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.

Sunday, November 20, 2005



Here is a picture of the recent activities on my blog site. As you can see visits and page views are continuing to grow.

The most interesting are the emails I receive from franchise's from all over the world and other interested parties. Most express concern with how franchises are treated by franchiser organizations. It is no joke but the rights of franchise's are about the same as serfs back in the middle ages.


My last post referred to a letter sent by DAI's, Subway, legal department and advised that my Blog was in infringing of DAI's rights and I should immediately delete all offending material and cease publishing this site.

Well, I'm still here and still publishing. I removed one article which made reference to material which is in the hands of anyone who cares to know. It referred to Subway's very ambitious strategic plan. I also asked that DAI provide me with a list of specific articles which were causing them concern. I never received this and have not heard from them since.

Why would Subway want to go to such extremes to shut down a legitimate blog which does not do anything but collect, and republish, internet material and comments from personal experience in the Subway system over 15 years?

Do you know that legal suggested that I should contain my comments of dissatisfaction of nosebag member only web pages and the Ombudman department. There are two very good reasons why this is not an option:

1. No one reads the nosebag (North America Association of Subway franchise's) web post.
2. The Ombudman department is not independent and, from personal experience, not impartial.

Well that is all for today,

Take care,

Egil

14 Comments:

Blogger Mark E. Peterson said...

I am in so much trouble with Subway and I do not know where to turn for help. I have a great wealth of documentation showing the blantet violations of my franchise agreement on the behalf of DAI. I have just sent in a retainer fee to an attorney in CT.

If anyone outhere has been through the arbitration process or better yet, sued and won against DAI. Please contact me.

Subdiet2@comcast.net
Mark E. Peterson
Nashville,TN

12:37 PM  
Blogger Mark E. Peterson said...

My name is Mark E. Peterson. I am in serious trouble with DAI. This is no fault of my own. I have become the target of my field reps. and it seems that no one will help. I have been a franchisee for eleven years, and now somehow I can not get anything right.

I have an unbelievable wealth of documents showing the blantet disregaurd of the Operational Handbook, hidden video of evaluations, taped telephone conversations, etc.

I have just hired an attorney and plan to counter sue.

Has anyone out there been through the arbitration process, or better yet sued DAI and collected.

If so, please contact me.

Mark E. Peterson
subdiet2@comcast.net

12:41 PM  
Blogger huntsly said...

michael hunt wrote:
The Subway chain used be a good opportunity. Not since Subway headquarter became predatory against franchisees.

Read Fortune magazine archives on how this chain led by president Fred DeLuca (nicknamed BendoveritsFred) has caused a record number of unhappy franchisees, defrauded landlords and violated laws. Discover why after a six year study, U.S. House of Representatives' Dean Sagar concluded: "Subway is the biggest problem in franchising and emerges as one of the key examples of every abuse you can think of." Says Cliff Marshall, a franchise consultant for more than 30 years: 'If anyone in my family ever asked whether they should buy a Subway, I would say absolutely not, no way. A Subway franchisee who asked to remain anonymous for fear of retaliation said the system "is a total mess." Go here learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm


Learn how DeLuca violated Connecticut's Unfair Trade Practices Act by pressuring independent SFAF board members to block owners he didn't like from running for office. Apparently he has no respect for legal statutes or fair play. Go here to learn more: http://franchisepundit.com/index.php/2005/05/28/what-to-learn-from-this-subway-lawsuit/


Read how DeLuca's franchise agreement forces owners with a legitimate grievance to submit to arbitration where there is no jury, few rules, and the outcome is binding. Arbitration companies compete ferociously for Subway's business and DeLuca uses that leverage to stack the deck in his favor. Florida attorney Keith Kanouse says, "I've seen over 300 franchise agreements, and Subway's is the worst." Go here to learn more: http://franchisepundit.com/index.php/2005/07/05/subways-deluca-loses-battle-with-franchisees/


In a perfect example of poetic justice, the Wall Street Journal recently announced that DeLuca lost a NASD arbitration claim, in which he alleged the UBS caused him $193 million in damages Not only did the DeLuca trusts fail to recover any of their losses, they also were ordered to pay $50,000 to reimburse UBS for document-production costs. Some owners were delighted to hear DeLuca got a taste of his own medicine, but others worry that it will only fire his drive to abuse them more to make up his losses.


