Subway founder talks growth, health care, menu

With global growth as the new frontier, the Subway sandwich chain is reaching out to young people in other countries in a way that meets them where they are: online.

Subway last month launched an online “business simulation” game that allows players in the 100 countries where the brand operates to build their own virtual Subway unit.

The Milford, Conn.-based chain is challenging players to compete against each other to build the best restaurant by March 12. The top five winners will receive an all-expense-paid trip to the sandwich chain’s headquarters to meet Subway executives to explore work or entrepreneurial options with the company.

The virtual challenge coincides with the release of an educational video telling the history of Subway, which was founded 47 years ago by Fred DeLuca when he was 17. The video is being shared with professors at college and universities around the world with the goal of educating young people about the brand and the franchising industry.

In a recent conversation with Nation’s Restaurant News, DeLuca explained how the program fits into Subway’s ongoing growth plans worldwide.

Are the virtual challenge and new video part of a push to reach younger potential business owners around the world?

It’s not really a strategy. It’s more the result of a long relationship I’ve had with Jennifer Kushell [founder of Young & Successful Media, which created the video and online game]. She’s always been the young person’s advocate.

When we first made a video about Subway about 10 years ago, she was impressed that I started when I was 17, and thought kids would really connect with that. I thought it would be interesting for us to tap into talent around the world, so we updated the video.

In a lot of places, we’re just starting to develop markets, and we certainly have the need for franchisees, store managers, district managers and field consultants. Her idea was to teach young people about the possibilities of going into business.

It’s not necessarily that you’re looking to bring in younger owners as franchisees?

In our world, franchisees probably average in their early 30s. Some come in as young as age 20 and others over age 50, but I think that trend will continue. People usually go to school and get a job, they’re usually not thinking about getting into business right away. In the short term, it’ll help professors and students. In the longer term, we might have some people who would gravitate to Subway to learn about employment and later on, the franchise opportunities.

We hear a lot of franchising companies talk about working exclusively with multi-unit operators, especially overseas. Is that true for Subway?

Even with large companies that want to work with us, we don’t sign multi-unit deals. We usually start someone off with one. If they don’t like it, they sell their store. If they do like it, they do more.

We are a training ground for mostly new business people. Often we have franchisees that start with one and end up owning hundreds. We call them mega-multi-unit owners who have 50, 100 to 200 stores, but they all started with a single store.

With the healthcare mandate coming to businesses with more than 50 employees, will that encourage a return to single-unit franchising by other franchisors?

I don’t think so. Since all our people start out with single stores, they might open a few more and get to 40 employees. The big question for them will be what to do then. Will they cease growth or will they go forward?

I think Obamacare is the hugest concern among franchise owners by far because it’s such a mysterious thing to them. They don’t know how much it’s going to cost them.

But I tell them not to worry about it, actually. It’s going to affect the food business and it’s going to make it less competitive, compared to eating at home, for instance. But probably every operator will have to deal with this. It will be an extra cost on the average hour that you have to pay for. And probably people will raise their prices and pass it on to the consumer.

This year Subway’s goal is opening 3,000 units globally, including 1,000 in North America. The video mentions hitting a goal of 45,000 by 2015. Is that possible?

I think so. In 2013, we’ll be up over 40,000. Last year we gained a little over 2,500 stores, and the year before was closer to 2,000. Throughout the year we ramped up, so the question is, will we continue to ramp up to 3,000? I think 2,500 is a pretty safe number.