Subway cofounder Fred DeLuca ruled the company like a demigod and pursued wives of franchisees. How one man sent the world’s biggest fast-food chain into a tailspin.

_Fred DeLuca, poses with a sandwich in a Parisian Subway restaurant on June 17, 2011 Photo credit should read ERIC PIERMONT_AFP via Getty Images

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Fred DeLuca was angry at the people he made rich. It was the early 2000s, at a Subway convention at the glamorous oceanside Eden Roc Hotel in Miami Beach. Development agents — master franchisees deeply involved with the sandwich chain’s expansion — arrived in Bentleys and Benzes. Eager to show off the riches Subway provided, they wheeled their cars in front of the hotel and pulled out wads of cash to tip valets $50.

DeLuca, the chief executive and cofounder of Subway, pulled up in an old Lincoln. He fumed as he watched the development agents. They should know not to flaunt their wealth, he told an executive.

Few outside the Subway family who spotted DeLuca seething would’ve guessed he ranked among the world’s richest men. Despite an estimated net worth of $3 billion, he eschewed designer suits, flew coach, and berated his daughter-in-law if she dared to pay up for organic produce at Whole Foods.

Frugality didn’t always translate into modesty, though. As DeLuca grew Subway from a tiny submarine chain into a behemoth with 27,000 locations and $17 billion in global sales in its heyday, he refused to relinquish much control. He ran Subway like a titan, maintaining a tight grip on the company operations and surrounding himself with employees who loved and feared him. DeLuca devised a system that gave him the final say and even philandered with some franchisees’ wives, two sources said.  

And he got away with it. DeLuca was the brilliant center of the Subway universe, nearing godlike status for many franchisees and employees. He created a secretive, complex multibillion-dollar enterprise, and ensured no one knew Subway the way he knew Subway.

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When DeLuca died, in 2015, at age 67, there was a power vacuum. He had insisted that Subway, the world’s largest restaurant chain, stay in the family, but he failed to set up a functioning succession plan. His death left his sister floundering as the new CEO; left his widow, who’d been absent from operations for decades, owning half of a multibillion-dollar business; and left insiders baffled by his lack of planning.

This week Roger Lipton, a restaurant-industry analyst, called Subway a “slow-motion train wreck.” In the past six years, the company has been laying off employees and closing stores, with hundreds of furious franchisees and development agents losing everything they invested in the chain. Now, rumors are flying that DeLuca’s widow, Elisabeth, and his cofounder, Peter Buck, are desperate to cash out and sell the chain.

Insider spoke with 20 of DeLuca’s employees, business partners, and friends, as well as recent staffers, to better understand why a man obsessed with his company failed to protect it, and why his surviving family may want to get out while they’re ahead.

Subway didn’t start with global ambitions. DeLuca grew up in public housing in the Bronx, New York, the son of a factory worker who dropped out of high school. In 1965, DeLuca, age 17, attended a Connecticut barbecue and asked his …read more

Source:: Business Insider


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