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Subway does franchisee damage control after John Oliver segment: memos

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Subway, America’s greatest restaurant chain, is doing harm management with its personal franchisees after a 26-minute phase on HBO’s “Final Week Tonight with John Oliver” sharply criticized its therapy of them.

Oliver criticized Subway for exploiting its franchisees and being maybe the nation’s worst franchisor in the course of the episode on Might 22.

“For many years, franchisees have complained about Subway permitting places to open close to one another and cannibalizing their enterprise,” he stated. “A Subway might open proper subsequent to yours and minimize your gross sales in half.  And none of this actually impacts Subway company. They nonetheless get their royalty charges on any sale, plus a $15,000 franchise payment for each new retailer that’s opened.  That’s the reason these shops are f***ing in every single place.”

Subway fired again after the phase went viral, having been seen greater than 4 million occasions on YouTube. The corporate stated Oliver primarily based his phase on previous details and that since John Chidsey took over as CEO in 2019 it seems to be out extra for the homeowners of its roughly 21,000 US eating places.

“We’re disenchanted {that a} latest episode of Final Week Tonight with John Oliver inaccurately characterised Subway and the help we offer to our franchisees,” Subway stated 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 sensitive topic for Subway throughout a time when the corporate is having issue retaining eating places and discovering new franchisees. Subway owns none of its personal eating places.

The British funnyman additionally poked enjoyable at allegations Subway doesn’t use actual tuna and perhaps not even actual meat in its meatballs.

He put a tray of Subway sandwiches on his desk and famous the odor.

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

Turning severe, Oliver cited a 2019 New York Submit story that detailed how space managers (“improvement brokers”) usually discover franchisees out of compliance for minor infractions and shut their shops to allow them to purchase them for artificially low costs or resell them and gather extra charges.

“There’s an incentive for improvement brokers to be overly harsh, as a result of if a retailer will get a number of violations, that franchisee’s settlement might be terminated and the shop might be re-sold, typically to the enterprise improvement agent themselves at a reduced worth. One former inspector even described a improvement agent telling her the precise retailer homeowners that he needed to fail, including, “I used to be form of his hit man.” You understand, regular sandwich stuff. “

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

Subway took solely 13 actions in 2021 in opposition to franchisees as extra of the retailers wrestle to make a revenue, a long-time franchisee stated.

New York Metropolis Subway space supervisor Restaurex despatched its personal Might 25 memo to native franchisees it oversees, which was reviewed by The Submit.

“The phase included misinformation and damaging remark about our meals,” it stated.

Restaurex additionally gave options on how to answer prospects who say they watched the phase, particularly the half about how Subway exploits its franchisees.

“Many of the info on the present was from greater than a decade in the past,” it stated. “That isn’t how Subway works at the moment.”

“A Subway might open proper subsequent to yours and minimize your gross sales in half.  And none of this actually impacts Subway company. They nonetheless get their royalty charges on any sale, plus a $15,000 franchise payment for each new retailer that’s opened.  That’s the reason these shops are f***ing in every single place.”

John Oliver on ‘Final Week Tonight’

Oliver additionally mocked Subway for implementing a brand new franchise settlement last year that forces franchisees to be open on daily basis besides one barring “an act of God” — a strict authorized time period that tends to incorporate solely essentially the most extreme of pure disasters — or danger being taken over by the mother or father firm.

Franchisees can lengthen their present franchise agreements and pay a lot increased royalties if they don’t need to adjust to the brand new guidelines which might be unusually harsh for the quick meals trade, The Submit reported on the time when breaking the information in regards to the agreements.

“They lately up to date their contract for brand new and renewing franchisees, which, amongst different issues, expands the non-disparagement clause to incorporate subjecting the Subway model to ridicule, which, come on, Subway. You’re the one who made your new brand two arrows 69-ing one another. The decision is coming from inside the home right here,” Oliver quipped.

The HBO host requested rhetorically why anybody would open a Subway.

“And look, plenty of the issues you’ve seen tonight exist in some kind with virtually all franchises,” Oliver stated. “However Subway specifically looks like absolutely the worst.” 

Subway advised its franchisees it’s frightened how Oliver’s phase might harm them.

“We’re involved that the deceptive characterizations made on Final Week Tonight with John Oliver could have a destructive affect on our franchisees — hundreds of small enterprise homeowners whose livelihood is serving company, on daily basis of their communities,” Subway stated in its franchisee memo.

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