New Subway CEO draws criticism from franchise owners over price cuts
By: Josh K.
Fast-food giant Subway is planning to slash prices early next year — an aggressive gambit under a controversial new chief executive that threatens to squeeze the company’s struggling franchisees, The Post has learned.
Deals slated for January include cutting the price of a six-inch “Oven Roasted Chicken” sandwich to $2.99 from $4.25. A similarly priced, six-inch “Veggie Delite” sandwich with cheese will likewise get marked down to $2.99.
A total of a half-dozen popular sandwiches are expected to get the discounts, according to sources.
Subway’s ad agency revealed the looming sandwich discounts last month in a series of private, regional conference calls — and quickly drew complaints from franchisees, insiders said.
“Stop the discounting and quit giving away the little profits we have,” Deidre Sharp of Belding, Michigan, wrote on the North American Association of Subway Franchisees Open Forum, according to a screenshot reviewed by The Post.
Resistance to the price-cutting plan is mounting as former Burger King CEO John Chidsey was named as Subway’s new CEO on Nov. 18. Last week, Chidsey sent a video introducing himself that failed to address growing concerns among Subway franchisees, sources said.
In particular, store operators fret that Chidsey’s four-year stint at the helm of Burger King ended amid slumping sales, shrinking market share and a legal battle over a $1 double cheeseburger promotion. Chidsey launched the discount in October 2009 despite store operators having voted twice to reject it.
A lawsuit from franchisees over the $1 discount was settled a year later, when Brazil-based private equity giant 3G Capital bought Burger King and replaced Chidsey as CEO.
“I can only listen to it with half an ear because it is only half a story,” a Subway franchisee with multiple restaurants said of Chidsey’s video blast. “The most positive comment I’ve heard about Chidsey is that maybe he’s learned from his failures.”
When it acquired Burger King, 3G Capital believed the relationship between the chain and its franchisees had gotten so bad that it fired every single executive that worked with franchisees, a senior source who worked at Burger King at the time said, adding that relations are now much better.
“They felt they had to start from scratch,” according to the source.
Burger King’s market share among burger joints fell from 14.3 percent in 2006, when Chidsey became CEO, to 13.3 percent in 2009, shortly before he left, according to data service Technomic.
Reached by phone on Friday, Chidsey declined to comment. A Subway spokeswoman didn’t return calls.
Unlike other big fast-food chains including McDonald’s and Burger King, Subway doesn’t own any of its restaurants and relies solely on the fees it charges franchisees. Specifically, Subway collects an eight percent annual commission on revenues, regardless of whether the restaurants themselves make profits.
The model effectively pits Subway’s interests against those of franchisees, according to some store operators, who fear the new price cuts will make it even harder to turn a profit.
Subway franchisees have shown a willingness in the past to fight back against unwanted sandwich promotions.
In 2017, Subway franchisees started a petition drive to protest a $4.99 foot-long promotion. The deal was short-lived, and six months later Subway CEO Suzanne Greco announced her retirement.
The latest conflict is brewing as Subway is struggling to reverse a multiyear decline. It operates about 24,000 US restaurants — down from more than 27,000 US Subways when the chain hit its 2015 peak. Subway shrank by more than 700 stores this year, according to research firm ChainXY Solutions.
