New Venture Lab: Equipping Christian Entrepreneurs

I don't know about you, but I just love to hear stories about how successful entrepreneurs did it - the steps they took, the pitfalls that almost did them in and their lessons learned.

This is a terrific story about a 17-year-old college freshman that built one of the world's largest sandwich franchises...

No Experience Needed 
 
Trial and Error

Fred DeLuca was just looking for a way to pay his college tuition. He ended up founding Subway, the multimillion- dollar restaurant chain.

It was the summer of 1965, and DeLuca, then 17 and right out of high school, had tagged along with his parents to visit Peter Buck, a family friend. At some point, Buck asked DeLuca about his plans for the future. "I'm going to college, but I need a way to pay for it," DeLuca recalls saying. "Buck said, 'You should open a submarine sandwich shop.'"

The idea wasn't so far-fetched. When Buck was growing up in Maine, he frequented Amato's for its Italian subs. And DeLuca often ate at Mike's Sandwiches in Schenectady, New York, before he moved to Connecticut. Says DeLuca, "I didn't know anything about subs, but Pete had noticed that people in the sandwich business did pretty well."

Sitting in Buck's backyard on that July afternoon, they agreed to be partners. They designed the menu and pricing, says DeLuca, "even though we didn't know what the food would cost." And they set a goal: to open 32 stores in ten years. After doing some research (chowing down at Amato's), Buck wrote a check for $1,000. DeLuca rented a storefront in Bridgeport, Connecticut, and when they couldn't cover their start-up costs, Buck kicked in another $1,000.

DeLuca's mom scouted out food suppliers, and his father looked for equipment. When they needed a sign, DeLuca's dad suggested they try a guy he worked with. "So we drive over to Dick's apartment and tell him the story. He jumps in the car, comes to the store, designs a logo and paints the sign." The first Subway was ready for business, with friends and family helping out.

"As far as product quality and operational methods, it was what you would imagine a 17-year-old doing," DeLuca says. "Everything that could go wrong, went wrong. After six months, we were doing poorly, but we didn't know how badly, because we didn't have any financial controls." All he and Buck knew was that their sales were lower than their costs.

DeLuca was manning the store and commuting to the University of Bridgeport. Buck was working at his day job as a nuclear physicist in New York. They'd meet Monday evenings and brainstorm options for keeping the business afloat. "We convinced ourselves to open a second store. It wasn't that costly, and we figured we could tell the public, 'We're so successful, we're opening a second store.' " And they did -- in the spring of 1966. A third opened the following summer. Still, it was a lot of learning by trial and error, DeLuca says.

Intimate Ties

But they learned. When DeLuca's car broke down, he hitched a ride with a kid who was an enthusiastic Subway fan. "This kid points to my store and says, 'They have great sandwiches, and you can get all the soda you want free. You go in with a few friends and order sandwiches, and when the kid behind the counter turns around to make them, you go into the cooler and sneak the soda out.' "

DeLuca was flabbergasted. He hadn't realized that he needed to keep track of his sales and his inventory. But the partners' seat-of-the-pants, learn-as-you-go approach turned out to be one of their strengths.

For example, every Friday, DeLuca and his mom would drive around and hand-deliver the checks to pay their suppliers. "It probably took us two and a half hours and it wasn't necessary, but as a result, the suppliers got to know us very well. They allowed us more credit than we deserved, and the personal relationships that resulted really helped out," DeLuca says.

And having a goal was a huge plus. "Even though it felt like we were a gang that couldn't shoot straight, we knew what direction we were going. Being persistent was important," DeLuca emphasizes. "There are so many obstacles that can get you down. You just have to keep working toward your objective."

After eight years, they had expanded to 16 stores, forcing DeLuca to make a crucial decision. "The stores that weren't close were not doing well, and it was too far to travel to control things. That's when we decided to franchise."

By 1982, with the team operating 200 stores, DeLuca was thinking big. "I set a goal of having 5,000 stores by 1994. The team thought I was crazy."

They blew past DeLuca's goal, operating 8,000 stores by 1994. Today, Subway Restaurants number 20,446 stores in the United States, and 6,113 stores overseas.

In many ways, Subway continues to be a network of family and close friends. "I am still partners with Pete," DeLuca reports. "My sister works here. My mom is retired from the board. I have uncles, aunts and a cousin in the business. Our old-time franchisees are bringing their sons and daughters into the business." Even Dick, who designed the first logo, still works with Subway.

Those intimate ties provided a safety net for the fledgling company. Later, they helped it grow and prosper. For DeLuca, they are the ultimate secret to his success. As he says, "It's just a bigger family now."

By Maria Bartiromo, from Reader's Digest