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QSR Feature
Subway, Unscripted

In addition, “it helped us be better prepared for our lunch rush,” Horner says. “With that extra hour of prep time, everything’s ready and fresher looking. The real benefit is the stores are better run at lunch.”

That payback addresses what DeLuca cites as a major challenge to the brand. Fueling demand is important, but so are the quality and consistency of stores’ efforts to satisfy it. Operations are a particularly crucial concern when a chain has as many franchisees as Subway does, not to mention when it faces considerable direct competition from a pack of upstart fast-casual challengers.

“I tell my team all the time, ‘The biggest chain in the world used to be Howard Johnson. Now no one eats at a Howard Johnson,’” DeLuca says. “The world doesn’t stand still and we don’t deserve to be where we are unless we stay ahead of things and take the necessary steps to remain competitive.”

Inertia can also be a factor after at least a seven-year run of strong sales, Horner says. “How do you keep successful owners fresh, how do you keep them interested and motivated enough when they’ve paid off their house and are living well?”

Providing consistent quality is “probably our biggest challenge,” and will be addressed in the five-year strategic plan that the home office and franchisees are about to draft for the brand, says Goodridge, who’s on the committee writing it.

DeLuca says that some operational problems are allayed through a process he instituted two years ago to foster improved communications and hence better relations with franchisees. “We started having these massive conference calls. I’d invite a whole mess of multiunit operators, maybe 60, 70 people,” he says. “I get maybe 50 people at headquarters to participate.”

Franchisees are invited to raise any issue or concern on their minds. “One operator brought up some equipment problem he was having,” DeLuca says. “I asked all the other operators on the call if they knew about it, and every one of them did. No one here [in headquarters] knew about it.” It was subsequently fixed.

In addition, DeLuca says he spends time in the field visiting stores. “My typical way to spend a day is to get in the car with a local development agent and drive from here to there, visiting stores in between,” he says. “Obviously he’s talking to me between stops about what’s going on, what he’s hearing. I pick up these little things and fit them into the puzzle.”

Franchisees say DeLuca is still the ramrod who pushes ideas through the system. A franchisee was the source of $5 Footlongs, but DeLuca pushed the permanent discount as a way of simplifying menuboards, which were turning patrons off with their complexity. Franchisees also cite DeLuca as the proponent of controversial ideas like cutting the price of six-inch subs to $2.49 in some markets.

“Fred blows me away with some of his goals and projections,” Horner says. “I wonder where he gets some of those things.”

With a 2009 net worth pegged at $1.5 billion by Forbes magazine, DeLuca could arguably do nothing but sit back and count the money coming in. “They’ve got great marketing, they’re positioned well, they were ahead of the curve with the health positioning, they have a halo in the mind of the consumer, and they have a franchising model that’s been very aggressive,” Henkes says.

Meanwhile, Subway’s lead over the competition is enormous, particularly in terms of breadth. “It’s almost eight times as large as Arby’s, six times as big as Quiznos, and 20 times as large as Jimmy John’s,” Henkes says.

But DeLuca isn’t ready to hand the bread knife to a successor anytime soon. “There are many, many people who could step in with the skills and talent needed to do the job,” he says. It’s just that golf, sailing, or other retirement pursuits just don’t interest him as much as franchising.

“I work every day, and I can’t figure out why I enjoy it so much,” he says.

“I’ve been doing this for 45 years. Sometimes I think, ‘If I just keep at it for another five years, I could say I’ve done it for 50.’”

He pauses.

“When I hit 50, I’ll probably say, ‘You know, I could do this for 100 years.’”

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Peter Romeo is a veteran reporter and recently interviewed the CEO of McDonald’s for QSR’s May issue.