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Subway’s chief development officer Don Fertman recounted to Daniel Smith of QSR Magazine his stint in Subway from 1981 when the store had only 166 branches.  He credits franchisees’ non-traditional location choices for the global expansion of the sandwich chain.  Subway president and cofounder Fred DeLuca, during their annual convention in San Francisco, traced the humble beginnings of the store in 1965 to its current 35,000 stores in a hundred countries.

For the last three decades, Fertman, Subway’s chief development officer, has been an active player in spearheading the company’s rocket-paced rise. His perspective is one few in the industry can possibly share. He heads development for the biggest quick serve in the world, one that now has an ever-expanding array of 35,000 stores spread across 100 countries.

In his own words, the veteran Subway leader details how the sandwich chain’s franchise-only system, nontraditional units, and focused business model lend a hearty push to local industries, as well as the global economy.

When I started in 1981, Subway had 166 stores. In those days, when you would say, “Subway,” someone would respond, “You mean the underground in New York?” After we started moving into franchising, the brand spread and reached a certain critical mass. These days, when you say, “Subway,” someone says, “I just ate there.” Subway’s now a part of the world’s consciousness and business climate.

Our average Subway store generates 8–10 jobs, which means there are about 350,000 jobs in our Subway restaurants alone. We then have 1,200 positions at our headquarters and regional offices. Combine that with our partners—the vendors who supply us goods, the farmers and meat manufacturers, food processing, and the equipment providers, and you begin to see that Subway cuts a wide swath.

You then add in that 35,000 stores have 35,000 landlords, and each store has provided work to local contractors and builders, and it’s clear that Subway’s a far-reaching brand that goes from Detroit to New Delhi.

As we’ve gone into 98 countries, we now have about one store for every 200,000 people in the world. That’s how people become aware of the brand. You reach a certain threshold and critical mass, and at that point sandwiches become a part of the culture and there’s a strong economic impact that grows from that.

This summer, we had our annual convention in San Francisco with nearly 4,500 people in attendance from all over the world.

In our general session, Subway president and cofounder Fred DeLuca gave an address and recounted Subway history from our start in 1965 with one store to where we are today. With that, you could just see the growth, you could see the impact, the number of people that individually and collectively have been impacted by Subway and benefited from the brand’s growth around the world.

I can’t say making a global economic impact was ever our goal or a part of our plan. It’s really about being the best possible business for the largest number of franchise owners and winning more loyal customers around the world.

We never take our eyes off this particular ball: Keep the costs down and the profitability up. As a result, we’ve been able to offer a business opportunity to a lot of folks over the years who had an entrepreneurial spirit but may not have been able to afford to get into business for themselves.

We take an optimistic outlook. An ongoing story in Subway folklore, but a very real one, is when DeLuca announced in 1982 that we would have 5,000 stores by 1994 at a time when we had less than 200 stores and only McDonald’s had gotten anywhere near that mark.

At that time, he had the vision, but it took many of us a while to catch up. We reached the 5,000-store mark by 1990 and hit 10,000 stores by 1994. With that, we all saw what the possibilities were.

When we saw how well franchising worked, we understood that our business model is predicated on owner-operators. People in the stores with their sleeves rolled up … making sandwiches one at a time, interacting with customers, and building the business in the community. That was our best avenue for growth.

We’re absentee owners. That’s why we’ve stayed glued to that franchise model. It gives a lot more people opportunity and those people are dedicated to their individual stores. That’s what keeps the Subway motor running.

We’re 100 percent franchised, and as a result of that the dollars stay local and the impact is on a local basis. That all translates into the global growth we’ve seen.

We’ve put together a proprietary model to look at a market and determine its potential impact. We better understand the scope of potential growth we can have in a country by analyzing certain factors, such as GDP, fast food development, business models in that country, understanding of franchising as a concept, and a number of other elements. That’s enabled us to go into countries where we can have a large number of restaurants, where we can accelerate our development, and where we can have an impact on the economy that much more quickly.

The trick is to handle each market separately, which is why our system of local developers works so well. The developers and the franchisees know their markets a lot better than we do looking at a map at headquarters.

The early strategy with the nontraditional units was to use convenience stores to build our customer base, especially in small towns where that store might have been the only game in town, but now it’s evolved along with the whole nontraditional concept. Anywhere people eat, we want to be.

Photo by BrotherMagneto