(
)
Brooklyn-born Subway baron Fred DeLuca is squeezing more profits out of his sandwich empire, sparking talk that he’s prepping the private chain for a sale or an IPO.
The self-made billionaire has grown a single shop in Bridgeport, Conn., into a chain of 34,891 stores in 98 countries with the help of development agents — some 200 salespeople who peddle new stores to entrepreneurs in exchange for a cut of the franchise fees.
But after years of growth fueled by the development system, DeLuca is raising eyebrows by re-signing agents to shorter contracts and, in some cases, shedding them altogether.
Subway, whose parent is Doctor’s Associates, has terminated Mark Choi, the development agent for Queens, two sources said. Choi could not be reached for comment.
“The company is not renewing development agent contracts,” said one development agent, citing examples in California, Nevada and New Mexico. “I believe this has already happened with 20 to 40 agents and the trend will accelerate.”
Eliminating development agents will both boost the chain’s profit and streamline its structure — signaling to some industry experts that DeLuca is dressing up the company for a potential sale.
“Absolutely, this could mean he’s preparing to sell the company,” said franchisee lawyer Michael Garner.
The success of Subway’s development system has long stood out in the franchise world, in part because most chains abandon agents after reaching critical mass.
DeLuca launched Subway’s development program not long after opening his first shop 46 years ago. At first, he offered new agents 40-year contracts, then lowered them to 20-year contracts starting in the ’80s. Many of those 20-year contracts are running out now and have no renewal rights, said one agent.
Agents with long-term contracts keep one-third of the 8-percent franchisee royalties in their territory with the rest going to corporate, one agent said. The average store generates $450,000 in annual sales, so the agent collects about $12,000 per restaurant.
DeLuca, worth $1.8 billion according to Forbes, is taking over some markets himself. In other instances, he is offering agents 90/50, five-year contracts, in which the agent’s cut of royalties becomes 90 percent of what it was in the first year and declines to 50 percent over five, the agent said.
A Subway spokesman said: “There have been no changes to our corporate structure. With regards to taking over territories, this has been done on occasion over the years, and is considered to be a temporary measure often due to attrition.”
Paul Landino, the development agent for Manhattan, Bronx, Westchester, Rockland and parts of Connecticut, said he believes DeLuca depends on his development agents and doubts big changes are in store. Still, he said his territory, which has been adding 30 to 40 stores a year, is reaching the saturation point with 490 stores.
“We can stay on track for a few more years,” he said, “but then it will taper down.” jkosman@nypost.com