Do You Eat at Subway? Remember This Incredibly Important Lesson (It Could Save Your Business)

Do You Eat at Subway? Remember This Incredibly Important Lesson (It Could Save Your Business)

The late Fred DeLuca was one heck of an entrepreneur.

As the co-founder and president of Subway, he grew the company from a single store to the largest restaurant chain in the world by one important measure–bigger even than McDonald’s. 

He and his team were almost entirely self-taught: launching at age 17 with just a $1,000 investment, and building a lucrative franchise model, without any “coaches or advisors.”

About three years ago, when he was battling leukemia, he started to transfer control to his sister, Suzanne Greco. After DeLuca passed away in 2015, she took over as CEO.

Now, however, it’s starting to look like it all might have made a big mistake. It’s not necessarily that choosing Greco was a bad decision in and of itself; it’s that, according to some contemporary reports, DeLuca wasn’t really able to make a choice at all.

Ordering ‘through the sneeze guard’

After three years in charge, Greco retired abruptly last week, and since Subway is privately held and doesn’t disclose much, it’s difficult to know if she was a good leader or not, or if she could have been successful under other circumstances. 

Regardless, the circumstances Subway is facing now are rough. Last year, Subway closed 800 stores; recently it announced it will close another 500, and its relationships with franchisees are fraught.

It’s owned equally, according to reports, by just two people: first, DeLuca’s widow, Elizabeth, who inherited his 50 percent share, and second, DeLuca’s original business partner, Peter Buck. The two owners reportedly have very different visions for how the chain should try to turn around. (Even as CEO, Greco apparently had no equity stake.)

Meantime, it seems like Subway just hasn’t kept up with consumer preferences.

“Let’s face it,”  Bob Phibbs, chief executive of a New York consulting company called the Retail Doctor, told The Washington Post, a week before Greco’s retirement announcement. “If you’re in a major metropolitan area, you’re looking for that green salad place. You’re not saying, ‘Let’s all go to Subway and order through the sneeze guard.’”

‘Even since she was in grade school’

To really drive home the key lesson here however, we need to point to two other quotes, in two other articles. Both of these are from Josh Kosman of The New York Post, who seems to have had a great reporting relationship with Subway over the years. And they’re illuminating.

Quote #1, from an article when DeLuca was still alive, revealing that he was informally handing off more decisions to his sister (emphasis added):

DeLuca, 67, has declined to discuss succession plans despite chemotherapy and a bone-marrow transplant that sidelined him for months, leaving franchisees to grapple with the question of who will step in for the legendary founder.

And Quote #2, from last October, in an article about how Subway was trying to understand why its sales had suddenly fallen. The article makes clear that between its two owners, Buck wanted to pivot and launch an entirely new brand, while Elizabeth Deluca wanted to focus exclusively on Subway itself.

That leaves Greco, the younger sister of DeLuca, hand-picked by the late CEO to run the chain, caught in the middle — wanting to make changes but almost powerless to do so.

Greco, a former Subway purchasing executive and sandwich developer, does not own stock in the company. Putting further pressure on Greco is that Buck, who has known the 59-year executive since she was in grade school, never saw her as being CEO-caliber, he told The Post.

And therein, it would seem, lies the problem. Did DeLuca know that Buck felt this way? If so, how could he could have possibly imagined his sister would succeed as CEO? Leading a private company like Subway, especially after the death of a legendary founder, would be hard enough even with the full support of its owners.

None of us lives forever

DeLuca died fairly young, at age 67, and he’d spent the last three years of his life battling an aggressive illness. He had other things on his mind besides the company at that time, and very understandably.

But, all the more reason for any entrepreneur, running a business large or small, to develop a succession plan early–long before he or she thinks it will be required.

You don’t do this simply in case you’re no longer physically able to run your company. It’s also there in case you someday simply don’t want to run it anymore. 

So keep that in mind the next time you pass by a Subway. And raise a $5 foot long or a fountain soda to the DeLucas, Buck, Greco, and an iconic entrepreneurial brand.

(By the way, I asked Subway for more information before writing this article. As of publication, I haven’t heard back.)

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