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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.

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.

Company Posts

Spur’s Got A Taste For Success

With eight brands across five countries, the Spur Corp’s secret sauce to success has all the best ingredients — most importantly, its franchisees. Sacha du Plessis, Group Marketing Executive at Spur Corporation, explains the company’s 51-year journey in creating some of the most popular places to eat the world over.

Nedbank Franchising

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What is the biggest contributor to Spur’s success?

Since the beginning, we’ve made an unwavering commitment to run restaurants that are operated by entrepreneurially-minded owners who put the customer first. Customer satisfaction is one of Spur Corporation’s most important value drivers, we partner with people who ensure we retain and grow a loyal customer base. We seek to work with franchisees who take pride in the training of their staff and prepare food with passion.

This mindset has been alive for over 50 years in our staff and franchisees.

Please share some of the challenges Spur encounters as a franchisor?

We have a sizable franchise network and a big priority is to ensure that we meet customers’ expectations in every single franchise they visit. Another challenge is finding the best franchisees to partner with, people who are aligned with our company values and customer orientation.

In terms of growth, it is sometimes challenging to find the correct locations per brand and to ensure the rental is at a level where it’s sustainable for the franchisee. The management of our marketing communication to ensure we remain relevant and distinctive in an ever changing landscape can also be a challenge.

Related: A Three-Pronged Approach To Franchise Success

Name a few of the qualities you look for when selecting franchisees?

Our business was built on a highly focused customer orientation and centred on a love for food. Our franchisees need to be focused on the customer: Pleasing the customer, meeting the customers’ needs and being willing to spend large amounts of time in growing a business that essentially is the hospitality industry and is really about people. Our franchisees are people who have an appreciation for, and love, food as well as serving their local community over and above their product.

Why is Spur a solid investment for entrepreneurs seeking to pursue franchising?

We’ve invested greatly in growing our brand over a long period of time. Spur was founded by our Executive Chairman Allen Ambor in the spirit of entrepreneurship. Over the past 51 years, we’ve built a track-record of comprehensive operational, finance, marketing, IT, training, procurement, distribution and development support. Our marketing approach grows sustainable brands in a considered and well researched manner.

Our customer scope is broad, so while our main brands are focused on the wider South African market, we also have niche brands. This track record reassures the franchisee and broader market about Spur Corporation’s credibility.

What kind of support can a franchisee expect when joining Spur?

Franchisees can tap into expertise that’s been built up over five decades. We provide franchisees with the most effective tools to help manage and sustain their businesses successfully. Our operational support is wide-reaching and includes access to procurement, development, logistical as well as IT support. Skills development is one of the most important ways in which Spur Corporation supports its franchisees to run successful businesses.

Marketing support enables franchisees to actively identify opportunities and get assistance in developing and implementing bespoke marketing plans for each restaurant. Most importantly, when a franchisee joins Spur Group he or she gets access to cutting-edge management know-how from an experienced team of people who are passionate about our business.

Related: Nedbank’s Full Service Offering for Franchise Owners 

Why is it important for successful franchises such as yours to have a strong banking partner and how does it benefit the franchisee?

Buying into a brand is a substantial investment for a franchisee, so they need a banking partner that will help with financial planning and running the business. Nedbank has built relationships with franchisees while helping to open and maintain their businesses.

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Company Posts

Muscle And Grill Is Your Daily Chef. We Provide Fresh, Nutritional Food At Affordable Prices

It isn’t always easy to stay in tune with both body and mind. We do all the prepping for you so that you can keep up your pursuit of greatness.

Muscle and Grill

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Vital stats

Muscle and Grill is a healthy fast food establishment based in South Africa. In the face of modern South Africa, lives spent on the go require a fuel to match their aspirations while maintaining a delicious, fast and fresh service.

As our lives swirl into life’s vast depths of opportunity, our bodies are often the product of poor health habits, while trying to keep on the move to achieve our goals. Muscle and Grill challenges this. We want to be able to support the South Africa of tomorrow by offering the food your body needs to keep reaching new heights – to keep pushing the boundaries of accomplishment with health food convenience.

At Muscle and Grill we’ve got you covered. We provide nutritional fast food that is fresh and affordable. We have your health at heart. You could start your day off with some free-range scrambled eggs or fresh oats – for lunch a mixed bowl of rice, protein and fresh vegetables – or to round off your day, replenish your mind and body with a hearty health-infused burger and all its wholesome goodness. We have not forgotten that home constitutes a hungry family who have all been active, so grab a lean beef pasta salad with some greens on the side to go.

Related: SA Fast Food Franchising On The Rise

It isn’t always easy to stay in tune with both body and mind. We do all the prepping for you so that you can keep up your pursuit of greatness.

