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CASE STUDY:TEACHERS GUIDEHOW A 17-YEAR OLDBUILT THE #1 RESTAURANT CHAININ THE WORLD*THROUGH FRANCHISINGYoung & Successful Media LLC
Teachers GuideThe SUBWAY Case Study is the firstcorporate documentary to explore amyriad of fundamental concepts critical tounderstanding business, entrepreneurshipandfranchisingusingSUBWAY Restaurants, the largest restaurant chainin the world, as a case study.Containing 60 interviews with the foundingteam at SUBWAY , the “Sandwich Artists”and franchisees who run the business,and the C-level executives leading globalgrowth, this documentary will enthrall,inspire and awaken students to newpossibilities in their own lives and careers.This guide is intended to be used inconjunction with the documentary andto provide supplementary instructionmaterials for professors so that it may bestudied in sections, as a lesson plan.SUBWAY Restaraunt Case Study DVDEach chapter of the DVD and guide will actas a different instruction segment that can be used independently or in order.* SUBWAY is the #1 restaurant chain in total restaurant count with more locations than anyone elsein the Quick Service Restaurant (QSR) industry.1 2013 Young & Successful Media LLC
Table of ContentsChapterTime1. What is Franchising? . 01:132. The SUBWAY Story . 08:233. Becoming the Largest Restaurant Franchise . . 16:294. How the System Works . 22:455. Sandwich Artist . 31:436. Franchisees: Owning Stores . 35:357. The SUBWAY Family . . 40:258. Training & Development . 45:409. International Expansion . . 50:0510. Supply Chain, Farming & Logistics . . 59:1211. Sustainability & Global Citizenship . 01:04:4712. Leading a Nutrition Revolution. 01:09:0013. Marketing, Advertising& Promoting the Brand. 01:13:4014. The Next Generation . . 01:20:41Sandwich Artist is a registered trademark of Doctor’s Associates, Inc.1968 The SUBWAY name is used for the first time.2 2013 Young & Successful Media LLC
CHAPTER 1What is Franchising?Chapter 1 introduces the concept of franchising, explains the fundamental theories thatgovern the franchise business model, and shares the entrepreneurial history and current workof the International Franchise Association (IFA). This chapter also examines what it takes tobecome a franchisee and the benefits of venturing into franchising for younger entrepreneurs.View online at: http://www.youtube.com/watch?v oZXx7fKM7LgFeatured PeopleVictoria Conte - Media representative for Franchising Today, USA TodayScott Lehr - Vice President of U.S. and International Development, IFANancy Weingartner - Executive Editor, Franchise TimesKey Concepts & TermsFranchising - a long-term cooperative relationship between two entities—a franchisor andone or more franchisees—that is based on an agreement in which the franchisor grants thefranchisee the right to do business using the franchisor’s concept in return for a fee. Thisincludes the right to use the franchisor’s brand names and trademarks; production, serviceand marketing methods; and the entire business operation model. The franchisee providesthe capital, time and desire and uses the brand, operating system and ongoing servicesprovided by the franchisor to build a franchised business.Franchisor - The company that owns and controls the rights to grant franchises to potentialfranchiseesFranchise Disclosure Document (FDD) - A legal document required by the Federal TradeCommission (FTC) that must be provided by the franchisor to the potential franchisee at least14 days before any agreement of sale is signed or finalized. This document is intended toprovide prospective franchisees with enough information to help them make an educateddecision about buying the franchise.International Franchise Association (IFA) - The oldest and largest global franchisingorganization, the IFA is a nonprofit trade association that was launched more than 50 yearsago to promote ethical operating standards and encourage the growth of the nascentfranchise industry. Its mission is to promote, protect and enhance franchising by establishingand monitoring best practices to enforce uniformity and fairness within the franchisingindustry. The IFA currently represents more than 1,300 franchise systems and over 10,000franchisees.Point-of-Sale System (POS) – A system typically used in restaurants and hotels wherea computer replaces a cash register. In addition to recording transactions, a POS acceptsdebit and credit card data, usually with a barcode, and can track inventory and recordemployee hours.3 2013 Young & Successful Media LLC
