Fred DeLuca didn't grow up with dreams of building the world's largest submarine sandwich chain. He wanted to become a medical doctor, but the drive to raise money to bankroll his education led to the creation of Subway.
Armed with a $1,000 loan and his friend Peter Buck as a partner, the first Subway shop opened in Bridgeport, Conn. during the summer of 1965. DeLuca and Buck didn't stop there, of course. They began to gradually expand, and by 1974, they were watching over a budding fast-casual empire of 16 locations.
That is when DeLuca decided that shifting away from a company-owned operation and toward a franchising model would be the most effective way to grow the chain quickly. The rest is history, but obviously Subway wasn't the first company to embrace franchisee owners as a way to scale quickly.
Fred DeLuca makes dough rise
The success that Subway and DeLuca have experienced over the past few decades stems largely from its cost-effective franchise model and the concept's ability to ride the wave of fresh and healthy dining.
You don't need to be a multimillionaire to run a Subway sandwich shop. Subway charges a reasonable $15,000 as an initial franchise fee. That's not the only up-front cost. The total investment averages between $114,800 to $258,300 for traditional locations, and that includes the fee, construction and equipment costs, and operating capital. Subway prefers that no more than half of the initial outlay is financed.
That's a reasonable sum to be able to run a turnkey business, explaining why Subway has been able to grow to more than 40,000 locations worldwide.
Fred DeLuca gets fresh
It's not just the reasonable price of admission to dive into the Subway family. The chain also benefited from the successful positioning of its brand as a fresh and healthy eatery.
When news broke that the now disgraced Jared Fogle lost 245 pounds by merely walking to Subway twice a day for nearly a year, the sub chain hopped on the "Subway diet" craze. It brought him on as a spokesman in 2000, and its marketing campaign played up the healthy nature of its meals.
It was the right campaign at the right time. Just as Morgan Spurlock would go on to show the health risks of consuming nothing but McDonald's for a month in 2004's Supersize Me, Subway leaned on Fogle to set itself apart as a lifestyle choice for active diners. Subway dismissed Fogle this summer as a spokesman, but the "eat fresh" message continues to resonate with consumers.
DeLuca's world was rocked before Fogle's fall from grace. DeLuca announced two summers ago that he was being treated for leukemia. He has entrusted his younger sister with a larger role in running the company, but no matter how his health fares, he has already left an amazing legacy.
Subway defied the logic that submarine shops are indie-run eateries. It now has more locations around the world than even Mickey D's. That's a healthy recipe for success.
Rick Munarriz has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.