of sandwiches, just like Mike’s.
Even though we didn’t know anything about costs, we stuck with Mike’s pricing scheme. After all, as good as it was, there was only one Amato’s, but there were thirty-two Mike’s! We figured Mike’s must have been doing the right thing with pricing, but the fact that Mike’s combined thirty-two restaurants’ worth of volume and had far greater buying power wasn’t even a consideration for us. What did we know about volume?
That was the sum and substance of our research. It was really simple. Could we have done more? Certainly. Would it have made a difference? Probably. Observation is a terrific tool, but when you don’t know any better, you can see something that’s obvious and not know what it means, or you can miss a critical component. Something like pouring oil on sandwiches is a good example. When we watched Amato’s people poke a small hole in the top of a gallon can and lift that heavy can each time they wanted to pour oil on a sandwich, we thought there had to be an easier way. That’s why we decided to use small pitchers. However, the secret to pouring the oil from a gallon can with a small hole in the top is control and consistency. By making the hole a certain size, Amato’s could control the amount of oil per sandwich. With our pitcher, we had no control. The amount of oil we poured on each sandwich depended on how far we tilted the pitcher, and for how long. Consequently, our oil costs and product quality varied from sandwich to sandwich. But that’s not something we would have understood simply by observation. We had to try it ourselves before we realized there was method to the madness.
Intuitively, we realized that to really understand our business, we would have to begin to work it. It didn’t matter if we chose Amato’s pricing instead of Mike’s, and Mike’s taste profile instead of Amato’s. If we made mistakes—and we did—we could correct them as we progressed. We realized that we were starting a small business. It was a tiny investment of money. We didn’t have much to lose. If there ever was a time to experiment, it was now. Indeed, other people were already operating similar businesses, and it was so easy to go see what they were doing. Why would we spend our limited time and capital on research?
When we had 14,000 restaurants, we spent $70,000, a modest amount of money for this kind of research, that worked out to just $5 per restaurant. What a bargain! When we were just getting started, we couldn’t get much research for $5, and we couldn’t have afforded much more than that. Therefore, we did what we could as quickly as possible without getting hung up on what we didn’t know. And there was plenty we didn’t know.
Today, however, it’s a different story. For example, to introduce something as simple as a new cookie formula in our Subway restaurants, we invest months of time and tens of thousands of dollars in the research. We might send researchers into five or six regions in North America to hand out cookies and ask detailed questions to gather information about perceptions and preferences from consumers. We then hire experts to correlate mounds of data in anticipation of finding the perfect cookie for our customers.
Preparing the Restaurant
On the way back from Maine we targeted Saturday, August 28, 1965, for the opening of our restaurant. That meant I would devote all of August to preparing for the big event. With some help from my parents, and my high school friend Art Witkowski, who wasn’t doing anything that summer, I purchased equipment and supplies, contacted vendors, built a counter and an outdoor sign for the restaurant, and drummed up future customers by handing out promotional flyers.
Oh yeah, Pete and I also came up with a name for our business. As we looked at the stores adjacent to our shop, there was Ann’s Bakery, Judy Blair’s Dance Studio, and Suzie’s Yarn Shop. All of the businesses were identified by a person’s name, so we arrived at the logical decision to call our business Pete’s Submarines, but we decided to glorify the name by adding the word “Super.” Thus we became Pete’s Super Submarines! Occasionally we had to shorten the name to the less glorious Pete’s Submarines to make it fit on our outdoor signs.
However, we later discovered the name wasn’t easy to communicate. When people heard the name Pete’s Submarines over the radio, they often thought they heard the words “pizza marine.” When consumers who had never been to our restaurants began asking me “What kind of pizza do you have? Is it seafood pizza?” I knew we had a problem.
I was driving in my car one day thinking about our name and what to do. I wanted a name that was short, clear, and difficult to mispronounce. I wanted to use “sub” in the name because it was a crisp, short way to say submarine. And suddenly, the word “subway” popped into my mind. We changed the name to Pete’s Subway, and eventually to Subway, but not until after opening several restaurants.
While my buddy Art helped me get the shop ready for opening day, my mom helped me line up the various vendors who would provide the bread, paper goods, meats, vegetables, and cheeses that we would need. Without anyone to guide us in these matters we consulted the local Yellow Pages and my mom and I were sort of like the blind leading the blind. With a name and an address in hand, off we’d go to tell our story to any vendor who would listen. I’m sure these vendors had never witnessed anything quite like it before. A pretty, little Italian woman and her lanky teenage son show up with plans to open a sandwich shop so he can afford to go to college. They say their goal is to open thirty-two restaurants in ten years! It’s not a story they heard every day.
We must have been a convincing pair, however, because no one turned us away. I am sure they took me more seriously because mom was with me, but the process was fairly simple. I think it’s the type of thing that anyone could have done in almost any community. In nearly every town there are suppliers and most, if not all, of them need more customers. And even if mom and I seemed a bit unusual, and our business a bit risky, the suppliers were willing to work with us. We registered our most complicated request at the bakery. We wanted our rolls custom-made. But the baker said even that wasn’t a problem. Everything was cut-and-dry. After all, what’s to buying vegetables, meats, cheeses, or paper products? The suppliers simply sold us what they had in stock.
Of course, we had absolutely no purchasing power, but we never worried about it, either. We simply had to pay high prices for whatever we needed to buy, but any small business faces a similar predicament. There wasn’t anything we could do about it. However, the vendors didn’t require payment in advance. They gave us credit on the spot! We could have shopped around and looked for better deals, but that would require more time. It was more important to line up what we needed, buy it, and figure out how to get it cheaper at a later time.
Now that I wasn’t working at the hardware store, I had no income, so time was a major issue. Every day that our restaurant was closed I was losing money, and so was the business. There was not only the cost of ongoing rent and utilities, but also the lost opportunity. If the restaurant wasn’t open, we couldn’t sell anything. If the restaurant wasn’t selling anything, I couldn’t get paid. My singular focus was to get the restaurant open.
Of course, the location couldn’t open without equipment, so while my mom helped me find suppliers, my dad helped me scour the newspaper classifieds every day for used equipment. We needed a cash register, a refrigeration unit, a commercial sink, a meat slicer, and some countertops and shelves. We found it all, even on our shoestring budget. Most of it was obsolete, but it was functional and it lasted for many years. My most unusual purchase was a big, brass cash register. When we pressed the number keys, two or three of them simultaneously, the price popped up with a “cha-ching” in the top of the cash register, and the drawer opened automatically. It was so old that the highest dollar amount it could ring up was $2.99. That wasn’t a problem, though, because our highest-priced sandwich was 69 cents. For the purpose of collecting money and making change, that piece of junk was all we needed.
Opening Day
On