If you think Subway owners make good money, think again. A store owner in the US nets less than $26,600 in profit, barely above the poverty level for a family of five. To earn a decent income, they must often work 60 to 70 hours a week and invest in multiple stores. The main problem is encroachment of stores. Even with more than 27,000 Subway's already open, DeLuca keeps building more. The result? Average revenues per store are down some 8% from when they peaked way back in 1994! Go here to learn more: http://books.google.com/books?id=yNFN1OpnkBkC&pg=PA100&lpg=PA100&dq=subway+franchisees+lowest+paid&source=web&ots=l-dgtBas1-&sig=Of1ObbDdfXuZsckQcO2Vp54RAV4&hl=en

9:58 PM  
Blogger huntsly said...

This comment has been removed by the author.

9:59 PM  
Blogger huntsly said...

Read how DeLuca's franchise agreement forces owners with a legitimate grievance to submit to arbitration where there is no jury, few rules, and the outcome is binding. Arbitration companies compete ferociously for Subway's business and DeLuca uses that leverage to stack the deck in his favor. Florida attorney Keith Kanouse says, "I've seen over 300 franchise agreements, and Subway's is the worst." Go here to learn more: http://franchisepundit.com/index.php/2005/07/05/subways-deluca-loses-battle-with-franchisees/

In a perfect example of poetic justice, the Wall Street Journal recently announced that DeLuca lost a NASD arbitration claim, in which he alleged the UBS caused him $193 million in damages Not only did the DeLuca trusts fail to recover any of their losses, they also were ordered to pay $50,000 to reimburse UBS for document-production costs. Some owners were delighted to hear DeLuca got a taste of his own medicine, but others worry that it will only fire his drive to abuse them more to make up his losses.

If you think Subway owners make good money, think again. A store owner in the US nets less than $26,600 in profit, barely above the poverty level for a family of five. To earn a decent income, they must often work 60 to 70 hours a week and invest in multiple stores. The main problem is encroachment of stores. Even with more than 27,000 Subway's already open, DeLuca keeps building more. The result? Average revenues per store are down some 8% from when they peaked way back in 1994! Go here to learn more: http://books.google.com/books?id=yNFN1OpnkBkC&pg=PA100&lpg=PA100&dq=subway+franchisees+lowest+paid&source=web&ots=l-dgtBas1-&sig=Of1ObbDdfXuZsckQcO2Vp54RAV4&hl=en

Consultant Marshall estimates that 25% of franchisees are unhappy and suffering, while about 40% are "just getting by and making a few dollars. Barely a third are happy and doing fine, though many of those owners are also development agents who control the number of competing Subways in their vicinity." Steve Sager, a departed Subway agent estimates that half the franchisees in the Northeast are suffering. What does DeLuca have to say about this? "It bothers me that people lose money, but I don't lose sleep over it. This is America." I imagine DeLuca and co-owner Peter Buck sleep pretty soundly indeed, both being ranked by Forbes as the 207th richest men in America. Go here to learn more: http://www.forbes.com/lists/2005/54/BNPG.html

For most people, reaching billionaire status would be enough, apparently not for DeLuca. He recently rewrote the franchise agreement, stripping owners rights and doubling already inflated royalty fees for stores out of compliance of written guidelines. It also eliminates protection against encroachment, encouraging development agents to stack stores. He even added a loophole to take back the lucrative Subway advertising trust which he vested to owners years ago. With apparent impunity DeLuca pronounced his new agreement retroactive for all existing owners! Almost immediately field inspectors began bloating corporate profits through increased compliance fines. Ignoring past policy, inspectors now mark owners out of compliance in several areas for each deficiency! Go here to learn more: http://findarticles.com/p/articles/mi_m3190/is_23_40/ai_n16463127

