The Little Submarine That Could: DeLuca Takes Subway to the Top
The Little Submarine That Could: DeLuca Takes Subway to the Top
DeLuca immediately went to work building a counter and partition. “I didn’t even carry it to the ceiling or put Sheetrock on the back,” he recalls. He then began to look for used equipment he could buy. “I put ads in the newspaper saying something like, ‘Student needs refrigerator,’ and I’d buy old household refrigerators for ten bucks apiece.”
It was not something he had thought out too well, but he was willing to roll with it and try his luck. After all, he was running out of other options to finance his way through college. He had no lease, no building mockups, no business plan, and no equipment, but he thought if he could just keep trying to make it work, eventually it would.
DeLuca first called his venture “Pete’s Submarines,” but after realizing the name sounded too much like Pizza Marines, he changed it to “Pete’s Subway.” Still, the store was almost forced to close down even before it got started thanks to a financing problem. DeLuca had discovered that he would need to install a special sink in the store that would run him up $550. He did not have that kind of money to spend on a sink. Thankfully, his partner, Buck, came to the rescue and fronted a second thousand dollars.
From the very beginning, DeLuca set his goal of opening 32 stores within ten years. That was ambitious thinking considering he barely had enough operating capital for one store at the time. “You’d sell the sandwiches for cash today, and you’d pay the employees and the food bill tomorrow,” he recalls. “So we had the float.”
By the end of the next winter, DeLuca had opened up a second outlet nearby. Both, however, were losing money. Together with Buck, DeLuca decided that the best solution was not to shut down, but to open a third store. Soon, all three had finally begun to turn a profit.
With three moderately successful stores on his hands, DeLuca decided it was finally time to get serious about his goal. The only way to achieve 32 stores in ten years, he decided, would be by franchising. There was nothing to it, he thought: recruit some people, train them, and let them run.
DeLuca approached his friend Brian Dixon with the idea. He told Dixon about the franchising plan and offered to loan him the money to buy one of his already existing restaurants. If Dixon did not like the business, DeLuca told him he could return it and owe him nothing.
At first, Dixon refused, as he was unsure about the stability of running a franchise. After finding himself out of a job, he decided to take DeLuca up on his offer. Dixon became Subway’s first official franchisee.
Over the next few years, the chain would grow at a dizzying pace. By 1978, there were 100 outlets, and another 200 in the four years following. In 1987, the company reached its 1,000 mark. Since then, Subway has averaged 1,000 openings a year.
Now in business for over 40 years, Subway is the world’s largest submarine sandwich chain with over 25,000 outlets in 83 countries, more than even McDonald’s.
“When we approached our goal of 5,000 stores, I thought our growth would begin to slow, but that didn’t happen. Growth continued at a steady pace,” says DeLuca. “We must be the fastest-growing restaurant company ever in terms of rate.”
The Little Submarine That Could DeLuca Takes Subway to the Top
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In less than a week, DeLuca had gone from a struggling student earning minimum wage, to a submarine sandwich store owner, all thanks to his friend Pete Buck. “I talked to Pete on Sunday,” recalls DeLuca. “I borrowed my dad’s car on Monday and drove around a little bit and found a vacant store.” The next Saturday, DeLuca returned to the store with Buck and rented it. He never signed a lease, but it was all his.
DeLuca immediately went to work building a counter and partition. “I didn’t even carry it to the ceiling or put Sheetrock on the back,” he recalls. He then began to look for used equipment he could buy. “I put ads in the newspaper saying something like, ‘Student needs refrigerator,’ and I’d buy old household refrigerators for ten bucks apiece.”
It was not something he had thought out too well, but he was willing to roll with it and try his luck. After all, he was running out of other options to finance his way through college. He had no lease, no building mockups, no business plan, and no equipment, but he thought if he could just keep trying to make it work, eventually it would.
DeLuca first called his venture “Pete’s Submarines,” but after realizing the name sounded too much like Pizza Marines, he changed it to “Pete’s Subway.” Still, the store was almost forced to close down even before it got started thanks to a financing problem. DeLuca had discovered that he would need to install a special sink in the store that would run him up $550. He did not have that kind of money to spend on a sink. Thankfully, his partner, Buck, came to the rescue and fronted a second thousand dollars.
From the very beginning, DeLuca set his goal of opening 32 stores within ten years. That was ambitious thinking considering he barely had enough operating capital for one store at the time. “You’d sell the sandwiches for cash today, and you’d pay the employees and the food bill tomorrow,” he recalls. “So we had the float.”
By the end of the next winter, DeLuca had opened up a second outlet nearby. Both, however, were losing money. Together with Buck, DeLuca decided that the best solution was not to shut down, but to open a third store. Soon, all three had finally begun to turn a profit.
With three moderately successful stores on his hands, DeLuca decided it was finally time to get serious about his goal. The only way to achieve 32 stores in ten years, he decided, would be by franchising. There was nothing to it, he thought: recruit some people, train them, and let them run.
DeLuca approached his friend Brian Dixon with the idea. He told Dixon about the franchising plan and offered to loan him the money to buy one of his already existing restaurants. If Dixon did not like the business, DeLuca told him he could return it and owe him nothing.
At first, Dixon refused, as he was unsure about the stability of running a franchise. After finding himself out of a job, he decided to take DeLuca up on his offer. Dixon became Subway’s first official franchisee.
Over the next few years, the chain would grow at a dizzying pace. By 1978, there were 100 outlets, and another 200 in the four years following. In 1987, the company reached its 1,000 mark. Since then, Subway has averaged 1,000 openings a year.
Now in business for over 40 years, Subway is the world’s largest submarine sandwich chain with over 25,000 outlets in 83 countries, more than even McDonald’s.
“When we approached our goal of 5,000 stores, I thought our growth would begin to slow, but that didn’t happen. Growth continued at a steady pace,” says DeLuca. “We must be the fastest-growing restaurant company ever in terms of rate.”
The Little Submarine That Could DeLuca Takes Subway to the Top
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