Subway franchisees fret as corporation says it won’t offer new break on fees
Subway franchisees whose business has been crippled by the coronavirus got a break two weeks ago on the fees they pay to their corporate parent — and now the break is over.
The fast-food giant on Monday abruptly announced that it will stop forgiving half of the 8 percent royalty fees it collects from franchisees for its 23,500 North American restaurants, instead revealing plans to defer and collect the fees at a later date, sources told The Post.
The about-face from Subway’s headquarters in Milford, Conn., miffed franchisees, feeding the perception among some that its new chief executive, John Chidsey, a former CEO at Burger King, isn’t looking out for the little guy.
“To say I was disappointed in [the restored fees] would be an understatement,” Steve Workman, vice chair of the North American Association of Subway Franchisees advocacy group, said in a blog post this week, a screen grab of which was reviewed by The Post.
“They only see the world from the singular paradigm of ‘me’ with not a thought of ‘we,’ ” Workman continued. “That is not just sad but will be catastrophic to the very system they purport to be looking out for.”
A Subway spokeswoman said, “We recognize the significant impact and strain this event will have on our network of franchise-owned businesses,” referring to the corona shutdown which, according to some franchisees, is reducing revenue at many locations by more than half as others shutter altogether.
“We are working around the clock to monitor, evaluate and respond in real time, and do what we can to support our global ecosystem as we face this unprecedented situation together.”
Subway is reportedly in negotiations with landlords for rent reductions, declaring the coronavirus a “force majeure” that has preventing it from meeting its obligations. Still, experts say that could prove difficult unless its contracts specifically address pandemics.
Subway CEO Chidsey, along with top executives from other big fast-food chains, had a call recently with President Trump and reportedly committed to keeping drive-through and delivery options for their customers in exchange for access to government funds.
Franchisees are now eligible to apply for loans that the government will consider grants to the extent that borrowers continue their full spending on payroll. Applications are expected to be distributed to lenders this week with the first checks being cut in about three weeks.
“I think this is a program where the government is trying to prop everybody up,” said franchisee lawyer Ron Gardner.
Still, some Subway franchisees remain skeptical that a government bailout will solve their problems.
“My sales are plummeting,” one franchisee wrote on a Subway blog. “Do I place one last food order … or do I give my employees one last paycheck? I’ve decided to give my employees one last paycheck.”
“All of us borrowed hundreds of thousands of dollars to live the American Dream. To work for ourselves. To be our own boss. And this is what it has come to,” the franchisee added. “I’ll be damned if I’m going to take out another loan to buy me maybe three more months.”
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