Subway vs Quiznos | Subs Rising | 1

0:08It's 10 a.m. on a steamy August morning 1965 in Bridgeport Connecticut. 17-year-old Fred DeLuca stands at the counter in the kitchen of Pete's Super Submarine Shop. He's a street-savvy kid born and bred in the Bronx, with a cleft chin and the big brown eyes of a born charmer. DeLuca plucks a foot-long Italian roll out of a brown paper bag, picks up a knife, and turns to his first and only employee, a friend from high school. Okay, I don't want you to pay attention. I only have time to do this once. I gotta go take an English placement exam for college. Okay, you cut the roll in half, but not all the way.

0:47Leave one side attached. That way the bread will hold all the stuff in better. DeLuca's teaching Art how to make an Italian sub before the grand opening of his shop in just an hour. It's a venture he co-founded with a family friend, Pete Buck. The only problem, neither he nor Art has ever made a single sub in their life. Art takes the knife from DeLuca and saws through the whole roll and almost in his hand. Damn, let's try to make it through opening day without a trip to the ER, all right? All right, now let's take a slice of salami, then ham, then cheese, and layer them in a row like this, you see?

1:23Now then do that all over again and throw on some tomatoes, some shredded lettuce, and any other toppings they want. DeLuca learned the little he knows about the process from watching Italian guys make subs in Amato's Deli in Portland, Maine. Pete Buck grew up there and took him and his mom to the shop on a research trip. Art slaps toppings on the roll and turns back to DeLuca. Okay, Chef Boyardee, now what? Mustard? Mayo? DeLuca shakes his head and picks up a small metal pitcher from the counter. No smartass. Next you pour some olive oil on everything. DeLuca drizzles the oil. Art wrinkles his nose.

2:00Ah, gross. That's weird. Yeah, I know, but it's how the Italians do it. DeLuca plops the pitcher on the formica countertop and wipes his hands on his jeans. Okay, sorry, buddy, I gotta run. You'll do great. Art looks lost, but DeLuca doesn't have a moment to spare. He sprints to his car. Three hours later, with the exam all done, DeLuca parks his car in the store lot and runs back in the door. It's only 2 p.m., but inside the shop, it's already chaos. A line of customers stretches the length of the small shop and out the door. At the counter, his father rings up a sale on an ancient brass cash register.

2:43DeLuca found it in the newspaper classifieds, along with the Formica countertop and the soda cooler. Further down the line, his mother wraps a sandwich in wax paper. Beside her, Pete Buck, short, balding, and bespectacled, slices a tomato. He turns to DeLuca and waves his knife. Oh, the prodigal son returns. I bought two of these at the hardware store on the way over. We can't feed all these people with just one knife. Art emerges from the back room with a pile of freshly sliced salami in his hand. I've read my man. It's been nuts here. We're almost out of ham. Can you go get some more at the grocery store?

3:21DeLuca mops his sweaty forehead with the back of his hand and grins. I can't believe all these customers showed up today. We didn't spend a single dollar on marketing. Hardly anyone knows we exist. Just imagine tomorrow. By 6 o 'clock, they're out of everything but olive oil. They've sold 312 subs for$108. DeLuca's sure they're all going to be millionaires. But what he doesn't know yet, their expenses far exceed their take, and Pete's Super Submarine Sandwich Shop will never sell that many subs again. Once Buck and DeLuca's friends and family satisfy their curiosity about the crazy scheme, few customers darken the door.

4:10It's an inauspicious beginning, but Fred DeLuca's optimism will carry him far. Eventually, he'll helm the world's largest fast food chain and create a ferocious hunger in the American public for outsized Italian sandwiches. And that, in turn, will inspire an actual Italian chef in Colorado to stake his future on Americans' appetites for a more authentic, artisanal spin on the Old World sub. Then his restaurant, Quiznos, will sprout like a fleet of torpedoes aimed right at Subway's vulnerable$5 flank. flank. This message is brought to you by Apple Card. Apple Card members can earn unlimited daily cash back on everyday purchases wherever they shop.

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6:26From Wondery, I'm David Brown, and this is Business Wars.

6:50Subway vs. Quiznos In our new series, Subway vs. Quiznos, we tell the story of the fierce competition between the first two sandwich franchises in the United States. They started out in an era when heroes, grinders, subs, and hoagies were regional specialties found only in mom-and-pop delicatessens and corner markets. Today, Subway is such a ubiquitous presence in the$330 billion fast food landscape, it's hard to remember a time when its green and yellow themed stores weren't a fixture in every strip mall, airport, and rest stop, or that it never faced any significant competition at all, let alone from a bit player like Quiznos.

