Fred DeLuca Biography - The Subway Franchise Story

Pete's Subway 1968

Frederick Adrian "Fred" DeLuca was born in Brooklyn, New York in 1947, lived in public housing in the Bronx, then moved to Schenectady and ultimately to Bridgeport, Connecticut. From humble beginnings, he grew the largest quick service restaurant chain in number of units (Subway has close to 45,000 locations worldwide, but McDonald’s is still larger in volume) and Subway was reported by Forbes magazine to be worth $3.5 billion dollars.

Not a bad return on a $1,000 investment. He is among a host of franchise founders who started poor and, like Dave Thomas (Wendy’s) and Bill Rosenberg (Dunkin Donuts), had an idea and then grew companies that literally changed America.

The Subway story begins with a 17-year-old’s desire to attend college and asking a family friend for a loan at a barbeque to pay for tuition. Dr. Peter Buck, a nuclear scientist, had a different idea for Fred and instead of loaning him the tuition he needed, instead invested $1,000 for Fred to open his first sandwich shop in 1965. Fred continued his education while growing his chain of restaurants. While originally planning on being a medical doctor, Fred graduated from the University of Bridgeport in 1971 with a degree in psychology.

The idea for Subway was Buck’s, based on an Italian sandwich shop in Maine called Amato’s that he frequented as a child. Started in 1902 in Portland, Maine by Giovanni Amato, an Italian immigrant, the brand was purchased by Dominic Reali, a long time employee at Amato’s first location.

Today, Amato’s is also franchising and has 44 locations in Maine, Vermont, New Hampshire and New York. It's worth a visit to an Amato’s restaurant - their sandwiches are authentic old-style Italian and really truly amazing.

Fred and Peter drove up to Maine and spent some time studying the Amato's operation.

A few weeks later they opened their first Pete’s Super Submarine in 1965, changing the name to Pete’s Subway and ultimately to Subway in 1968. They settled on "Subway" as a play on words based on the subway system in New York. The name change came about because people who listened to the radio commercials thought the name sounded like “Pizza Marines” and were surprised when they arrived to discover that it was a sandwich shop and not a pizzeria.

The first few restaurants did not do as well as expected, so instead of abandoning the concept Fred instead opened a few more. By 1973 Subway had grown to 16 restaurants in Connecticut, and began to franchise in 1974. By 2013 Subway was reported to be opening over 50 new restaurants per week. Today it has close to 45,000 locations in 112 countries, with its first international franchise opening in Bahrain in 1984. Headquartered in Milford, Connecticut under the corporate name Doctor’s Associates, the company’s international operations are serviced from offices in the Netherland, Australia, Lebanon, Singapore, and Miami. Doctor’s Associates is a closely held private company.

The introduction of Jared, a customer who claimed to have lost 245 pounds on his Subway diet as its spokesman, began to turn the company’s brand positioning into a healthier food alternative.

In 2009 a Zagat survey named Subway the best provider of “Healthy Options” in the mega-chain category. It won praise from the American Heart Association for its low-calorie, low sodium meals in 2012 and was awarded its Heart-Check Certification. Even First Lady Michelle Obama chimed in by praising Subway for “working to get kids excited about eating their vegetables." Most certainly, the introduction during the same period of its expanded assortment of bread, its improvement in its proteins, and expansion of menu assortment has had more to do with continuing and improving the success of the restaurants at the local level than anything else.

Jared Fogle was accused and convicted in 2015 of child exploitation and child pornography and is currently serving 15 years in prison. With the close and long term ties between the Subway brand and Fogle, there was clearly concern over the potential impact it could have had on the public’s perception of Subway.

How the company has dealt with the Jared controversy is a remarkable case study in brand management during a crisis.

The Subway brand has proven to be remarkably adaptive to local and foreign markets. While Fred was frequently quoted as not wanting to modify the Subway offering; as it entered new markets, it did locally evolve. It introduced Kosher locations starting with Cleveland and developed vegan restaurants that do not serve beef or pork in India. It also modified its products based on local consumer demand, offering gluten-free bread and brownies, developed reduced salt and fat to meet consumer trends in international markets, and has removed some ingredients used in its products including the food additive azodicarbonamide. It also recently announced that it will be moving to proteins that are raised without antibiotics.

The history of Subway has not been without challenges. Over its history it has been plagued at different times with franchisee dissatisfaction, litigation, claims that the length of its sandwiches are exaggerated, and among other issues has frequently been mentioned in legislative battles dealing with federal and state regulations targeted at franchising. Also, as new concepts have emerged with healthy food offerings, Subway's health-conscious brand positioning has come under increasing competition.

As with many successful founders in franchising, Fred, while not particularly active in the International Franchise Association, was always an accessible mentor. There are countless stories of Fred meeting with new franchisors and spending hours with them providing advice – and some of those new franchisors were sandwich shops that only wanted to become the next Subway. Prior to his death, Fred appointed his sister Suzanne Greco to take over the leadership of the brand as its president. Fred died on September 14, 2015, at the age of 67.