Subway

In nineteen sixty-five, Fred DeLuca was seventeen and broke. A friend lent him one thousand dollars on condition he attend college. He opened a submarine sandwich shop instead. DeLuca worked sixteen hours daily. Slicing meat. Toasting bread. Cleaning floors. Daily revenue was fifty dollars. Daily profit was ten dollars. Rent stayed the same whether he sold fifty sandwiches or five hundred. Labor scaled with revenue. Opening a second store meant duplicate rent and labor costs. Capital was the bottleneck. DeLuca had none. Instead of borrowing to expand, he sold the right to open Subway restaurants. A franchisee paid a fee and percentage of sales in exchange for the Subway system, brand, and supply relationships. A franchisee paid fifteen thousand initial fee—low compared to traditional fast food. Royalties were eight percent of sales. Advertising was four point five percent. Total fees were twelve point five percent of every dollar sold. A location cost one hundred twenty to two hundred sixty thousand to open.