This comment is worth a place all on its own:

"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." From a former NAASF Board Member.

Every so often I get an email which is just too good not to post. The following is worth reading and, if you are interested in starting a Subway Franchise, following up on. Please, do not limit your research to my blog as you will be amazed at the number of negative comments about Subway you will find. As a note; most of the positive blogs you will find are posted by DAI, Subway or 'friends' of Subway.

"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"

and a second;

" 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."

Take care.

I occasionally receive email letters from people either in the system or thinking of getting into the Subway system. Most are usually just letters blasting Subway or seeking information.

The following letter was received recently and goes to the point of why Subway is dysfunctional.


"Hi,

I have been thinking about letting people know how horrible an experience this Subway franchise has been and will be until I die. My husband and I have seriously considered suicide but we love our kids (adults) too much to do that to them. My husband wanted this store so badly that I couldn't say no to him. I'm 59 and have had fibromyalgia since I was 35. My doctor's nurse offered to help me get a full disability at that time. I decided to tough it out so that my kids-I was raising them alone after their father died, wouldn't think that's how to live. I made it through to retirement at U/Mass and was working part-time close to home. I was so happy and wanted my husband to be happy. I signed the papers putting our home up as security-stupidity! 3 months after he started running the store-happily and well I might add-his back went out and we found out he has several ruptured discs as well as other back problems. One operation and several procedures later he is in more pain than when he started and I had to quit my job and try to run the Subway. The day he was going to be operated on I let the corporate office that we deal with know and they told me it would be best if I was at the store that morning to meet with them anyway! I went-because at that time they frightened me-listened to their complaints--which is really all you ever get-even though you will here about the "Subway Family" and how they are there to help you. They couldn't have cared less if my husband lived or died and have not offered one bit of help. I have cried myself into a stupor over the stupidity of signing over the home that I love and have worked so hard to keep to people who couldn't care less and would kick us out onto the street without a 2nd thought. They nickel and dime you every time you turn around and guess what-everyone in our town is down in business because of the drastic weather change this winter. Has anyone from corporate offered any help or suggestions other than give away more free grinders and you'll have more customers. Which is true. There's an old saying that if you give everything away, you'll have more customers than you could imagine!

Well, live and learn and remember that the hell that is Subway school-oh, yeah, I'm serious, is just the beginning.


wondering when it will and how much it will hurt,"

Name withheld by me so that the sender will not be harassed by Subway legal department.

Subway is suing franchisees!

In order to derail attempts by franchisees to maintain some form of control over their business DAI (Doctor's Associates Inc.) under the direction of Fred Deluca and Peter Buck have taken a very agressive action of going after some of the franchisee's board members. Bear in mind that the board members were all democratically elected by franchisees to represent them.

Here is a copy of an email sent to all franchisees by NAASF (North American Association of Subway Franchisees). To get more detail of event leading up to this you should research the archives in this Blog.

"We want to update everyone in the Subway® family about a troubling development in the dispute between DAI and the Franchisee community involving DAI's attempt to grab control over SFAFT, and to take away many of your rights under your Franchise Agreements.

As you are aware DAI has refused to negotiate a mutually acceptable solution with NAASF. This very fact prompted NAASF to file the current lawsuit against DAI in the Connecticut state court. Rather than responding to NAASF's complaint in the Connecticut state court on the merits, DAI instead chose to file 11 new lawsuits in Federal Court against a select group of NAASF's volunteer Directors. NAASF filed the complaint on behalf of you in good faith and in a manner designed to obtain a prompt, inexpensive and fair resolution. It appears that DAI is trying to avoid having the Connecticut courts review DAI's actions on their merits and is instead waging a very personal war of attrition against selected individual Franchisees.

DAI's litigation tactic is a classic "divide and conquer" strategy. It is designed to maximize the cost to NAASF and to you in seeking a fair and prompt resolution on the merits of the issues that DAI created with its new contract (these costs are trivial to DAI and its owners’ economic resources).

