Entrepreneurs

Subway Franchisees Write Open Letter to Owners: ‘This Dream Has Turned Into a Nightmare’

The letter puts a spotlight on Subway’s troubles amid rumors that the sandwich chain is going up for sale.

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In the midst of rumors that Subway is setting itself up for sale, some of the chain’s franchisees have banded together to raise concerns and demands.

On Monday, a group of franchisees voiced outrage at their treament and proposed solutions in an open letter to Elisabeth DeLuca, the widow of Subway co-founder Fred DeLuca. According to the New York Post, the signed letter comes from 250 Subway locations, which total 1% of the chain’s U.S. locations.

“Sadly, for many of us, this dream has turned into a nightmare,” the letter says. “We didn’t understand that language in our Franchise Agreements was written in a way so that Subway could change the rules on us at any time, without notice, for anything.”

Some of the frustrations come from pandemic-related issues, such as the corporate office preventing franchisees from reducing hours to make ends meet. Other points of contention extended beyond Covid-19, with complaints of the inability to source higher-quality ingredients.

The letter includes a list of six demands, which include the ability to directly lease stores and exemption from royalty payment in correlation to the amount of the PPP loan and federal aid received. 

Recent rumors of the sandwich chain’s sale have put a spotlight on Subway’s issues. According to Restaurant BusinessTechnomic’s 2021 Top 500 Chain Restaurant Report indicated that Subway suffered a 18.5% loss in revenue compared to 2019 sales.

Subway’s owners, which include DeLuca, appointed John Chidsey as the CEO in 2019 to remedy the downward spiral the company was experiencing even before the pandemic. Since Chidsey began as CEO, Subway has closed more than 1,700 stores and let go of hundreds of employees. The New York Post estimates Subway’s corporate office laid off nearly 500 employees last year, which equate to a 40% cut of its initial 1,200 corporate-level employees.

In the early 2000’s, Chidsey made similar cost-cutting measures as CEO of Burger King before selling the company to investment firm 3G Capital in 2010. Alongside Miami relocations and a restructuring of Subway’s franchise program, many see this as a sign that the company is looking to sell.

“He’s following the exact playbook that he followed for Burger King,” one operator told Business Insider.

Some of the rumors seem to have merit, as Business Insider reports that restaurant companies Restaurant Brands International and Inspire have looked into buying the brand.

“What is confirmed through chitchat in the restaurant industry is that both RBI — Restaurant Brands International — and also Inspire, in the last year to year and a half, have done due diligence looking at Subway,” chain restaurant analyst John Gordon told Business Insider.

Subway has declined to comment on the rumors.

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