Franchisees’ commercial conflicts

The Subway chain of fast food restaurants is one of the latest high-profile franchise companies to have a conflict between the company and franchisees. Last November, a foot long sandwich promotion was announced by company management that caused many franchisees of the sandwich chain to complain.

The Price of Promotion

The franchisees stated that the low price of the promoted sandwiches would make it impossible to maintain sustainable margins for their locations. Franchise owners pay Subway to develop the menu, marketing, store plans and supply logistics. In turn, the owners pay a fee to corporate for these services.

Conflicting Interests

The conflict centers around the franchisee’s owners who are focused on their local profitability, and the corporation’s executives who want to grow market share across the brand as a whole. While Subway executives state that Subway’s brand will become stronger, many franchisees claim the truth is quite different.

Decreasing Outlets

The Business Insider reported that in reality, Subway’s network of sandwich stores declined by 909 outlets in 2017 and that almost a third of franchises are not operating at a profit. It remains to be seen if franchisees will organize and pursue litigation against corporate management, as they have previously done in 2006 over control of the franchise’s advertising budget.

Whether you want to end your relationship with your franchise management company, settle a dispute or need to protect your market share in a territory disagreement, commercial litigation can be the optimal venue to restore fair conditions to your business arrangements.