Franchisees Sue Subway Sandwich Chain
Franchisees sued the Subway sandwich chain Monday, claiming that a new franchise agreement will threaten control of a $500 million advertising trust fund.
The Subway Franchisee Advertising Fund Trust, acting on behalf of more than 10,000 franchisees worldwide, said the lawsuit, which was filed in Ansonia-Milford Superior Court, seeks to prevent Subway from breaking terms of a trust agreement between the two parties. The lawsuit names Doctor’s Associates Inc., the franchisor of Subway restaurants.
At issue is a fund controlled by franchisees to advertise Subway sandwiches and other products.
In a statement, the advertising trust fund praised Subway founder Fred DeLuca for initially approving the trust fund arrangement. But it criticized Subway officials for what it says is a change in policy.
“As an entrepreneur himself, Fred recognized the importance of empowering the small-business owners of Subway franchises with control over advertising and marketing programs,” the trust said in a statement. “Unfortunately, for reasons that are not clear, Fred has now decided he wants to change this proven formula and unilaterally assume control — 16 years after his original agreement with franchisees. At a time of record sales and growth, we do not know why Fred would want to do this now.”
Kevin Kane, a spokesman for Subway, would not comment on the specifics of the dispute.
“We are still hopeful we can come to an amicable resolution,” he said.
The advertising trust says a new franchise agreement introduced by DeLuca April 1 allows Subway “at any time it chooses” to redirect franchisee advertising contributions away from the trust to a separate entity established by Subway.
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