Even more unconscionable, DeLuca devised a scheme to rip off owners by claiming high internal loss is royalty theft. Using proprietary software he sniffs out owners suffering from excessive shrinkage and forces them to undergo intense internal audits. Owners who can't account for every portion of lost, wasted or stolen meat are labeled thieves and fined up to $50,000! Those who fight DeLuca's illicit attacks are threatened with criminal prosecution or store seizure. Coincidentally, "shrinkage", a term prevalent throughout the restaurant industry, has been stricken from the Subway training curriculum since DeLuca's royalty theft crusade began. Just coincidence? Go here to learn more: http://subwayfranchisee.blogspot.com/2005/04/compliance-issues-at-subway-real-or.html

What help can store owners who suffer from chronic shrinkage or compliance problems expect? Does DeLuca offer additional training and support to help them get their losses under control and their stores back into compliance? Just the opposite! He dangles eviction notices over their heads and charges them huge fines! The U.S. Small Business Administration even stopped lending to Subway owners until DeLuca removed a contract clause that gave him the power to seize any store without cause. Go here to learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm

Franchisees fear that DeLuca may have bolder plans to cannibalize the chain. For years he pressured owners to abandon cash registers in favor of computer POS systems, despite dependability issues and a higher cost to own. When he encountered resistance, he simply ordered POS systems mandatory. Then he required all owners to connect their POS systems to headquarters, giving DeLuca access to every store's transactions. Using his "spy" software to monitor stores chain wide, now DeLuca can efficiently target owners ripe for royalty theft audits and spot inspections, boosting corporate revenues. Go here to learn more: http://storefrontbacktalk.com/story/081006Subway.php

DeLuca appears intent to use new technology against franchisees. Some owners suspect that the Subway Technology Department's pet video surveillance vendor DTT USA has conspired to help DeLuca spy on owners through live camera feeds being installed in stores. If DeLuca can tap into ring ups and video evidence then use it against them, they might as well kiss any hope of a profitable future good by. Is it coincidence that DeLuca's new contract gives him full rights to transmitted data? If you're a Subway owner, here's a hot tip; If it seems every time you have a minor compliance violation (ie: an oven door latch that won't stay shut or a POP display is out of date), a field rep mysteriously shows up on your doorstep for a spot inspection, Big Brother is watching! If this happens to you, obtain a copy of your DSL provider's server logs and have them scrutinized by an IP expert. If you are being spied on, take your findings immediately to the FCC.

Want more proof that Subway corporate is corrupt? Investigate Subway's legal beagle Leonard Axelrod (nicknamed Lenny the Ax), the architect of Subway's contracts. You'll have to dig deep, the evidence is buried. If you're diligent, you'll uncover how Axelrod was disbarred for brainstorming a scheme to defraud landlords. An Illinois appeals court concluded that there was 'overwhelming' proof that Subway had committed "far reaching fraud". An Illinois jury awarded a landlord $10 million in punitive damages after concluding that Subway had defrauded him. DeLuca spent $1.3 million to resolve 72 similar claims. Go here to learn more: http://findarticles.com/p/articles/mi_m3190/is_n49_v29/ai_17847096

Once landlords wised up to Subway's shell game, Axelrod brainstormed his dirtiest trick; a way to skip arbitration by signing leases with landlords and then subletting stores to unwitting franchisees, unaware they were being used as de facto landlords. This way Subway can quickly evict a store owner in a lease dispute and DeLuca can screw the landlord out of the lease. An Illinois court has called the eviction/ arbitration provision "unconscionable". Go here to learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm

What effect has DeLuca's predatory actions had on the Subway chain? At a recent franchise convention & trade show, it was all too obvious. Attendance and morale were at an all time low. Store owners sulked by, all emotion drained from their faces, not unlike holocaust survivors. Some wore shirts printed with "I Survived a DAI Audit". They huddled in small groups, searching for some relief from this nightmare. Sadly, Subway was once the greatest opportunity in the industry. Today it's just the greatest con job in the industry. Don't fall for it!

