Lesson #4: The Name of the Game is Profit or Perish

|
| Tweet |
|
Free PDF Download Fred DeLuca Quotes - By Fred DeLuca |
In the very first year that Subway hit the million dollar mark in sales, DeLuca’s practices were called into question by his accountant. The company may have had over a million dollars worth of sales, but it was also recording a loss of $100,000. Subway’s operations were simple and its startup costs were low compares to its competitors; opening a Subway franchise cost $85,000 compared to $1.1 million for a McDonald’s franchise. And, while Subway outlets did bake their own bread in-store, no other cooking was done on the premises.
It was a hard lesson to learn for DeLuca. Sales were soaring so he assumed his company was on the right track, but the financial books revealed otherwise. It was then that he realized it did not matter how much his company was bringing in; if he was not in complete control over his expenses – over what was going out – it was irrelevant.
DeLuca accepted the mistake and rationalized it as necessary for the stage he was at. Subway was in its brand-building stage and sometimes it was necessary to risk profit for long-term gain since brands do not get built overnight. But DeLuca knew that strategy could only go on for so long.
After that, DeLuca began to focus not on improving the product, but on the business system as a whole. He began taking advantage of economies of scale in obtaining cost savings, and passing those on to his franchisees. Even as the company continued to expand, DeLuca made sure that startup costs were low per average store. He also provided support to each franchisee in the form of equipment, financing, supplies, training, and more. DeLuca wanted to ensure that both he and his franchisees had the most chance for success.
“I thought initially that it would be a small-scale business,” says DeLuca. “But after I brought in franchising we got to about 200 stores in the early 1980s. It was then that I wondered how well we could really do.”
Now that DeLuca has a better handle on his expenses and the cost of franchising, he is setting his sights even higher. Having conquered the U.S. market, which is still going strong, DeLuca is aiming for the U.K. and Europe. By 2012, DeLuca hopes to have 2,000 stores throughout the U.K. and Ireland. Subway remains one of the leading international fast food chains because DeLuca learned early on the importance of profiting or perishing.
Related Articles
Home
> Famous-Entrepreneurs
> Fred DeLuca
> Lesson 4 The Name of the Game is Profit or Perish
> Google +
|
Free PDF Download Fred DeLuca Quotes - By Fred DeLuca |
Related Forum Posts
Share this article. Fund someone's dream.
Share this post and you'll help support entrepreneurs in Africa through our partnership with Kiva.
Over $50,000 raised and counting - Please keep sharing! Learn more.
Featured
Expert
ExpertTrending Articles
|
|
|
|
|
|
|
|
|
|
|
|
Like this page? PLEASE +1 it! |
Newsletter
Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Popular Articles
Are You Stuck in Your Comfort Zone
Cleavage in the Boardroom
••••••>File Naming Conventions for Top SEO
Are You Stuck in Your Comfort Zone
Cleavage in the Boardroom
••••••>File Naming Conventions for Top SEO
Suggestions
Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.
Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.






