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

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

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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.

 

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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.

Fred-Deluca-book-advice

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.

GG van Rooyen
GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.