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Subway does franchisee damage control after John Oliver segment: memos

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Subway, America’s biggest restaurant chain, is doing damage control with its own franchisees after a 26-minute segment on HBO’s “Last Week Tonight with John Oliver” sharply criticized its treatment of them.

Oliver criticized Subway for exploiting its franchisees and being perhaps the country’s worst franchisor through the episode on May 22.

“For many years, franchisees have complained about Subway allowing locations to open near one another and cannibalizing their business,” he said. “A Subway could open right next to yours and cut your sales in half.  And none of this really affects Subway corporate. They still get their royalty fees on any sale, plus a $15,000 franchise fee for each recent store that’s opened.  That’s the reason these stores are f***ing all over the place.”

Subway fired back after the segment went viral, having been viewed greater than 4 million times on YouTube. The corporate said Oliver based his segment on old facts and that since John Chidsey took over as CEO in 2019 it looks out more for the owners of its roughly 21,000 US restaurants.

“We’re disillusioned that a recent episode of Last Week Tonight with John Oliver inaccurately characterised Subway and the support we offer to our franchisees,” Subway said in a message to its franchisees and shared with the media this week.

The chain saw 1,043 more Subway restaurants shuttered in 2021 than it opened, making this a touchy subject for Subway during a time when the corporate is having difficulty retaining restaurants and finding recent franchisees. Subway owns none of its own restaurants.

The British funnyman also poked fun at allegations Subway doesn’t use real tuna and perhaps not even real meat in its meatballs.

He put a tray of Subway sandwiches on his desk and noted the smell.

“This complete studio is about to smell like a Subway, which, as everyone knows is the precise smell of “What if bread could fart?’” 

Turning serious, Oliver cited a 2019 Latest York Post story that detailed how area managers (“development agents”) often find franchisees out of compliance for minor infractions and shut their stores in order that they can purchase them for artificially low prices or resell them and collect more fees.

“There’s an incentive for development agents to be overly harsh, because if a store gets multiple violations, that franchisee’s agreement could be terminated and the shop could be re-sold, sometimes to the business development agent themselves at a reduced price. One former inspector even described a development agent telling her the precise store owners that he desired to fail, adding, “I used to be sort of his hit man.” You recognize, normal sandwich stuff. “

Public filings show Subway in 2018 took 718 actions against its franchisees and 955 the prior yr. That compares to lower than 10 per yr during that point filed by McDonald’s, Burger King and Wendy’s.

Subway took only 13 actions in 2021 against franchisees as more of the shops struggle to make a profit, a long-time franchisee said.

Latest York City Subway area manager Restaurex sent its own May 25 memo to local franchisees it oversees, which was reviewed by The Post.

“The segment included misinformation and damaging comment about our food,” it said.

Restaurex also gave suggestions on how one can reply to customers who say they watched the segment, especially the part about how Subway exploits its franchisees.

“Most of the knowledge on the show was from greater than a decade ago,” it said. “That is just not how Subway works today.”

“A Subway could open right next to yours and cut your sales in half.  And none of this really affects Subway corporate. They still get their royalty fees on any sale, plus a $15,000 franchise fee for each recent store that’s opened.  That’s the reason these stores are f***ing all over the place.”

John Oliver on ‘Last Week Tonight’

Oliver also mocked Subway for implementing a recent franchise agreement last yr that forces franchisees to be open on daily basis except one barring “an act of God” — a strict legal term that tends to incorporate only probably the most severe of natural disasters — or risk being taken over by the parent company.

Franchisees can extend their current franchise agreements and pay much higher royalties in the event that they don’t need to comply with the brand new rules which can be unusually harsh for the fast food industry, The Post reported on the time when breaking the news concerning the agreements.

“They recently updated their contract for brand new and renewing franchisees, which, amongst other things, expands the non-disparagement clause to incorporate subjecting the Subway brand to ridicule, which, come on, Subway. You’re the one who made your recent logo two arrows 69-ing one another. The decision is coming from contained in the house here,” Oliver quipped.

The HBO host asked rhetorically why anyone would open a Subway.

“And look, a number of the issues you’ve seen tonight exist in some form with just about all franchises,” Oliver said. “But Subway specifically looks as if absolutely the worst.” 

Subway told its franchisees it’s fearful how Oliver’s segment could hurt them.

“We’re concerned that the misleading characterizations made on Last Week Tonight with John Oliver can have a negative impact on our franchisees — 1000’s of small business owners whose livelihood is serving guests, on daily basis of their communities,” Subway said in its franchisee memo.

“Franchisees are key to our success — after they succeed, we succeed. It’s our top priority at Subway to make sure our franchisees have the tools they should thrive.”

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