Subway really must hate its franchisees, because the rules keep getting worse

Subway franchisees can only close once a year, otherwise corporate will take over their stores.

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Is it just me, or does Subway genuinely seem to hate its franchisees? There’s been so much dirt coming out of the sandwich chain’s corporate office in the past few months that it’s hard not to feel bad for franchise owners. So far there’s been the melting cheese hazard issue and the 25% royalty fee hike, and now the New York Post reports there’s a new edict the chain’s new 20-year franchise contract: any Subway stores that close more than once a year without permission (aside from strictly-defined “acts of God”) risk the chance of being taken over by corporate headquarters.

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This means that even under dangerous circumstances, like snowstorms, power outages, or even something as extreme as a terrorist attack, stores must still stay open. The idea of requiring employees to risk their lives to make a footlong BMT with a gallon of creamy sriracha on it just seems cruel at this point.

Franchisees who don’t agree to the change in the contract must shell out more than 10% of their gross revenues to corporate headquarters. To put that into perspective, rival chains charge their franchisees 5%-6.5% per year.

Owners are getting pissed. A Subway franchisee in the Northeast told the Post, “I’ll start systemically shutting them down.”

The other contract terms include non-disparagement clauses, a $155 fee for rights to Subway’s digital menu board, and ceding control over hours of operation and pricing to Subway’s corporate office. Any franchisees that prematurely leave the system have to pay royalties for three years, based off the prior year’s average sales.

“When I was a franchisee, my Subway was just outside the 9/11 frozen zone,” Paul Steinberg, a former New York Subway restaurant owner, told the Post. “Since terrorism would not be an act of God under New York law, if this new franchise agreement had been in effect, Subway could have taken my store.”

He also added, “Often on holidays such as Thanksgiving and Christmas, nobody wanted to work — even at double or triple pay — and so I and my partner worked and skipped our family gatherings but even with that, we would have times when the snowfall was such that we would not open. In a place like New York, you might be closed two days per year due to snowstorms.”

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The previously-mentioned franchisee who threatened to shut down his locations said, “I built this. As I start looking back, I wonder was it worth it? You can’t get out because no one wants to buy these stores.”

I don’t know about you, but I feel like we’re witnessing a sub slowly sinking to the bottom of an ocean full of sandwiches.

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DISCUSSION

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Who eats at Subway still?