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Subway's DeLuca tells chamber group of microlending initiative
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Business New Haven
5/4/1999
By: Linda Mele
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Subway founder/president Fred DeLuca opened his first fast-food sandwich shop in 1965 with a dream, a $1,000 loan from family friend Dr. Peter Buck, some sub rolls, several pounds of meat, a few tomatoes, peppers and heads of lettuce and exactly one knife.
That first day he sold 312 subs and was elated, but within six months he couldn't even pay the help.
So, what did he do?
“We had three choices,” DeLuca told a crowd of nearly 700 who attended the annual Greater New Haven Chamber of Commerce breakfast in the Omni New Haven Hotel at Yale ballroom on April 22.
“We could lock the door and throw away the key; we could try advertising to drum up business; or we could open a second store,” he said.
In May 1966, he opened a second store and, in July of that year, a third.
By the company's first anniversary, all three were doing poorly, but DeLuca wasn't discouraged. He knew the idea would work and on that rather bleak first anniversary he set a goal of having 32 stores within ten years.
As the event's keynote speaker, DeLuca told his story as part of a larger story about the importance of setting goals and following through on commitments.
“We didn't reach that 32-store goal until the 11th year, but we reached it,” DeLuca says. “In 1982 we had 200 stores and set another goal: 5,000 stores by 1994 which we reached by 1991. In 1994, we had 8,000 stores and today we have more than 13,100 in 64 countries.”
Subway exceeded his goal because the company became one of the most aggressive franchisers in the business.
“Everybody needs goals,” DeLuca says. “They must be quantifiable, have a definite time frame, and be a stretch, not something easily obtainable. By setting goals and, more importantly, making them public, you stick your neck out. But that's how things get done.”
DeLuca used all this personal company history to illustrate another of his goals: the development and growth of MILE, the Micro Investment Lending Enterprise project he helped start in Milford in 1996.
Modeled after two sources, the Grameen Bank in Bangladesh (a recognized pioneer in micro lending) and the Women's Self Employment Project (WESP) in Chicago, which he supported, DeLuca called MILE a “community service franchise.”
MILE is a non-profit organization that lends money to people without access to credit so they can start their own small businesses. The program links would-be entrepreneurs with mentors and provides support, guidance and loans through local banks which are guaranteed by local business and individual sponsors. Loans are truly micro, ranging from $100 to $1,500.
“Peter took a chance on me, and I want to give that same opportunity to others,” DeLuca says.
“It's important to have goals and to let others know what they are because then you have to work to achieve them,” DeLuca told the gathering as he challenged others in the audience to become sponsors or mentors, too.
What DeLuca didn't mention during his speech, however, is an article that appeared in Fortune magazine in March that called Subway “The Biggest Problem in Franchising.”
The critical piece reported that Subway and its affiliated entities are fighting 160 “legal disputes” with franchisees and landlords which represent “more than the combined total listed by [the company's] seven largest competitors.”
At the same time, Subway is ranked No. 4 on Entrepreneur magazine's “Franchise 500” list (behind McDonald's, Burger King and Yogen Fruz/Bresler's Ice Cream) and, according to DeLuca, was No. 1 for many of the past ten years.
DeLuca says the disputes are part of doing business and that they represent just a small fraction of the total number of outlets in the $3 billion-plus chain.
DeLuca says he's tried to arrange a meeting with the reporter and his editors to discuss “what [the reporter] wrote vs. the information he had.”
“The Subway opportunity attracts a large number of people,” DeLuca says, “and some of them come into it with unreasonable expectations. Many don't know the first thing about operating a business.”
At the event, chamber chairman and Bilco Co. vice president Roger Joyce introduced Anthony Vallillo, vice president of client services for the United Illuminating Co., as the new chamber vice chairman who will take over the chairmanship next year.
In addition, the chamber also presented its “Spirit of Cooperation Award” to BankBoston Connecticut president R. Nelson (Oz) Griebel for his continuing role in community activities.
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