The fast-food industry is a highly competitive one, and Subway has been struggling to keep its share of the market in recent years. To that end, it called together its North American franchisees for a meeting last month to discuss reasons for the decline in sales and profits as well as strategies to bring the company out of the slump.
The company, which was purchased by a private equity firm this spring, has seen declines of as much as 10% in sales over the past year, with some stores barely breaking even. Some franchisees have expressed concern about the company’s promotional activities, coupons and deep discounts, which they say haven’t yielded the anticipated growth in sales but have eroded their profits.
Despite reports by some media outlets about the urgent nature of the meeting, a spokesperson for the sandwich chain said, “There is no emergency virtual conference. We consistently and proactively communicate with our franchisees to share business updates and plans.”
When a new company acquires a franchisor, it can result in a change in direction that may hurt franchisees’ bottom line. Of course, any smart franchisor will see that losses across multiple areas (or even stores within one area) reflect a larger problem that’s not the fault of any individual franchisee.
What can franchisees do to address the problem?
Nonetheless, when franchisees see a problem with the direction in which their franchisor is going, they can and should take some important steps. For example:
- Make sure they understand the rationale behind the new direction.
- Collect evidence supporting the negative effect that the new direction is having.
- Present their concerns clearly and professionally.
A direction or strategy that’s bad for franchisees is bad for the franchisor. They should have common goals.
If you’re a franchisee who’s suffering financially because of a change in your franchisor’s strategy, it’s worthwhile to determine what your options are. For example, they may or may not be in breach of your franchise agreement. If you and other franchisees can get together to seek a resolution, that can be considerably more effective than going it alone. A good first step is to get experienced legal guidance.
NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.