Subway Franchisees

Recently the New York times posted an article titled, “Subway Got Too Big. Franchisees Paid a Price” (06.30.2019) where it talks about the treatment of some franchisees in the Subway franchise system.

According to the article, franchisees feel that the regional developers have been purposefully trying to find faults within their stores through inspections so that the developers can eventually terminate the franchisee and take over control. An employee of a developer has confirmed that this indeed was the case.

There may be conflict of interest when regional developers are the ones taking over the terminated franchisees. The developers may have incentives to do so especially if the franchisee is profitable.

Goodwill that is associated with the brand requires a lot of work. Franchisees may be treated as guinea pigs where the franchisor tests the waters from a safe distance and once the franchisee proves to be profitable, the franchisor comes in and takes away the goodwill that the franchisee has worked so hard to build up. This is a sinister tactic that is not lawful.

Whether the Subway system is abusing its franchisees is still not unequivocally clear. However, the concerns of distressed franchisees should be taken seriously because if Subway develops a reputation of treating their franchisees poorly, it could be bad for business.

For more information on what types on what rights and obligations franchisees have, contact franchise attorney Mario Herman who has worked with multiple franchise systems, including with Subway franchisees.