Fred DeLuca, who died this week at the age of 67, after a two-year battle with leukemia, started a sandwich shop as a teenager to raise money for college, and ultimately turned it into the world’s most ubiquitous restaurant chain, Subway.
Along the way, DeLuca established himself as one of the most innovative entrepreneurs in restaurant industry history, on par with giants like Ray Kroc, Harland Sanders, Norman Brinker and Dave Thomas.
Subway, which DeLuca started with a $1,000 loan from a family friend, would help revolutionize the way restaurant chains operate, and how franchise businesses develop new units and spread their brand names.
The company helped pioneer many of the strategies that are commonplace in the restaurant industry today, including low-cost investment, an assembly line that creates food in front of the customer, freshly baked bread and a health-based marketing scheme.
“The franchise community is saddened by the passing of Fred DeLuca,” International Franchise Association chairwoman Melanie Bergeron said in a statement. “His vision, which began as an inspiring 17 year old, continues to contribute significantly to the advancement of franchising and the franchising community.”
“We are deeply saddened by the passing of Fred DeLuca, a pioneer in the restaurant industry,” National Restaurant Association CEO Dawn Sweeney said in a statement. “Fred helped propel Subway into one of the world’s most recognizable brands, and has been an inspiration to the entire restaurant community. Our thoughts and prayers are with his family.”
Restaurant chain operators and even some of Subway’s upstart competitors reacted to the death on social media.
“Subway's Fred DeLuca paved the way for me in this industry,” Jimmy John’s wrote on its Facebook page. “He was a titan, a maverick, a pioneer, an entrepreneur and a good friend. We've lost a great man!”
In a post on its Facebook page, the chain Which Wich called DeLuca “a passionate leader, a generous mentor and an absolutely lovely person. He will remain an inspiration to all of us, the restaurant industry, and entrepreneurs everywhere.”
Firehouse Subs tweeted that DeLuca was “a true pioneer in the restaurant industry.”
Today, we tip our hat to Fred DeLuca, founder of Subway and a true pioneer in the restaurant industry. May he rest in peace.— Firehouse Subs (@FirehouseSubs) September 15, 2015
Born in 1947, in Brooklyn, N.Y., to a working class family, DeLuca in 1965 borrowed $1,000 from physicist Peter Buck, and opened what would be called “Pete’s Super Submarines” in Bridgeport, Conn. He initially planned to raise money to go to medical school, and thus called the chain’s parent company “Doctor’s Associates.”
But DeLuca would later abandon the medical school plan and concentrate on running the restaurants.
“I found my temperament was not well-suited to the kinds of study I’d have to do to be a good medical student,” DeLuca told Nation’s Restaurant News in 2010. “I also realized that it wouldn’t be a good idea to be a medical school student running a sandwich company.”
Nine years later, the company had 17 units, but DeLuca struggled to manage all the locations as they opened further away. DeLuca and Buck then decided to franchise the business. “Wouldn’t it be cool to have someone else own the store — someone who lived near it?” DeLuca quoted himself telling Buck. “They could care for it the same way I cared for those close by me.”
The chain started franchising in 1974, and had 200 locations by 1982. It then took off, as the company’s development professionals kicked expansion into high gear. By 2002, it overtook McDonald’s as the world’s largest restaurant chain in terms of unit count.
The company bakes the bread for its sandwiches fresh every day. And its style of preparing food in front of customers — and giving them the ability to customize those sandwiches — would pave the way for later chains like Chipotle Mexican Grill.
“They did popularize, through the glass countertop, customer choice,” said John Gordon, a San Diego-based restaurant consultant. “There had to be some brilliance on Fred’s part to build that.”
Its low investment cost also lured people by the thousands, who were interested in becoming their own boss through franchising, giving a broader range of people the chance at becoming their business ownership.
In addition, the company’s flexible business model, and its ability to make the sandwiches without much of the equipment that a typical restaurant needs, enabled franchisees to blanket the country with the Subway logo.
Today, Subway restaurants can be found in gas stations, airports, hospitals, kiosks, and even churches or on a crane building the Freedom Tower in New York City. The chain now has more than 26,000 locations in the U.S., and more than 44,000 units worldwide — close to his prediction in 2010 that the chain could have 45,000 locations by 2015.
Subway's growth falters
DeLuca once suggested that 100,000 locations was a possibility.
“People gravitate toward brands,” DeLuca told NRN in 2013. “Big chains are getting bigger. Many are global now. Looking at growth of the world and changing economics, I felt pretty confident that would happen.”
But he also said that the chain’s growth was “actually quite simple.”
“If you think about what’s required to open one store … to open 10 stores requires those same things,” he said in 2010. “To open 100 stores requires 10 times that again. It’s a matter of scale.”
In 2000, Subway would become the first major restaurant chain to use healthfulness as a central tenet of its marketing strategy. And it effectively used the $5 price point, with its $5 Footlong promotion, started by a Florida franchisee in 2004 and expanded systemwide in 2008.
The promotion was so successful that it was given credit for speeding the decline of rival chain Quiznos, and for establishing $5 as a key consumer price point.
In recent years, however, Subway’s once unstoppable growth seems to have slowed amid sales weakness. Domestic system sales have been flat for the past couple of years and average unit volumes fell. Last year, Starbucks leapfrogged Subway as the nation’s second-largest restaurant chain, based on system sales, according to the NRN Top 100 census.
In addition, the company had to fire its famous spokesman, Jared Fogle, after a child pornography investigation.
DeLuca fell ill in 2013, during one of his frequent visits with franchisees. He was ultimately diagnosed with leukemia.
He remained active in the company, and with the International Franchise Association, even as he received treatment for the illness. At one point, he appeared to have gotten better, but the illness returned. Early this year, DeLuca ceded more control of the company over to his sister, Suzanne Greco.
In June, Greco was named company president, and was in charge of day-to-day operations. Yet DeLuca kept the CEO title, remaining in charge of the overall direction of the company.
DeLuca leaves behind his wife, son and sister.