Subway has ignored its struggling franchisees’ “pleas for help” for years – and is now at risk of being “fed” by a fast-growing rival, a lawyer representing thousands of Subway owners warned.
subway last week Said CEO John Chidsey would “retire” at the end of the year Five years later he became the first executive outside the founding family to lead the chain. This is despite the fact that Chidsey had said he planned to stay with the company after Roark Capital was sold for $9.5 billion in May,
As Subway announced the CEO’s exit, it was also revealed that it was Canceled his 6.99 foot long deal just a month ago After the franchisee admitted that the deal was “not producing the anticipated results,” Restaurant Business Magazine informed,
Subway’s disappointing headlines were a sharp contrast to recent news from its much smaller competitor, Jersey Mike’s. The latter now operates at only 3,000 US locations compared to Subway’s 20,000 – yet Sold itself to buyout firm Blackstone Group for $8 billionThat’s not far from what Subway had achieved six months earlier.
Subway’s $6.99 foot-long promotion was the latest in a series of punitive measures under Chidsey for Subway franchisees, who are forced to pay an 8% royalty fee on gross revenues regardless of their profitability.
According to Robert Zarco, a lawyer for the North American Association of Subway Franchises, which represents about half of Subway’s 20,000 U.S. restaurants, Chidsey asked franchisees to remodel the restaurants and pay “undisclosed” technology fees despite uncertainty over returns. Have forced to.
Zarco told The Post, “If Subway continues to treat its franchisees the way it has for the past five years, where it has been ignoring their cries for help, it would be an easy task for Jersey Mike’s to usurp the Subway brand. “
“I hope this is the reason for the change because it was meant to be,” Zarco said, referring to Chidsey’s exit. “Given the tension that is prevalent, it is a good move for Roark to step forward and clear up the situation and establish a better working relationship with the franchise.”
Chidsey has not made any significant proposals to NAASF, Zarco said.
Roark – which owns dozens of major fast-food chains including Dunkin’, Arby’s, Sonic, Baskin-Robbins and Buffalo Wild Wings – did not respond to requests for comment.
on a A meeting was hastily called in AugustSubway President Douglas Fry acknowledged that sales in many areas had declined 5% to 10% year over year. Meanwhile, he estimated that Jersey Mike’s same-store sales, or sales at stores open at least a year, rose 1%, sources told The Post.
According to sources, Fry admitted at the time, “We are performing poorly compared to the rest of the industry.”
But according to the franchisee, the 6.99-foot-tall deal set by CEO Chidsey – who is the former CEO of Burger King – made things worse.
“This is the first time I have not had a promotion honored,” a franchisee with more than 10 Subway restaurants in the U.S. Northeast told The Post.
That store owner was one of the lucky ones: While most Subway franchisees who signed contracts before 2021 could opt out of the promotion, new franchisees were forced into a money-losing deal.
“The last 20 days have been hell,” a Subway employee wrote about the pricey meal on Reddit on Wednesday. “It might have been better if the higher-ups actually worked in the store and looked at why the owner didn’t want it for any subs.”
The franchisee complained that under the promotion, a customer could order four “Monster Subs” for less than $30, which featured steak, peppers, cheese and onions. As a result, the $6.99 a foot long deal failed to improve their gross sales even though their costs skyrocketed.
Subway is naming Cary Walsh, president of its Europe, Middle East and Asian regions, as its interim CEO. Zarco said some Subway franchisees are liked by those who know him.
According to public filings, Subway has shrunk by 15% over the past four years, from 23,799 U.S. restaurants on Jan. 1, 2020 — shortly after Chidsey took over — to 20,133 on Jan. 1, 2024. Sources said that it is believed that this series has become a little shorter this year.
Meanwhile, the average Jersey Mike’s, whose CEO Peter Cancro became a billionaire from the Blackstone deal, makes about three times as much money as the average Subway, according to public filings.
“Blackstone buying Jersey Mike’s tells me it’s time for me to run,” said the Northeast-based Subway franchisee with more than 10 restaurants. He said he can easily see Jersey Mike’s doubling in size to 8,000 U.S. restaurants soon.
Blackstone senior managing director Peter Wallace said on Nov. 19 that his firm has “deep experience in helping accelerate the expansion of high-growth franchise businesses” like Jersey Mike’s.