Questions for Discussion1. What are some of the differences betweenowning a franchise and starting your ownbusiness?2. What are some of the similarities?3. What is the purpose of signing a FranchiseDisclosure Document?4. What business skills are most important toa potential franchisee’s success and why?5. Why is franchising a viable career optionfor young people?6. What are some of the benefits of theIFA’s involvement with franchisees andfranchisors?External ResourcesFor more information about franchising and afree course in franchise basics, visit the IFA atwww.franchise.orgFor an interactive database of franchiseadvisors and suppliers that are committedto the franchise community and alreadyknow the inner workings of business formatfranchising, visit the Franchise Times VendorDirectory pFor an index of business opportunities, visit Entrepreneur.com For the IFA’s in-depth academic guide An Introduction to Franchising, visitwww.franchise.org/uploadedFiles/Franchise Industry/Resources/Education ide.pdf1974 - FAST FORWARD TO FRANCHISINGDeLuca and Buck decide that franchisingis the best way to kick-start the chain’s growth.The first franchised SUBWAY restaurantopens in Wallingford, Connecticut.4 2013 Young & Successful Media LLC
CHAPTER 2The SUBWAY StoryChapter 2 provides a history of the SUBWAY restaurant chain started in 1965 by then-17-yearold Fred DeLuca who, in order to earn moneyfor college, took a 1,000 loan and opened asubmarine sandwich shop that eventually grew intothe number-one restaurant chain in the world. Thischapter also provides a glimpse into the foundationsof SUBWAY as a company and the events that ledto its global success.Fred DelucaView online at:http://www.youtube.com/watch?v APzOv2jyIY8Featured PeopleThe SUBWAY Franchise GrowsFred DeLuca – President and Co-Founder,SUBWAY RestaurantsDr. Peter Buck - Co-Founder, SUBWAY RestaurantsElizabeth DeLuca - “First Lady” of SUBWAY Suzanne Greco – Vice President Research and Development, SUBWAY RestaurantsRichard Pilchen - Profit Building Consultant, SUBWAY RestaurantsDon Fertman - Chief Development Officer, SUBWAY RestaurantsKey Concepts & TermsFred DeLuca - Frederick “Fred” DeLuca is an American businessman who is best knownas the co-founder of the SUBWAY franchise. DeLuca is an alumnus of the University ofBridgeport and Central High School in Bridgeport, Connecticut.Food Service Industry - This industry includes restaurants, hospital and school cafeterias,catering companies and various other businesses, institutions and companies responsiblefor any meal prepared outside the home.Quick-Service Restaurant Business – A quick-service restaurant (sometimes known as aQSR or fast-food restaurant) is a specific type of restaurant characterized by both fast-foodcuisine and minimal table service. QSRs are typically part of a restaurant chain or franchiseoperation, which provisions standardized ingredients and supplies to each restaurant throughcontrolled supply channels.Vendor - A person or company offering something for sale.5 2013 Young & Successful Media LLC
Questions for Discussion1. What is so unique about the SUBWAY story?2. What ingredients did Fred DeLuca have to make his business so successful?3. DeLuca borrowed 1,000 from a neighbor to start SUBWAY . What are some methodsentrepreneurs today commonly use to fund startup businesses?4. How did the marketing methods used by Pilchen and Fertman contribute to the early growthof SUBWAY ?5. How did DeLuca keep going even when he didn’t have the money to grow? Could thatstrategy of vendor management work today?6. Do you think DeLuca could have succeeded in another business?7. What other businesses that you know of have had similar startup stories?External ResourcesFor a SUBWAY history timeline, visitwww.subway.com/subwayroot/about us/timeline/default.aspxFor a complete listing of each of the countries in which SUBWAY operates, xFor information on opening your own SUBWAY franchise, visitwww.subway.com/subwayroot/own a franchise/default.aspx1966 THE DREAM TEAMPartners DeLuca and Buck form Doctor’s AssociatesInc. The name is derived from Dr. Buck, who holdsa Ph.D., and the fact that DeLuca hoped to earnenough money in the sandwich business to pay hiscollege tuition and eventually become a doctor.6 2013 Young & Successful Media LLC
