The Co-Founder of Subway Sandwich Chain,Fred DeLuca, Dies at 67

Fred DeLuca, who in 1965, at 17, borrowed $1,000 to open a sandwich shop in Bridgeport, Conn., to help pay college expenses and parlayed that experience into building Subway, the world’s largest chain of fast-food franchises, died on Monday night. He was 67.

Subway confirmed his death in a statement but did not provide the cause or location.

In 2013, while traveling around to visit with franchisees, Mr. DeLuca became ill and was ultimately found to have leukemia. Since then, he had been receiving treatments and still overseeing the brand as chief executive, but he recently named his sister, Suzanne Greco, president to run Subway’s day-to-day operations, the company said.

A gregarious, hands-on chief executive, Mr. DeLuca ran those operations for decades, personally signing company checks, making corporate decisions, traveling the country in an old car and stopping at Subway outlets incognito to sample the food and service and talk with franchise owners and customers.

His first sandwich shop, named Pete’s Submarines to acknowledge the loan from his friend Peter Buck, was not a success. Its name had to be changed after his local radio advertisements, delivered in his native Brooklyn accent, confused many listeners, who thought he was saying “Pizza Marines.”

Mr. DeLuca’s first two restaurants, which he opened with a partner to help pay for college, were not successful. Credit Stefan Wermuth/Reuters

His second shop was not a success, either. He opened it, as he once told Fortune magazine, “to create the image of success.” But the earnings defrayed his costs at the University of Bridgeport, and his experience laid the foundation for today’s empire of 44,268 independently owned Subway franchises in 110 countries, surpassing the outlets of KFC (18,000) and McDonald’s (36,000).

A privately held company with headquarters in Milford, Conn., and regional offices around the globe, Subway does not publicly report financial results, but Forbes said it had revenue of $18 billion in 2012. It listed Mr. DeLuca, the president, and his co-founder and partner, Mr. Buck, as the 259th-richest Americans, each with about $3.5 billion in 2015.

Subway, which sells made-to-order sandwiches, including foot-long “submarines” — so called for their oblong buns — and salads, beverages and desserts, grew phenomenally after 1974, when it began using franchises to expand. It undercut its competitors with relatively low start-up costs, lower prices and marketing that emphasized fresh ingredients and lower-calorie, reduced-sodium foods.

While Mr. DeLuca’s success story was often portrayed as inspirational, Subway’s extraordinary growth was achieved with aggressive, sometimes questionable, tactics and despite sometimes unflattering publicity.

The latest round began in July, when the home of its well-known spokesman, Jared Fogle, was raided as part of a child pornography investigation, leading Subway to end its relationship with him last month. Mr. Fogle, who had gained celebrity for losing more than 200 pounds on his so-called Subway diet, has pleaded guilty to sex acts with minors and distribution of child pornography.

       Subway’s business tactics drew lawsuits, government investigations, run-ins with regulatory agencies, disputes with landlords and complaints by franchisees of being misled or defrauded.

Federal investigators found that many franchisees were young couples, business novices or immigrants who invested life savings, although some were unable to understand Subway contracts requiring minimum investments, royalty payments on gross sales and fees for advertising and other services. Subway provided few guarantees, even against other franchises moving in nearby. Regulators and lawsuits have challenged Subway product claims and said its franchise sales force misled some owners about their prospects.

Subway over the years settled many claims, paid fines and reviewed and modified some of its business practices. But it also produced thousands of success stories among franchise owners, many with no previous commercial experience, who profited from the company’s training, marketing and business guidance.

“I really feel terrific that so many people have done so well,” Mr. DeLuca told Fortune in 1998, responding to its findings of abuses in Subway business operations. “But there are risks. People can lose money. It bothers me that people lose money, but I don’t lose sleep over it. This is America.”

Frederick DeLuca was born in Brooklyn on Oct. 3, 1947, to Salvatore and Carmela Ombres DeLuca. His father was a factory worker, and Frederick spent part of his childhood in the Bronx. The family moved upstate to the Schenectady area when he was 10, and moved again a few years later to Bridgeport, where he graduated from Central High School in 1965.

Hoping to study medicine, he took a summer job in a hardware store, but he knew his wages would not cover college expenses and thought of opening a sandwich shop to help pay his way. At a family barbecue, he broached his idea to Mr. Buck, a family friend and nuclear engineer with General Electric, who provided start-up money and became a full partner in a venture that would bring fabulous wealth to both.

Mr. DeLuca rented a small store for $165 a month in downtown Bridgeport, built a takeout counter and opened on Aug. 28, 1965. He sold subs, known regionally across the country as heroes, grinders, po’boys or hoagies: Italian or French bread stuffed with meats, cheeses and other ingredients.

He enlisted family members to help. His mother hosted weekly planning meetings at her kitchen table and later became a company officer and director. His sister, Ms. Grecco, became the vice president in charge of operations and of research and development.

Mr. DeLuca’s wife, Elisabeth, whom he married in 1966, later worked at Subway’s corporate headquarters. They had one son, John. Survivors include his wife, his son and his sister.

As his growing operation gained traction, Mr. DeLuca gave up plans for a medical career and received a degree in psychology from the University of Bridgeport in 1971. He and Mr. Buck incorporated the business as Doctors Associates, although it had nothing to do with doctors or medicine.

“He’s the doctor, I’m the associate,” Mr. DeLuca often said.

In 1974, halfway to their goal of owning 32 stores in the company’s first decade, the partners adopted franchises as the key to growth. It worked. In 1978 Subway opened its 100th outlet, in 1987 its 1,000th.

Since then, it has averaged 1,500 new restaurants a year, and in recent years it surpassed all competitors, establishing restaurants with the distinctive Subway logo, with arrows projecting from the letters at both ends, across Europe, Asia, the Americas and Oceania.

Mr. DeLuca, who received an honorary doctorate from the University of Bridgeport in 2002, was the author of “Start Small, Finish Big: 15 Key Lessons to Start — and Run — Your Own Successful Business” (2000, with John P. Hayes). He had a home in Orange, Conn., but after Connecticut adopted a state income tax in 1991, he moved his official residence to Fort Lauderdale, Fla.
SOURCE:NYTIMES