Dear Ms. Deluca,
On April 19th, we, the franchisees of Subway, wrote an open letter to you, our owner for the last 5 years, with a plan to save our beloved brand. We asked for fresher vegetables, more autonomy, and pandemic relief.
Elisabeth Deluca, you did not feel that your franchisees were entitled to the dignity of a personal response.
What we received was a stale template message from a Subway spokesperson that has probably been used in the past and will be reused in the future.
However canned that statement was, we did find it revealing, as it showed how out of touch your corporate executives are.
At our peak, Subway had well over 27,000 US stores. The Subway representative stated that our letter is “not representative of the opinions of the vast majority of our dedicated franchisee network”.
However, with between 20-22k US stores in the Subway system, up to 25% of Subway stores have already closed, and at its current pace, the majority of franchisees and stores will be gone in the next three years.
If you took a poll of all Subway Franchisees, you would find that the majority agree with us.
Do you think that all franchisees like forced arbitrations? Do you think that they like having their Franchise Agreements changed at anytime without notice? Do you think they would argue against getting fresh vegetables more than 1-2 times per week?
If your corporate executives are telling you that Franchisees are happy with all of this, it might be time to get new ones.
The second statement we received from that Subway representative was: “Subway is not for sale”.
This was in response to our request for an 8% rebate for franchisees in the event that Subway is sold to any buyer.
If Subway is not for sale, then you should have no problem granting us 8% of the gross sales price of Subway. This should be an easy request to grant. If Subway is not sold, then no money gets paid to franchisees. Eight Percent of zero is ZERO.
As you know, the 8% is reflective of the royalty that franchisees pay to you, a multi-billionaire. Our royalty is one of the highest in the industry.
Papa John’s, Sonic, and KFC charge a 5% royalty fee. McDonald’s, Arby’s, and Dairy Queen charge 4%. Wendy’s royalty is at 3.5%.
In the middle of a pandemic, we were denied relief from our royalty payments to you, a multi-billionaire who owns Subway with no debt.
We were even denied when we requested PPP funds to be exempt from our weekly payments to you. Instead, those PPP funds and other federal aid that we so badly needed for our own stores and families eventually filtered up to your multi-billion dollar bank account.
If franchisees have to pay a royalty to you every week, even in the midst of the worst economic collapse since the Great Depression, then that royalty should not be one of the highest in the industry.
Therefore, we would like to formally request that, effective immediately, our royalty be reduced down to 4.5% bringing us in line with the industry average.
Subway has recently downsized its employee base by 30-40% and is actively in the process of shedding the development agent model, reducing its overhead expenses.
John Chidsey implemented a 4.5% royalty during his time at Burger King. So if it’s good enough for Burger King, it should be good enough for Subway.
A reduced royalty would be a major boost for the brand and make us destined for success.
Just think of the possibilities that this could open. We could reinvest more money into our stores, and hire more people. This new savings could help offset the cost of expanded delivery options. We can even run more seasonal promotions like the $5 footlong which the customers love.
Also for the first time in 5 years, Subway will be able to recruit new franchisees to replace the 5000-7000 stores we’ve lost.
Unlike your advisors who make money regardless if Subway does well or not, our only motivation is to see Subway succeed. We have our life savings invested into this business. Our goals should be mutually aligned.
Elisabeth, please don’t ignore us. Many of us who are minorities, women, and other disaffected groups have been ignored and mistreated our entire lives. Yet despite the odds, we’ve managed to make a life for ourselves and our families.
Help us help Subway. Let’s make sure that we run the brand with mutual agreement, not one-sided decrees. Give us more autonomy over our stores, and not a short leash.
Reward our dedication to Subway, after enduring the loss of our co-Founder and your husband, Fred Deluca. We have stuck with Subway despite poor leadership and national scandals. We’ve all been recruited to open up other franchises, but we all stuck with Subway because we believed in Subway.
That type of dedication should mean something to you. It means EVERYTHING to us.
A Growing Group of Concerned Franchisees