A true entrepreneur since the age of 17, Fred DeLuca doesn’t shy away from innovation.
As cofounder and president of Milford, Connecticut–based Subway, DeLuca isn’t afraid to take risks or listen to the advice of others.
“The owners of our 32,000 stores share a tremendous entrepreneurial spirit, so innovation comes naturally to them,” DeLuca says. “So we’ve built local option capability into the Subway system. That allows many different owners the ability to experiment simultaneously.”
And many of those experiments have hit pay dirt.
“The ideas are constantly flowing, and some of them have had lasting effects for the entire chain,” he says. “For instance, Subway’s ‘$5 Footlong’ campaign was started by a franchisee, and within a year it became a national promotion.”
Since 1965, Subway has had a healthier menu than many other quick-serve operations. Through the years DeLuca further established that healthy halo with marketing efforts such as the Jared Fogle commercials, which touted Fogle’s 245-pound weight loss from eating a six-inch Subway sandwich at every meal.
This year’s tie-in with the Biggest Loser television show further solidifies the sandwich chain’s marriage with a healthful image. The chain is paying $1,000 for every pound contestant Shay Sorrells loses.
Now with more than 32,400 stores in 91 countries, Subway continues to roll out new initiatives to keep up with a demanding marketplace.
A Buffalo Chicken submarine sandwich, with only seven grams of fat, was introduced last year, as well as the company’s new mobile site, which has a restaurant locator with a map function.
The brand also joined Energy Star, which is a joint program of the U.S. Environmental Protection Agency and U.S. Department of Energy, encouraging businesses and homes to conserve energy. To that end, Subway relocated several distribution centers next to vendor manufacturers, switched to energy-saving light bulbs, and made its napkins from 100 percent recycled materials.
The innovations keep coming from inside the franchisee community, and DeLuca couldn’t be more proud.
“A franchisee developed one of our newest and most unique stores, which is now about 100 feet in the air in the Freedom Tower construction site at the World Trade Center,” DeLuca says. “That store moves 15 feet higher every few weeks as the steelwork is put in place. That innovation keeps the food close to the construction workers as the building is built, saving time and money.
“Another store was built in a church in Buffalo, where the pastor uses the store to provide job training for local youngsters.”
In Sue Morelli’s world, extensive customer research is the catalyst for all innovation.
Morelli, president and CEO of Boston-based Au Bon Pain since 2005, has systematically put her stamp on the bakery café by paying close attention to others.
“We do a lot of guest research and, in fact, just finished with a pretty major focus group of more than 50 hours with our heavy users,” Morelli says.
During her presidency, Au Bon Pain introduced a new product line called Portions, which features a selection of 14 dishes made fresh daily, packaged individually. Each one is 200 calories or less. The Portions line focuses on vegetables and proteins as the main ingredients, retailing for $2.99 (without meat) or $3.49 (with meat).
“Innovation is a great word, and it’s complex,” Morelli says. “It has a lot of components: consumer trends, culinary savvy, and talent. And at the end of the day it has to be grounded by product profitability, the economics have to make sense.”
According to Morelli, another area heavily impacted by research is speed of service. Au Bon Pain recently underwent a major remodeling program, introducing a design that allows customers to serve themselves.
As a result of the recession, Morelli says consumers are doing more with less. In an effort to capitalize on the new reality, she is pushing the chain to offer “better basic foods that are affordable, fresh, and nutritious and served with speed and warmth.”
The 240-unit Au Bon Pain, which means place of good bread, is poised to grow both domestically and internationally.
“We keep a close watch on all the competitors, from fine dining to quick service,” she says. “Our executive chef, Tommy John, has the power to drive the concept. He has an extraordinary pulse on the consumer palate.”
The company, which was founded in 1976, rolled out a new café called the Bistro in 2006 and has a wide range of real estate applications to offer. In addition, the chain was recognized for its use of touchscreen terminals that offer nutritional information to the guests.
“In our business it is just so easy to put stuff out there and test it,” Morelli says. “Patrons are looking for higher quality at the same speed they used to get quick service, and they have a real good sense of what is real quality.”