7:33But back in 2001, Quiznos was the fastest-growing quick-service chain in the U.S. In that year, a new location opened every 16 hours. But Quiznos' meteoric growth was only possible because 35 years earlier, a precocious teenager named Fred DeLuca asked a family friend for advice. This is Episode 1 of Subway vs. Quiznos, Subs Rising.

8:11It's a humid afternoon in July 1965 in Armonk, New York, about 40 miles from Bridgeport, Connecticut. Fred DeLuca stands in Pete Buck's backyard next to a table covered with platters of hamburgers, hot dogs, buns, potato chips, and condiments. All the barbecue fixings DeLuca loves. But he's too nervous to eat. From the moment his dad pulled into Buck's driveway and DeLuca saw the three-story white colonial on a spacious lot dotted by towering shade trees. He knew that this prosperous, smart family friend might be the solution to his big dilemma, how to pay for his college degree. Buck gets up from the chair where he's catching up with DeLuca's dad, walks to the picnic table and reaches for a deviled egg.

8:58DeLuca seizes his moment. Pete, can we talk? Buck, you know I want to go to you at Bridgeport and eventually become a doctor. But we don't have any money. I was wondering if you had any ideas about maybe how I pay my way through school. Buck nods and takes a bite of his deviled egg. Fred, I do have an idea for you. DeLuca holds his breath. He's pretty sure Buck will give him a loan. Hell, he's a nuclear physicist with a doctorate and a high-paying job. Maybe he'll offer to foot the whole bill. Buck wipes his mouth with a napkin. You know, I think you should open a submarine sandwich shop. DeLuca stares at him, mouth ajar.

9:42He's so surprised he forgets to be polite. What? That's the weirdest thing I ever heard. Why subs? And I can't start a business. I'm only 17. Buck holds up his hand. Whoa, just hear me out here. All you have to do is rent a small store, build a counter, buy some food, and open the doors. It's as simple as that. DeLuca doesn't know enough about business to argue with Buck. DeLuca's father is a high school dropout who works as a foreman in a factory. His dad and Buck are unlikely friends who bonded over an interest in engineering problems and a love of bow hunting. No one in DeLuca's family has ever had money or shown any entrepreneurial talent.

10:26But despite all that, DeLuca's natural curiosity gets the better of it. Pete, is that really true? What about security deposits and accounting in refrigerators and stuff like that? There must be a lot that goes into running even a simple sandwich shop. Although, I guess you could get used equipment pretty cheap in the want ads, and maybe suppliers would let you buy on credit at the beginning. Buck grins at DeLuca, impressed by his obvious business sense. He's known DeLuca since he was just a boy. They often work on math puzzles together. And DeLuca always impresses Buck with his talent for problem solving and stubborn persistence in the face of a challenge.

11:09He's been casting about for a way to help the kid for a while now. You know what, Fred? I can see you already have a feel for this. Now, if you're interested, I'm willing to go in on it with you and be your partner. DeLuca sticks his hands in his jeans' pockets and considers the odd turn the conversation has just taken. He does know a little bit about retail from his job at the local hardware store, so maybe this idea isn't so crazy after all. He looks at Buck and shrugs. Sure, let's talk. Buck goes back into the house and returns with a newspaper clipping. He and DeLuca sit down at the picnic table with DeLuca's parents, and Buck reads aloud an article about a guy named Mike who opened 32 restaurants, mostly sub and roast beef shops, and grew a mini empire in upstate New York.

12:01It turns out Buck has been thinking about this for months. In the next two hours, Buck and DeLuca hash out a menu of seven different foot-long cold subs with toppings that include onion, lettuce, tomato, pickles, peppers, and black olives. They decide on prices ranging from 54 to 69 cents a sub, and they set a goal to build 32 sub shops in 10 years, just like Mike. DeLuca helps clear the table and clean up, and he and his family head for their car. Buck follows them. Hey, Fred, wait a second. He pulls a checkbook and pen out of his pants pocket and quickly scribbles his signature. He hands it to DeLuca.

12:43DeLuca stares at it in disbelief. Jeez, Pete, a thousand dollars? I don't know what to say. Thank you. Buck sticks out his hand to shake on the deal. I'm just providing some startup cash. It's your sweat equity that's going to make this venture fly, Fred. One month later, Pete's Super Submarine Shop opens for business in downtown Bridgeport and serves an avalanche of customers. On its first day, that is. But as winter sets in and temperatures plummet, so do Buck's and DeLuca's spirits.

