Key development: Won contract to install full-service restaurants inside selected Wal-Mart stores.
What's next: Boosting customer counts by 50% at each store.
Fred DeLuca wins by staying in touch.
DeLuca, co-founder and president of the Subway restaurant chain, always manages to be a step ahead. He does that by listening to everyone -- especially his franchisees -- and then acting on much of what he hears, industry observers said.
Without that give-and-take, Subway would have a more difficult time implementing some of its big pushes, such as contracting with Wal-Mart Stores this past year to put full-service units into Wal-Mart locations, more than 1,000 over the next year. A new plan to increase customer count at each store by 50% over the next five years is particularly dependent on communicating effectively with franchisees.
"That's one of the highest goals we've ever set," DeLuca told SN. "We developed the plan in consultation with franchisees and development people. Right now we're holding regional meetings to explain it, after unveiling it to development agencies this winter."
Among other things, the plan calls for addressing additional dayparts, developing new and improved products, stepping up employee training and sharpening advertising operations. Improving breakfast offerings is first on the list, and a chicken parmesan sandwich will lend itself to dinner, DeLuca said. More hefty, hot sandwiches are on the drawing board.
DeLuca considers Subway's agreement with Bentonville, Ark.-based Wal-Mart the major development in the last year.
"We've been awarded 300 Wal-Mart locations and have already opened 200 of them. We expect to open 1,000 more this year in Wal-Mart stores," he said. "We open a full store there with full preparation, full service, full menu. We're baking bread right in front of the customer."
While plans call for reaching beyond lunch, current commercials aim to bring health-conscious consumers into Subway for lunch.
"Our major competition is the hamburger companies, and this past year, half our ads were comparison ads that show the differences [in nutrition and freshness] between ours and what others offer," DeLuca said.
Jared, the man who lost 245 pounds eating Subway sandwiches, gave Subway an edge as a perceived healthy alternative and helped create huge increases in comp store sales over the past few years, said Neil Stern, senior partner, McMillan/Doolittle, Chicago.
Jared's employment as a spokesman is a good example of an effort that was driven by franchisees, DeLuca said. Despite corporate hesitancy, DeLuca said he listened to a franchisee group.
"Everything I've heard about Fred DeLuca indicates he's a good communicator. He e-mails franchisees all the time. That's extremely important because in a sense they are the customer. Fred keeps focused on the [everyday] business," said Ron Paul, president, Technomic, Chicago.
Indeed, DeLuca told SN he installed a state-of-the-art voicemail system years ago that allows him in seconds to forward a workable idea he might receive from one franchisee to his entire network of franchisees worldwide.
"I respond to all my messages, but I also use some messages for education. Just this week, I got a message from a fellow in West Virginia who told me the way he's handling sales promotions -- underscoring the affordability of eating Subway sandwiches often -- is working very well. When I pass that on to other franchisees, I think of it as continuing education -- small doses of relevant information on a timely basis. I do use e-mail, but I think voicemail works better. When you hear the inflection in people's voices, you get a better picture of what they're describing."
Fred DeLuca started Subway in 1965 at the age of 17 in partnership with a family friend, Dr. Peter Buck. Today, the privately held company, Doctor's Associates Inc., has more than 23,000 locations in 82 countries and recently became the biggest restaurant chain in this country. As of Dec. 31, Subway was operating 13,247 locations in the United States, 148 more than McDonald's.
