At one point in time, Subway was one of the most popular restaurant chains in North America—it was marketed as a healthy fast food option, something that wasn’t common in the early 2000s.
There was a time when Subway was at the top of the fast-food mountain—largely because they didn’t have any sort of significant competition; while many burger places had several different competitors, Subway used to be the only place you could get a sandwich. However, over time, competitors have begun to emerge.
In addition to rival sandwich shops, there has been a slew of healthy fast food alternatives that have also begun to poach some of Subway’s potential customers.
Feeding the American Dream
Part of the reason Subway was able to build so many locations was due to the ease with which regular people could open their own franchise, as opposed to some of the bigger fast-food chains that are predominantly owned by investment firms.
Subway charged only $15,000 in franchising fees as opposed to $45,000 that McDonald’s charges. However, subway owners were also subject to more rigid stipulations in their agreements, including providing the company with eight percent of their gross annual profits.
Strategy Change
As a result of their recent struggles, Subway has pivoted from their original mandate. There was a time when Subway had more locations than any other fast-food chain in the world—they used to have 24,000 locations just in the U.S., and, before his death, owner Fred DeLuca had hoped to reach 50,000 stores.
However, after his death in 2015, DeLuca’s sister, Suzanne Greco, took over and began taking aim at the less successful stores—either less profitable or prone to amassing violations. For the first time in the company’s existence, Subway closed more stores in 2016 than they opened.
Ousting Owners
Because of their vast size, Subway broke down their restaurants into regional fiefs that are overseen by someone known as a development agent. These agents have a tremendous amount of power over the franchisees, and many times they own franchises themselves.
Many franchisees believe having franchise owners acting as development agents is a conflict of interest—they feel it allows them to cherry-pick which restaurants are forced to either shut down or change hands.
Frequently, franchise owners of Subways that were in competition with locations owned by the development agent claim they were targeted.
Taking on Subway
As a result of having their restaurants allegedly forcibly taken from them, many franchisees have opted to take Subway to court. However, the company’s policy states that all disputes must be resolved in private arbitration in Connecticut.
This can make things hard on franchise owners who are unable to travel from their home location. On top of that, Subway has also been accused by franchisees of burying complainants in legal paperwork filled with complicated jargon.
Manoj Tripathi, a franchisee who had one of his stores close due to a series of policy violations he felt were unfair, attempted to sue Subway in 2016. Tripathi and his wife both have advanced degrees. He says they’ve been able to parse the legal documents Subway has presented them, but he believes many franchisees simply aren’t able to.