About us

It was once said that great ideas are born from ones’ frustrations. That is exactly how Muscle and Grill came about. Having no real on-the-go option to stay healthy, or having the time to prepare to be healthy, became a huge frustration for us. We struggled to find enough hours in the day to keep up with a busy lifestyle and still eat healthy while on the move. Our work came first and our lifestyles suffered.

The vision for Muscle and Grill is to make it possible to stay healthy on the go. We want healthy food to be easily accessible for all walks of life.

Our mission is to provide quality, healthy fast-food. The food we provide is delicious and will keep you coming back for more.

Concept

muscle-and-grill

Muscle and Grill works on an almost self-service basis. The point of sale system is customer operated where you can select what meal you would like to have. Once payment has been processed electronically the kitchen staff will receive the order and prepare it to spec. Muscle and Grill will be a completely cashless business, making it super-efficient for consumers and business owners.

Related: 3 Crucial Considerations For New Multi-unit Franchisees

The concept of Muscle and Grill is partnered with Puré Frooty. Puré Frooty is a self-service smoothie bar which prepares smoothies for you at the touch of a button. You can have a store with or without a machine – the choice is yours. Both concepts look to promote the idea of healthy living on the go.

We’ve looked to compliment our values by looking after that which grounds us. Our packaging and utensils are all eco-friendly, as we believe ‘going-green’ is not just a choice of eating but of the environment too.

So, when you are ready to join the next revolution in the fast food industry contact Muscle and Grill at info@muscleandgrill.co.za or visit the website at www.muscleandgrill.co.za to inquire on our franchise options today. Achieve your goals, stay on the move and look after yourself through Muscle and Grill.

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Company Posts

Nando’s Is Firing Up The East

Carlos Duarte has been part of the Nando’s brand since inception. When his brother Fernando co-founded the flamed grilled chicken brand in 1987, Carlos soon participated in its success and today owns four highly successful franchises in Johannesburg — three in the east and one in the south. Here’s how it all began.

Nedbank

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nandos

Vital Stats

  • Player: Carlos Duarte
  • Franchise: Nando’s
  • Position: Franchisee
  • Visit: www.nandos.co.za

What were you doing before becoming a franchisee?

I was in the audio visual technology field, as an employee. Then I joined Nando’s as an assistant manager in the Savoy and Rosettenville corporate stores. Franchising was my first experience of entrepreneurship.

Why did you decide to become a franchisee?

When my brother, Fernando Duarte, launched Nando’s in 1987, I noticed its quick growth and wanted in on the action. Being assistant store manager prepared me for when the opportunity to run my own store came along soon after.

What prompted you to partner with Nando’s?

I joined Nando’s in 1991 as a joint venture partner. At the time, Nando’s hadn’t yet franchised its operations, and the JV partnership meant the brand owned 51% of the business, while I owned 49%. My first franchise store was in Edenglen in 2001.

Related: (Watch) Why Nando’s Is Clucking Its Way To The Top

Describe some of the challenges of running not one, but four franchise locations

At the Edenglen store, we initially battled with sales and getting feet into the store. To be honest, I think the area was overtraded at the time, so it wasn’t the best location. Since acquiring the store in Lambton, Germiston, another in Greenstone and a third in Comaro, I’ve learnt to be cleverer in how I do things — and how I handle some of the same challenges — and learn every day from the brand itself.

Name some of the benefits you’ve experienced as a Nando’s franchisee

Nando’s is 31 years old this year. We’re in 30-odd countries worldwide with thousands of stores across the globe. As franchisees, we leverage off the dynamism of an operational business that’s known for its marketing — customers talk about our ads and they love our food.

What kind of support do you receive from Nando’s as a multi-unit franchisee?

Besides the popular marketing campaigns that attract customers, Nando’s has an extensive training manual along with a skills development training consultant who comes to the store for two days to help staff understand and implement it. The training is really effective — it has to be as this industry involves a very high turnover of staff and new skills need to be taught often.

Why is it important for a franchisee to have a good banking partner?

As a franchisee, your bank should understand your business — from operating costs, to overdraft needs and revamping expenses — so it has cash available for loans that can be approved quickly, with minimal hassle. On the technical side, a reliable mPOS device is imperative, especially for us, because 30% of our sales volumes are from home and office deliveries. It’s a fundamental method of payment every bank should provide its customers of a similar nature.


What advice do you have for budding franchisees on seeking out a good franchise brand and banking partner for their business?

  • Do your research to ensure you’re partnering with a brand that is established, well-known and expect to pay a fair price for that franchise.
  • Be aware of how the franchise brand is perceived in the market and what location opportunities are available to you as a franchisee.
  • Choose a banking facility that always has the funds available to grow your business.
  • Ensure the bank understands the brand’s business model and where you’re falling short.

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