CHAPTER 3Becoming theLargest RestarauntFranchiseChapter 3 reviews the early growth and subsequentexplosive success of SUBWAY . It emphasizesthe importance of the company’s goals andcommunications that allow it to provide high qualitystandards both at headquarters and globally.This chapter focuses on the franchising strategySUBWAY employs and how they develop theindividuals working within their company andextending opportunity worldwide.View online at:http://www.youtube.com/watch?v u5LL597qa4sCelebrating 500 StoresCelebrating 2400 StoresFeatured PeopleFred DeLuca – President and Co-Founder, SUBWAY RestaurantsSteve Lawrence - Technology Product Manager, SUBWAY RestaurantsJoe Chaves - Chief Operations Officer, SUBWAY RestaurantsElisabeth Medaris - Manager, e-Learning, SUBWAY RestaurantsDon Fertman - Chief Development Officer, SUBWAY RestaurantsRobert Wilker - Director, Profit Building and Local Marketing, SUBWAY RestaurantsLinda Rizzo - Director, Franchise Services, SUBWAY RestaurantsRalph Piselli - Franchise Sales Manager, SUBWAY RestaurantsMurad Fazal – SUBWAY Franchisee, IllinoisGeorge Estep – SUBWAY Multi-Unit Franchisee, IndianaRebecca Petterson - Development Agent, DenmarkGur Gal - Development Agent, IsraelKey Concepts & TermsProfit - The positive gain from an investment or business operation after subtracting for all ofthe expenses that running the business costs. Profit is the opposite of loss.Store Growth - A figure used to determine what amount of sales growth is attributable tonew store openings, based on sales made by stores that have been open for longer thanone year (continued)7 2013 Young & Successful Media LLC
Mom and Pop Shop - A term for a small, independent, and often family-owned business.The “shop” could be any type of business, such as an auto repair garage, bookstore orrestaurant.Development Agent - A Development Agent (DA) is a local, on-site representative of theSUBWAY concept. A DA is a franchisee’s primary contact in a given local area and will beable to provide local support not only throughout the application process but continually asthe restaurant is operated.Questions for Discussion1. What factors enabled SUBWAY to become the world’s biggest restaurant franchise?2. Why aren’t there many other franchise companies that have scaled this large?3. To what degree does promotion affect the success of the brand? To what degree does thequality of the product affect success?4. SUBWAY has been able to fund its own growth through cash flow. How common or difficultis that?5. Could SUBWAY have become the world’s largest restaurant chain without franchising?6. Many chains are company owned. What are the pros and cons of being company owned vs.franchised? Can expansion happen as rapidly without franchising?7. How big a factor was depending on other people’s money (OPM) in the growth of SUBWAY ?External ResourcesFor an explanation of how and why franchises go global, visitwww.franchising.com/howtofranchiseguide/how a franchise goes global.htmlFor an in-depth look at the ties between franchising and entrepreneurship, ate-begin/For a look at the SUBWAY Global Challenge simulation’s promise as a franchise tool, s-virtual-reality1981 PICKING UP SPEEDThe development of the SUBWAY chain picks up,with the 200th restaurant openingin Renton, Washington.8 2013 Young & Successful Media LLC
CHAPTER 4How the System WorksChapter 4 provides an overview of the corporate structure of SUBWAY , Fred DeLuca’sleadership, and how the corporate headquarters assists SUBWAY franchisees all over theworld. It provides a description of each department at SUBWAY corporate headquartersand highlights the duties of those who play key roles in the company’s evolution. This chapteralso introduces SUBWAY University and how it trains and develops employees potentialworldwide.View online at: http://www.youtube.com/watch?v DUpNJS1vgSgaA4Featured PeopleDon Fertman – Chief Development Officer, SUBWAY RestaurantsJoe Chaves - Chief Operations Officer, SUBWAY RestaurantsElizabeth Rolfe - Director, New Business Development, SUBWAY RestaurantsDuane Thomas – Restaurant Manager, New YorkSuzanne Greco – Vice President, Research and Development, SUBWAY RestaurantsThys Van Hout - Chief Technology Officer, SUBWAY RestaurantsRaghu Marwaha - Development Agent, Californ
studied in sections, as a lesson plan. Each chapter of the DVD and guide will act as a different instruction segment that can be used independently or in order. *SUBWAY is the #1 restaurant chain in total restaurant count with more locations than anyone else in the Quick Service Restaurant (QSR) industry. SUBWAY Restaraunt Case Study DVD
