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.

Thursday, April 28, 2005

Compliance Issues at Subway - real or imaginary?

How is it that a franchisee who has been in the Subway system for well over a decade and who takes great pride in having a well run store gets threatening letters from Subway head office if he has just one incident of a problem. We are not talking about onging problems but, say one in a year.

Here is a typical letter sent to many of most faithful and hard working franchisees on a regular basis:

"Dear Franchisee:

All SUBWAY restaurants must operate in accordance with the strict

standards for quality, service and cleanliness as defined by

the Company. It is the responsibility of each SUBWAY franchise

owner to be knowledgeable of all company policies as well as applicable

health and consumer protection regulations concerning food preparation,

food handling, storage, etc. Health and safety regulations exist to

protect our employees, our customers and the Brand.

Your Store Evaluation & Compliance Report dated xxxxx

indicates that your restaurant is not operating in compliance with the

specified SUBWAY standards regarding the following compliance areas:

Food Safety / Glove Usage

Food Quality & Preparation

In addition, there were 6 areas with a critical rating of “0” or “1”

which require your immediate attention.

Improper food safety may cause illness, which may affect the reputation

of your restaurant, your investment and the SUBWAY franchise system.

It is imperative that you correct the aforementioned violations


Please be advised, that if the next Store Evaluation & Compliance Report

indicates that your store is still not complying with Company standards,

we will have no recourse but to refer this matter to our Legal Department,

which could result in proceedings to terminate your franchise.

If you need additional direction and/or assistance on how to correct

the compliance areas in your restaurant, please refer to your

Operations Manual and/or contact your Development Agent or Field

Consultant immediately.


Policy/Compliance Adm."

Nice wording, is it not?

Now put this in context of this very same person who wrote this letter and who makes a mistake at work. Do you think she would be very happy with such a letter or do you think she would contact human relations, a union, or some other similar body to complain about unfair treatment and abuse by her boss?

Now, consider the owner of a Subway restaurant. He has hundreds of thousands of dollars invested in this store. He also can not just fire anybody because they make a mistake. There is also no guarantee that another new employee will not make a similar mistake. What recourse is there? None at all. He can only hope that the same mistake is not repeated by an employee. It really does not matter how hard he tries to correct the problem as mistakes do happen.

I can understand if this was an ongoing problem so that a history of documented problems exist. In addition one would expect that there would be some history of poor reports from the local heath department. If none of these exist why is it necessary for such a threatening letter after only one such incident?

The interesting thing is that this is not unusual. DAI (Doctors Associates Inc - Subway) do this on a regular basis. They use form letters as they issue so many. In addition, it does not matter if the expiry date is out by a few minutes or days. You get the same letter. It does not matter if it is vegitables or meat. After all, a sliced tomato poses the same health risk as a slice of meat, according to Subway. It does not matter if the product is held at a very correct temperature and constant monitoring of these are done by the store or if this is not done.

What we have is the "No Tolerance" policy which is so rampant through out North America. You know the one where the policing officer does not have to think. There are no extenuating circumstances. I have never found that a no tolearance policy works in any situation. The underlying problem is not solver but just complicated. For example, the incident of drunk driver collisions have not declined in society even with a no tolerance approach. Similarly, you will not reduce the possibility of a person getting food poisoning by using a no tolerance approach.

What will happen is that some of the less hygenic operators will just hide the problem. They will not get caught and when they do have a problem they will point to the clean record from Subway to exonerate themselves.

What we need form Subway is more of a helpfull approach to any indetified problems. Maybe there is some training which is required, maybe there is some operational problems which can be improved.

The only way to correct any perceived problem is to study its root cause and correct it. If after this no major improvements can be made then one has to conclude that it was an error and it should be noted as such.

Take care.

Sunday, April 24, 2005

What do Subway and McDonalds have in common?

Sure, they are both large players in the QSR industry. McDonalds leads the hamburger QSR while Subway leads the Submarine sandwich sector. Other than that nothing is similar? After all, Subway is the healthy choice while McDonalds is not.

I was watching the show “Super Size Me” the other week. You know the one where this guy eats nothing but McDonald food for a couple of weeks and gets ill from the experience.

It got me to thinking what we do in Subway. Our staff is trained to ask, “On a foot long, extra cheese, double meat, bacon”? We don’t say will that be super sized? But the message is the same. If they do not then we get marked out of compliance and penalized for not up selling to the customer.

In this age where so many people are having difficulty in eating properly would in not be nice if there was one place where they were not tricked into eating more than they should? Maybe I should say they are not being tricked into eating too much as much as coerced. For example; the price of a foot long sub is less than 50% more than for a six inch sandwich. You get twice the amount of food for paying about 40% more, in most cases!

My recommendation:

1. Charge extra for extra items so that profits are maximized and temptation for excess on behalf of the customer is reduced.

2. Do not offer a foot long sandwich for less than the equivalent 2 six inch units.

3. Do a better job of promoting salads with low fat dressings.

4. Offer a Meal Deal with a reasonable discount.

5. Do not offer a toy with Kids Packs. Keep the cost low to encourage more kids to visit.

6. Seriously review the breakfast menu by offering a product which the customer wants.

7. Eliminate the drive through.

Some of the above have nothing to do with over sizing the customer’s waist but will improve the satisfaction of the customer while generating reasonable profits.

Item 1 is a no brainer but we still offer the customer a selection of add ones which are not available at any other business. It makes it difficult to control costs and also makes the modest buyer feel like he is supporting the eating habits of the indulgent ones.

Item 2 is supposed to encourage sales by up-selling the customer. Rather, why not eliminate the foot long items on the menu board. It will help simplify a very confusing display of choices by about 40%. In addition there will be less discrepancy between rural and urban stores. Urban stores tend to sell more six inch sandwiches. As such food cost will be more equitable and comparable between different locations.

Item 3 should be obvious to allow the person who wants to eat healthy a choice. It is sad to note that the salad program which we rolled out last year was an abysmal failure. What is even sadder is that our person responsible for this failure received an award for excellence!

Kids should be encouraged to visit more often. Offer them a toy at a price if they want one. However, with a selection of only four toys are we saying expect you to come to Subway only four times in six, or so, weeks? Get rid of the included toy and keep the price down. Mom will be real happy.

We do not have a real breakfast menu. We really need one.

Subway prides itself on making the sandwich in front of the customer. You can not do that in a drive through. In addition, you will need more staff and also have to invest more in capital assets and maintenance. If an owner wants one let him have one but don’t coerce them into installing a drive through.

Well that is about all for today.

Take care.

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