time is money as they say, especially when you have to factor in travel time between paying jobs. On demand scheduling apps, mobile point of sale systems and communication tools can add to your bottom line when implemented properly.
  3. Check your homeowners association (HOA) rules if you plan to park a commercial vehicle outside of your garage. Many HOAs do not allow any vehicles, including trailers, with logos or wraps to be parked in plain view.

Brick-and-mortar businesses

Brick-and-mortar locations include the standard restaurants, retail, hotel, storefront and offices. This model offers the potential benefit of walk-in traffic which may be a better fit for someone who is more comfortable having customers come to them as opposed to business models that require outbound marketing or sales. This model generally requires more planning and related expense due to the build-out and construction of the site before opening. Before you decide to open a brick-and-mortar franchise, you will want to keep the following items in mind:

  1. Location, location and location are said to be the three most important factors in the success of a brick-and-mortar business. Proper due diligence is mission critical to ensure the best location. The franchisor may offer site selection assistance or refer you to qualified service providers that can help you find the best options.
  2. Use a qualified commercial real estate broker. You should interview a few brokers to make sure that you find one that you feel will best serve your needs. You may find a broker that has experience in your specific business category, which can be an added benefit.
  3. Read Brick and Mortar Franchise Success by Carolyn Miller. Miller is the founder of the National Franchise Institute, which offers classes and education for location-based franchise operators. This book offers a wealth of money and time saving tips and trick that are a must for anyone opening a brick and mortar franchise.

Most franchise owners report that their business lifestyle was a determining factor in their choice of a business model. Consider the “day in the life” of each franchise model to see how they match up with your ideal business before you choose. You should be able to visit existing franchises or participate in a discovery day visit to get a good feel for how each model operates.

This article was originally posted here on Entrepreneur.com.

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Get Into Your Franchisees’ Good Books: 4 Ways To Communicate Better

Build a better relationship with your franchisees to avoid conflict and strengthen your brand.

Diana Albertyn

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Your franchisees weren’t chosen on the basis of a friendship criteria, so it isn’t surprising that you may not get along with all of them. If they were just tenants in your building, that would be fine – but as partners in your business, your relationship with them should constantly be worked on, especially by you.

“Ultimately, the best relationships – whether personal or commercial – are typified by mutual respect and trust,” notes Sally J’Arlette-Joy, founder and CEO of Sandwich Baron. “Communication is key to keeping all parties informed about changes, potential issues and success factors.”

How well are you communicating with your franchisees? Do you know what their pain points are? Are you open to their ideas for the business?

Here’s a guide to building and maintaining mutually beneficial relationships between your franchise and its network:

1Create and maintain multiple communication channels

Leverage the power and convenience of technology to interact with your team when you’re unavailable in person. Not only is everyone aware of any changes or developments, it’s a simpler way to communicate with everyone at once, getting the message across quicker and in more ways.

Related: Communication: The Glue That Holds Business Together

“To be effective, however, the communication needs to be more than frequent,” advises

“It needs to be honest. Get caught in a single half-truth, and trust is destroyed.”

Emails, WhatsApp groups and productivity apps are great ways to communicate in-between monthly or more frequent visits.

2Hone in on honesty

Transparency is a key factor and requires you to trust your franchisees to run an honest operation. They should also be able to know you trust them, allowing them to return the favour.

“If, for example, an operation uses mystery shopping to uncover violations of standards and under-reporting of revenues, franchisees should know about it,” says franchise consultant Mark Siebert. “Hiding this from franchisees will foster distrust and conflict.”

Trust isn’t easily repaired, so emphasise its importance to your franchisees and practice what you preach – always be open and approachable, no matter the situation.

3Keep an open mind for opportunities

mcdonalds-filet-o-fish

Most menu innovations, like the McDonald’s Filet-o-Fish – invented in 1962 by Lou Groen, a McDonald’s franchisee – don’t come from head office, but the guys running the network on the ground. They’re a result of a franchisee being unafraid to raise their hand, presenting a new idea, and being listened to by the franchisor.

“If a franchisor is willing to listen, and through meaningful dialogue between both parties, they may discover new ways to help the franchisee grow the business or exit the franchise as painlessly as possible,” says Monisha Prem, corporate advisor at M. Prem Inc.

Related: The Changing Face Of Business Communications

Strong relationships with your franchisees dictate their respect for the leadership of the franchise. Not sure how to go about strengthening your partnership as soon as today? Start by ensuring you’re aware how franchisees feel and how you can change or improve upon that.

4Steps to a successful partnership

Before you message all your franchisees for a coffee catch-up, remember that the quality of communication often trumps the quantity.

Keep the communication lines open by applying the guidelines below:

  • Whenever possible, take calls from franchisees rather than letting them go to voicemail; and always respond to messages on the same business day
  • If possible, establish a dedicated franchise support line
  • Every day, call at least one franchisee you haven’t spoken to in a while. Ask how they’re doing, how their family is, and what else your team could be doing to support their business.
  • Never speak negatively about franchisees to an employee in the company. Communications relating to franchisees should always be respectful.
  • Use a technology platform to track all communication with franchisees for staff members’ interaction with franchisees or should a dispute ever arise.
  • Appoint one person in the company as the communications manager, and have all system-wide communications filter through that, ensuring consistent tone and accuracy of information.

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