Subway Founder: Today's Regs Would Have Stopped Me

Thursday, 28 Feb 2013 07:33 AM

By Todd Beamon

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Fred DeLuca, the founder of Subway Restaurants, said on Wednesday that government regulations would have easily prevented his company from starting up in today’s marketplace.

“If I started Subway today, Subway would not exist,” DeLuca told CNBC.

The market for U.S. entrepreneurs has “continuously gotten worse because there are more and more regulations,” he said. “It's tough for people to get into business, especially a small business.”

DeLuca cited Obamacare, payroll taxes and minimum wages as examples of a restrictive American business climate.

Obamacare, or the Affordable Care Act, is “the biggest concern of our franchisees. They don't know what to expect,” DeLuca said. “It's causing a lot of concern, but that too will be passed on to the consumer.”

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He said payroll taxes are “affecting sales. It’s causing sales declines.” DeLuca estimated that sales were down 2 percentage points at Subway restaurants as a result.

“There are a lot of pressures on consumers,” DeLuca told CNBC, adding, “I think this is on the permanent side, but I think business will adjust to it.”

And, while base wages should increase over time, “doing a sharp raise all at once is a bad idea,” DeLuca said. “Minimum-wage workers deserve to make more, and a little bit of an increase makes sense to me.”

But he cautioned that “wages directly affect prices” and that a higher minimum wage “will cause franchisees to raise prices, there is no question about it.”

Subway employs minimum-wage workers, DeLuca told CNBC, though some may make more money in certain markets where demand is higher.


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