Billionaire Profile: Fred DeLuca
The billionaire cofounder of the subway sandwich restaurant chain, Fred DeLuca was born in 1948 in New York City. At the age of 17, Fred DeLuca created his first sandwich store. He began this venture to raise funds for college, but his restaurants took over his life. After some initial failures, his business began to prosper. According to the Subway Corporation, there were 33,005 Subway restaurants in 91 countries by 2010. Apart from restaurants in North America and Europe, there are also restaurants in war-torn Iraq and Afghanistan. The only faster growing fast-food franchise is McDonalds.
How he made his fortune
When he was a teenager, DeLuca desired to go to college to study medicine, but he soon realized the futility of his quest to raise enough money after working for low wages in a hardware store the summer prior to college. In frustration, he asked Dr. Peter Buck, a nuclear scientist who was a family friend, for a loan of $1,000. Buck liked DeLuca’s idea of a healthy fast food restaurant—a less fattening alternative to the popular hamburger and pizza parlors that were popular at the time—loaned him the money, and became a co-owner.
In 1965, at the age of 17 years-old, DeLuca opened his first store in Bridgeport, Connecticut, at the beginning of the summer. But, by the end of summer, only $6 was left from the original $1,000. Undeterred, Buck suggested a bold, new strategy: open another store to increase visibility. This new store also failed. Still undeterred, the co-founders, now opened a third store. This time, they tried something slightly different: they changed the name. Pete’s Submarines now became Subway. Through hard-work and relentless passion, the business eventually earned a profit of $7,000.
DeLuca did pursue his earlier dream of going to college and graduated from the University of Bridgeport, but he had fallen in love with his business idea and decided to expand his restaurant idea to 30 stores in a decade. In 1974, DeLuca asked a friend to help grow his business, which had reached 15 stores by the end of the decade. DeLuca then conceived the idea of training owner-operators to help him reach his goal. Today, there are well over 30,000 subway restaurants in over 90 countries around the world.
What he does now
Today DeLuca is married, with one child, and lives in Fort Lauderdale, Fl. Despite a fortune of $1.5 billion, he still goes to work. His work now consists of quality control. He drives across the country ordering sandwiches in Subway restaurants. Since there are well-over 10,000 Subway restaurants, he is seldom recognized by owners or their employees. DeLuca tries to visit as many outlets as he can and may eat as many as six submarines each day. DeLuca’s new goal is to be a bigger franchise chain than McDonald’s.
What We Can Learn
There are five take away lessons that a budding entrepreneur can take from this true story of DeLuca:
1. He did not settle for a regular job in the hardware store, as most ordinary teenagers in his position would have done to pay their bills, because he was motivated by a higher ideal: going to college to become a doctor.
2. He leveraged his relationship with Buck to develop an original idea in the restaurant business.
3. He did not give up after his initial failure of his first restaurant, but instead dreamed even bigger. When this second failed, he added yet another store. After his third store, he finally turned a profit.
4. Finally, when he was not achieving his goal of having 30 restaurants in 10 years, only getting half that number, he came up with the idea of creating an owner-operator business. Franchising resulted in tens of thousands of Subway stores around the world.
5. Today, when most people would have retired to a life of ease, he still pursues his vision of becoming the fastest growing franchise in the world.