13:26A cold, dreary Monday in February 1966 at DeLuca's family apartment in Bridgeport. As DeLuca's mother clears away the remnants of a spaghetti dinner, Pete Buck pulls a three-ring binder out of his briefcase. He flips it open on the kitchen table, pulls a pencil and six-inch ruler from his shirt pocket, and draws a line from last week's sales to this week's on a graph. He's been doing this at their weekly accounting meetings since they opened in August. The line points steadily downward. We're in the red again. Every single month. I can't take this anymore. Buck throws his pencil on the table, jumps out of his chair, runs to the back door and flings it open.

14:11What's wrong with you Bridgeport people? Get over to our restaurant and buy some subs. How about it? DeLuca leans on the table and rests his head in his hands. We only sold seven sandwiches today. Our worst day ever. Buck returns to the table, picks up the pencil and prints a series of large block letters across the next page in the binder. DeLuca leans over Buck's shoulder. L-T-D-A-T-A-T-K. What does it mean? Buck peers at DeLuca over his glasses. Lock the door and throw away the key. DeLuca pulls the binder to his side of the table and points at another graph. No, come on. There has to be another option.

14:55Look, we do great on Fridays and Saturdays and sometimes Sunday nights. We just have to find a way to do better the rest of the week. Fred, come on, let's be realistic. This location is no good. You only picked it because it's around the corner from the hardware store where you work. You said you never noticed it in all the years you spent in that part of town until the landlord showed it to you. That should have told us everything we needed to know. DeLuca frowns sheepishly. Yeah, maybe we should cut our losses and just close this place now and relocate. Buck pulls his chair closer and turns back to an older page in the binder.

15:34Well, I don't know. I mean, look at this column. That's how much we've invested in improvements in equipment. And this used stuff we bought, it's so old it's not worth moving to a new place. Hey, if we have to buy equipment all over again, why not keep this shop and buy the new equipment for a second location? DeLuca chews on his thumbnail and scans the figures. Well, I guess if we had two shops in the same market, it could be great advertising. We could write a promo flyer that says, Thank you, Bridgeport, for making us so successful we're opening a second restaurant. No one will know it's a lie because hardly anyone's coming into the first restaurant anyway.

16:19That night, they decide to take the risk and open a second store. If that one doesn't make a profit, then they agree. Pete's Super Submarine Shop, is DOA. The gambit pays off. The second location in Fairfield, Connecticut, draws a big crowd in its opening week and generates word of mouth for their first location as well. Buoyed by success, Buck & DeLuca opened three more stores in the next three years. Soon, another pattern becomes clear to Buck & DeLuca. Sales rise in the summer and drop off in the winter. In the 1960s, families still rarely eat out, especially not when the weather's nasty or during the holiday season.

17:05Luckily, the fifth location on Boston Avenue in Bridgeport has such great visibility that it alone brings in double the sales of the other four locations. It's the first shop to make a profit from day one and never loses steam. On the strength of this one store's sales, the duo expands to 16 restaurants across Connecticut in eight years. But then, they hit a wall.

17:36April 1973, Bridgeport. Fred DeLuca settles into his chair in his accountant's office. No longer a scrawny teenager, now he's a married man of 25, with a son and a thriving regional restaurant chain. The accountant, a family friend, looks up from the ledger on his desk. Well, Fred, which do you want to hear first, the good news or the bad? Jeez, Bob and I here thought this was just a routine review of the books. Okay, I'll bite. Give me the good news. The accountant nods. Congratulations, you finally passed the one million dollar mark in annual sales. DeLuca leaps up out of his chair and raises his arms in a through-the-go post sign.

18:20Hallelujah, Lord, get out of here, Bob. But I had no idea we were killing it. The accountant smiles faintly at the jubilant DeLuca. Yes, well, let's not get too excited just yet. The bad news is that despite that, last year your business posted a total loss of almost$100 ,000. DeLuca's arms dropped to his sides. He looks like he just took a punch to the gut. Wait, what? That can't be right. That means we lost like$300 every single day. I worked my butt off all last year trying to drive from store to store, checking up on sales, trying to cut food costs. What am I supposed to do about this? The accountant looks down at the ledger and shakes his head.

19:07Look, Fred, all I know is numbers, but they do tend to tell the whole story. You're writing out some big loans to keep you afloat so you probably haven't noticed a cash flow problem yet. Maybe you need quarterly or even monthly financial statements instead of annual ones. They need to be more detailed so you get a more precise picture of your business and its problems. That way you can fix them before they snowball. huh i'll think about it deluca walks to his car in a daze his mind swirling with doubts monthly visits to the accountant would get really expensive and by the time bob looked everything over and got back to him at least six weeks would have gone by and it might be too late to head off problems anyway deluca gets in his car and puts the key in the ignition but instead of starting the car, he leans back and stares out the windshield, lost in thought.