It appears that DAI's strategy is to drain NAASF financially. If DAI is successful, DAI won't have to defend itself against NAASF's forthright challenge to DAI's actions against SFAFT and against your rights as Subway Franchisees. We are also aware of other steps that DAI has taken in the last few weeks designed to eliminate NAASF, and to interfere with or defeat our ability to represent the Franchisees. DAI is interfering with NAASF's ability to represent your fundamental rights and interests as members of the Subway system, and to provide independent information, training, conferences and other services to you - the NAASF member!

We ask that, now more than ever, you continue to support NAASF with your ideas, your volunteer effort and your contributions to the NAASF Legal Support Fund. Every dollar helps, especially when our opponent has such deep pockets. You can do so online at http://rs6.net/tn.jsp?t=vf4bvxbab.0.ovrmvxbab.7w548obab.581&ts=S0197&p=http%3A%2F%2Fwww.naasf.org%2Fpage.cfm%3Fpageid%3D1367. We also invite your (constructive) criticism. You can reach the elected leadership of NAASF at mailto:info@naasf.org

We need to BE united to STAY united. We can restore the economic vitality of Subway if we do that. If we do not stand united, we are allowing ourselves to be bullied and allowing our contract rights to be taken from us."

Best of luck in fighting a corporation with a virtual botomless well of funds and access to any lawyer.

Take Care,

Egil

The deed is done - I sold my last Subway!

I started with my first store about 15 years ago. At one time I owned five stores, six if you include a satellite store.

I had hoped to build ten stores but along the way Subway changed. It went from a franchise which worked hand in hand with the franchise to one which became confrontational and control oriented. Rather than work with store owners to develop and improve the system it decided that this could best be done at head office.

Doctors Associates Inc. (Subway) took a new path. Why I'm not sure but I suspect it was to try and control as much of the market as possible. One of the objectives was to crowd out any competition by placing a store on every possible location. As this was not advantageous to an owner, due to reduced store sales (cannibalization of customers), there was some objection to crowding the market by over saturating locations. Various models were proposed by DAI to achieve a certain level of market penetration. Cents of sales per capita were used as a measuring stick as were population densities. The Development agents were 'encouraged' to develop their market under threat of termination.

The people most in objection to the New Order at Subway were the old guard of franchiser. There was a queue of people wanting to get into the system but they, Subway, were being hampered in the growth by objections and legal challenges made by existing owners and Development Agents with a vested interest due to ownership of stores or with associates with Subway stores.

So, how best to reinvent the System? Easy said but not so easy done. Get rid of the old guard and replace them with new, forward thinking, owners. To achieve this a new policing system was invented in the form of the monthly inspection report. In this report one DAI employee is empowered to terminate existing franchise agreements with impunity. No appeal is possible and if you do not shape up a letter will be sent by the legal department that your franchise is terminated. Your option at this point is to go to a dysfunctional arbitration with all the 'evidence' of wrongdoing compiled by DAI as evidence. You have nothing but your word and that of your staff and customers.

As this was not enough, a surprising number of owners stuck with the system, a new and improved franchise agreement was developed. Franchise fees are now going up from 8% to 10% over time, severe penalties are now added to any audit errors and further severe penalties are now included with a poor inspection report. This is in addition to the continued ability of DAI to terminate a franchise agreement. DAI also added e new twist to the equation. Now DAI is planning on taking over the Subway Franchise Trust Fund which is administrated by the franchiser at present through an elected board. DAI want control of the advertising funds so that it may utilize these funds for its own ends.


It is finally so bad that the various franchise organizations, FAF and NAASF, have taken legal action against DAI and Fred Deluca. Where this will lead is open to question. I suspect that DAI is within its legal right to do as it has done. It is unfortunate that the owners, the franchise, do not take stronger action. Wasting time in court is just what DAI wants. They have the time, money and resources to continue this battle until fatigue sets in with the franchise community.

My advice: Get Out While You Can.

I have been receiving a few emails asking why I have not posted in awhile. The fact of the matter is that I am in the process of selling my last Subway restaurant.

After the sale is complete I will post again, telling a story which may be hard for some to believe.

Check back late July.

Take care.