If you are affiliated with the Subway chain and believe you've been victimized by them, I urge you to add a comment to this post by clicking on the "File a Rebuttal" button below, or file your own report by clicking on the "File a Report" button next to it. RipoffReport.com posts are monitored by numerous law firms around the country. Your identity will remain confidential but will allow them to contact you in the event a class action suit or criminal complaint is imminent. Any criminal act that Subway staff may be guilty of negates the arbitration clause you are currently bound to.

10:01 PM  
Blogger huntsly said...

Hey Mark,

Welcome to the club. I was with Subway over 20 years when DAI decided to eliminate me. I believe your best chances are to take your complaints to your State Attorney, State Attorney General and the FTC. If you've read the complaints against them in Ripoff Report, Fortune Magazine and other web sites, your story is nothing new. The franchise agreement prevents you from litigating against them. They will let you expend your resources trying, then slam you with an arbitration order before you get a judgment. If they violated any state or federal statutes, you have a chance of filing criminal charges. If you transmit your weekly numbers via the internet from your POS system they might be guilty of wiretapping if they have monitored your POS system data without your knowledge. Best of luck.

http://subwayreallysucks.blogspot.com/

http://subwaysucks.tripod.com/

http://ripoffreport.com/reports/0/315/RipOff0315931.htm

2:18 PM  
Blogger huntsly said...

Subway Sucks art is now available free at:
http://digg.com/users/huntsly/gallery

2:44 PM  
Blogger meg said...

My story is rather long about the experience that i have been having with Subway. Just like any of you. i will gather my story and share with all of you soon.

7:08 PM  
Blogger Former NAASF BOD said...

Egil,

Most NAASF BOD members are gone. Hatfield, Wehr, Kaplan, Downey, Hook, all sold there stores after being harrassed and witnessing intense harrassment by DAI and its agents over NAASF lawsuit. Hook committed suicide after his ordeal.

7:32 AM  
Blogger Egil said...

This is truly tragic!

It pains me to read these comments and to know that we used to have a well run and dynamic franchise. We used to work well as a team with input and help from across our franchise. Obviously it is not the franchisees franchise any more. Sad to see all the suffering for no good reason other than the quest for power and money.

10:35 PM  
Blogger ninny2_1 said...

i am young 24 yr old who is very interested in starting my own subway franchise in the small town that i live in. i have been reading some of the posts on the blog and seem to be second guessing myself on my aspirations. being that i am young and inexperienced, i dont quite fully understand everything that is being posted but get the basic idea. some may not take me serious that i am interested in being an entrepreneur with subway at the age of 24 but thats ok. the only things that i have done so far is gathered info and filled out some info on the subway website. i kind of get the idea that none of you would reccommend someone to the subway franchise? If any of you have any comments or suggestions that you could give me or steps that i might take in this situation please feel free thank you for your time

8:33 AM  
Blogger hiflynjim said...

I’m not surprised in the least that Subway would request you cease making the statements you have made. Several years ago I purchased a franchise for a sandwich shop that turned out to be fraudulent. In order to recover my investment I retained an attorney, after he had carefully scrutinized the franchise agreement he determined that it was a one sided contract of adhesion. It took 2 years to get my investment back. http://www.onlinemoneythruaffiliates.com/

4:48 PM  
Blogger Aaron Siddle said...

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4:23 AM  
Blogger Clint Shaff said...

From my experience, no matter how the brand franchise flourishes, still, one franchisee must consider the feasibility before establishing the business in action.
- FranchiseMatch.com

1:31 PM  

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