20:05He's thinking that if monthly is better than quarterly, then weekly is better than monthly, like the weekly meetings he and Buck have, but more detailed, more professional. And they need to consolidate the various reports from each store into an organized weekly financial statement so they can see what's going on, all on one single sheet of paper. By the time he's back in his office, DeLuca has a mental picture of exactly what this report should look like. He even has a name, the Weekly Inventory and Sales Report. It will detail the five critical parts of Subway's business, food, bread, labor, soft drinks, and cash.

20:49The WISR will come to be the golden ticket to avoid financial disasters for DeLuca and Pete Buck as they take their initial steps into franchising, which they see as a necessary step to get them to their goal of 32 restaurants in 10 years. Before that can happen, DeLuca has to recruit his first franchisee, and if he can't persuade anyone to hop on board with him, and the whole train might derail before it even leaves the station.

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22:00Hiring? Do it the right way with Indeed. In just a few years, Ozempic has gone from a diabetes drug to a global phenomenon. But behind the miracle claims, another battle is raging. Demand is exploding, supply can't keep up, and as drugmaker Novo Nordisk scrambles to produce more, its rival Eli Lilly is racing to take the crown. Meanwhile, a darker market is emerging. Shady online sellers are offering cheap, unregulated knockoffs. Now millions are injecting mystery vials with no FDA oversight. I'm David Brown, host of Business Wars. In our latest season, we're diving into the race to Ozempic and the billion-dollar showdown between Big Pharma's biggest players.

22:41Can they close the supply gap before one bad vial destroys everything? Make sure to follow Business Wars on the Wondery app or wherever you get your podcasts. You can binge all episodes of Business Wars early and ad-free right now on Wondery Plus.

23:08A chilly night in April 1974 at the New Haven Coliseum in Connecticut. It's between periods at a hockey game between the New Haven Nighthawks and the Richmond Robins. Fred DeLuca carries beers and a big box of nachos in a cardboard tray down the aisle. He eases into a seat next to a fraternity brother from Bridgeport U, Brian Dixon. He hands Dixon one of the beers. Here you go, Brian. I want to talk something over with you before the game starts up again. Listen, I've got a proposal for you. Pete Buck and I are going to start franchising. We've always had a goal of 32 stores in 10 years. But now we're realizing we can't run all those stores ourselves, so we're going the McDonald's route.

23:52Long story short, I want you to be our first franchisee. Dixon reaches for the nachos. He's short and chubby, a fun-loving guy with dark-rimmed glasses and thinning hair. Are you nuts? I don't have the kind of dough to buy a restaurant, and I don't know anything about running one either. Yeah, but I know you, and I think you'd be great at it. You like to eat, huh? You know how to get along with people. That's really all it takes. And about the cash, what do you say I loan you the money to buy our Wallingford location? You'd own it, and we'd help you in every way possible to make it a cash cow.

24:28Dixon takes a swig of his beer. I don't know. The air conditioning plant is a steady job, and every single week they hand me a nice check. You know, my wife would kill me if I gave that up for some wild investment. Come on, how about I sweeten the pot for you? If you don't like the business for any reason at all, you can give the store back to us and you won't have to pay a single cent. Dixon gives DeLuca the side eye. Come on, Fred, you better hone your pitch. You sound desperate, my friend. The answer's still no friggin' way. DeLuca leaves the game crushed. Over the next few months, he repeats his offer to Dixon, but his friend's a no-go.

25:13DeLuca's afraid the whole franchising venture is a bust.

25:23One month later, a Monday morning in May 1974 in Bridgeport, Brian Dixon parks his car in the lot at the air conditioning plant and walks to the entrance. He's hung over and holds his hand over his eyes to shield them from the bright spring sun. He trudges up the three steps to the door it reaches for the handle but stops in his tracks. There's a padlock on it. A sheriff's notice taped to the front of the building. This business is closed by order of the Fairfield County Sheriff's Office due to bankruptcy proceedings. Huh. Dixon's in shock. He had no idea the company was in trouble. But he realizes even though he's out of work, he feels somehow lighter.

26:09Happy, even. Now, Maybe he has an excuse to reconsider DeLuca's offer. That week, the two fraternity brothers hammer out a deal. They even have a great new name, a necessary step because customers keep coming into the store asking for pizza. DeLuca eventually realizes that radio ads touting Pete's submarine sounds like pizza marines to listeners. So in a fit of inspiration, he shortens it to Subway. But there's still a lot DeLuca doesn't know about managing franchisees. If he doesn't get up to speed quickly, an experienced Italian chef out west will sink his subway fleet before it even cruises out of Connecticut.