World of Franchising - SUBWAY & NAASF

A discussion of issues affecting franchisee operators in the Subway franchise system and how the system may be improved. If you have any comments and wish to contribute to this web page; feel free to email the author.

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Location: Canada

My background is in Research and Development (Science) as well as Economic Development (Business). Currently managing my own businesses. My degree; B.Comm, Finance Major.

Wednesday, September 22, 2004



Low Carb Posted by Hello


Here are some comments from a few Subway Franchisees:

“I have been with Subway for 6 years and I am pleased for the most part; however, over the past year I feel that DAI has not put forth any ideas that have been to my benefit. Toaster ovens, increased hours of operation, getting in bed with Atkins, the 1% increase in FAF funding none of this has helped or will help me. I think we need more direct action- petitions, etc. to get the word to DAI that they have lost the backing of the owners. I for one will not be funding my account for the toaster ovens any time soon. Maybe we could suggestion that nobody fund their account? Short of that maybe we could get DAI to buy our stores and assume some risk.”

Another:

“I have a theory on why some customers are not coming back as often as they used to. We make the customer work too hard!! What kind of bread, what kind of cheese, what kind of dressing, etc etc. This is compounded by the idiots in menu development that take the name of one of our most popular sandwiches and give it to a friggen' salad. Did McDonalds take the Big Mac name and give it to a salad? Hell no. We are wearing people out. They change all the fresh value meals then change them back. Who makes these decisions and are they still employed at DAI? Then the brain trust at DAI fires the Ad agency like it their fault the menu choices and lo-carb BS is not what our customers want. We are the best sandwich chain in the nation and anything we do that harms that or takes away from that needs to be looked at very carefully. DAI's vice president of change for changes sake needs to get the boot. The new salad program is so inefficient it is criminal. I want to know who makes these decisions and see their head on a pike!”

Another:

“Funny how DAI is now concerned about price of admission after increasing our food cost. labor cost and decreasing sales at the same time. Not to mention the increase in FAF funding, purchasing the Quizno's oven, and on and on. I don't know about you guys but all of my costs have increased this year, insurance, unities, everything. If DAi is really concerned about price of admission they need to refund our 1%, cut down inventory (which would save some labor), and bring out some products that bring in customers. I have a real hard time putting any faith in DAi because their track record lately. I know Fred started and built up this thing from nothing but we need positive growth in existing stores not just positive growth because more stores are open. Let's get back to focusing on our sandwiches and being the best sandwich shop there is. Anything that takes away from that needs to go away.”

From me:

“I've been in the system now for almost a decade and a half and have seen some very disturbing trends. I posted, on my web site, the question of where is DAI taking us. We seem to be heading for a premium brand with all the decor and food items going up in cost. Service has now to be top quality or we get Termination Notices. Staff training and selection is very critical to maintain the expected standard. Our operation is very complex when compared to any other QSR and we need very smart people to run our stores with the very complex menu, etc. I'm at the point were I can't afford to stay open late as it is impossible to get quality staff for the late shift. This coupled with the need to sell no less than 5 units per hour to break even makes it impossible to have extended hours of operation. I used to be able to make money with unit sales of 3 per hour. My labor cost is several points above what it was just two years ago. My food cost is also several points above that it was before. There is absolutely nothing I can do to lower either while keeping the operational quality and prices in check. The short of it is that I need to do about $10,000 per week in sales to just have the same profit I had when I used to have sales of $6,000! I look at my neighbor QSRs and note they are full at breakfast while we have only a few customers. Our breakfast product sucks big time! I look at my neighbor QSRs and note they are very bust at night with coffee and donut sales. Our evening menu sucks big time. We need to improve our product to meet the need of the morning and evening customers. It is not the other way around. Advertising will not give them what they want! Discounting our product sounds like a good idea to bring in new customers until you realize that the other QSRs have food cost and labor cost several percentage points less than us. They have some margin to absorb the cost of discounting -- we do not!”

To my comments I got this reply from one franchisee:

“I have been in the Subway system for only two years, but I pray that at year fifteen I am not as miserable and unhappy as ‘you’. I have 30+ years in QSR and the last two have been the most satisfying for me. I know of no other QSR chain as easy to operate. If I was so unhappy, I'd sell and buy one of those other busy QSR's. You'll find thier COGS aren't much lower than ours either.It's easy to complain about what is always wrong, but what about ideas that would make it better ? I don't agree with everything that DAI comes up with, but we do more right, than wrong at Subway. I am excited about speed ovens, and what it can do for breakfast and dinner. Hope you find something that make you happy”

Wow – all I can say is what are you smoking? Are you truly so excited about the fact you have no recourse if you find yourself discriminated against by you development agent or DAI? Can you not see that we are being crowded out in our market by fellow franchisees and end up cutting our own throat with cannibalization?

With people like this we there is really no hope of reforming the system. It is possibly also why NAASF has only 70% membership. Why join as everything is just great!

On this positive note: I just received a letter and documents from a franchisee in a small town. He is currently doing a CPC of $1.05. The town in less than 10,000 population and the trading area is about 50% larger. Wal-Mart just located to the town and the DA wants a Subway in this location. He was approached but declined due to the fact that there was not room for two Subways in the small town. The DA went ahead with a study which proved that there was room for two stores and sold the location to an existing franchisee from an adjacent city. The franchisee had an independent person with several years of Subway experience look at the proposed store and came away with the assessment that his business would see about a 30% loss in sales. Talking to DAI was of no help and the DA is going ahead with the new Subway. Now neither one will be profitable but DAI will probably see a marginal growth in revenue from this action.

I also received a call from another franchisee who was complaining that a second Subway was being constructed 20’ away from their store. Yes, I said twenty feet! It was appealed but, again, it went ahead.

All I can say to Mr. “30+ years in QSR” is that all is not so rosy in our system. Why do you think Subway is the most litigated QSR in the world? I guess “I know of no other QSR chain as easy to operate” is a relative term?

Take care.

PS. I'm not miserable at all :-)


4 Comments:

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