Many Subway franchisees are rebelling against the company's promotion of selling a footlong sub for $6.99 and risk losing business in a bitter skirmish over the company's change of soda supplier, The Washington Post has learned.
Parent company Roark's, which bought the family-owned chain Subway in April, plans to switch its long-term agreement with Coca-Cola to Pepsi at the start of the year and had set a Friday deadline for franchisees to sign new 10-year agreements, the people said.
If no agreement is reached, “there is a risk that we will not be able to serve beverages in 2025, which could result in a default under our franchise agreement,” according to a recent email sent by Subway Franchise Support Services and reviewed by The Washington Post.
But the franchise group, which represents about half of Subway's 20,000 North American restaurants, has been hesitant to urge members to sign the agreement because financial details are being kept secret, several owners told The Washington Post.
“The continued requirement that we sign this agreement without full disclosure, including detailed costs of products and services, is completely unacceptable,” Bill Mathis, president of the North American Association of Subway Franchisees, wrote in a recent private blog post to members that was reviewed by The Washington Post.
“This lack of transparency is tantamount to asking us to sign a blank cheque, and no sensible business owner would agree to that.”
Roark, which also owns Dunkin' Brands and Arby's, uses Pepsi at all its other chains.
The owners suspect that Roark is receiving price discounts for bulk purchases and doesn't want franchisees to know the percentage of those discounts and possibly the kickbacks the company will receive, according to people familiar with the matter.
Subway has shared details of its existing 20-year contract with Coca-Cola, under which franchisees own Coca-Cola equipment.
Lawyers for Roark, Subway and NAASF did not return calls or declined to comment.
As The Washington Post previously reported, Mattis advised group members to ignore the $6.99 promotion.
The promotion, which is set to run through Sept. 8, was announced to franchisees during a conference call on Aug. 15, which one franchisee called an “emergency” call because it was scheduled just a week in advance, The Washington Post reported.
Aside from the soda wars and rebellions over footlong promotions, NAASF is also calling on Subway CEO John Chidosie to eliminate meat slicers, which were mandated in all stores last year.
“We are extremely concerned by the injuries sustained,” Mattis wrote in an Aug. 14 letter to Chidosie.
Mathis did not provide details about how many people were injured, but he slammed Subway for “failed to provide data showing that the slicers have boosted profits, sales or customer traffic” since it introduced the machines to increase competition from upstart Jersey Mike's.
Subway says slicing its meat will save it $25 million a year by eliminating the need to buy pre-cut slices, savings it will pass on to restaurant operators, the people said.
Sources told The Post that the slicer incident was one of several complaints leveled at Chidosie at the franchise group's annual general meeting on Wednesday at SeaSpice Brasserie & Lounge in Miami.
Chidosie, who was not in attendance, has infuriated franchisees since taking over as CEO in November 2019 by ordering not only sandwich price cuts but also expensive renovations despite razor-thin profit margins.
Another point of contention is the relatively new FreshLock lid, which is used to cover meat.
Mathis said the lid could deter customers who want “full transparency.”
“For a company that has long insisted on making food fresh in front of its customers, it is a complete 180-degree turn to now 'hide' food,” Mathis wrote in a letter to Chidosie on behalf of all NAASF board members.
