Thursday, February 28, 2013

Subway Founder: Subway Would Not Exist If Started Today Due to Government Regulations

Below is a pretty fascinating interview with the president and founder of Subway, Fred Deluca, The interview took place on Wednesday at CNBC.

Clearly, Deluca is no economist. At one point during the interview, Deluca said that the minimum wage needed to be raised, but then CNBC anchor  Melissa Lee asked an important follow-up question. She asked Deluca, if Subway paid only the minimum wage. This caused him to reply that it depended on the market. In some areas, they pay more, he said. In other words, he admitted that markets set wages, which taken to its logical conclusion means that an increase in the minimum wage will simply result in a decrease in employment for those whose market clearing wage is below the minimum wage. So his call for an increase in the minimum wage is a contradiction to what his real world market experience is. He hasn't, in other words, put the meat inside the sandwich bread.

At the end of the clip, he is correct in the way he describes how regulations hamper his business and says that Subway would not exist, if he tried to start out now, given all the new regulations. His insight here helps explain why it is so difficult for many to get nothing but menial jobs. Regulations are limiting the number of start-ups, where a lot of new quality jobs come from.

Video here.


  1. "People working at minimum wage deserve to be making more." - Subway CEO

    No morals or principles.

    1. Exactly. The illuminating question to me would be why he doesn't enforce his minimum wage principles on his franchisers if he feels so strongly about it.

      He is right though about the gov't regulation situation, it's been stifling the business environment for some time now and getting worse.