Subway Implements Brutal New Contracts for Franchisees A new bombshell report from the New York Post says that stores are only permitted to shut down via an "act of God."

By Emily Rella

entrepreneur daily
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It's not uncommon for certain restaurants and fast-food joints to have somewhat strict policies about what is and isn't considered due reason to shut down for the day — after all, the food industry relies on money coming in from customers.

For chains that allow restaurant locations to be franchised, a harsher set of rules can be applied in order to create consistency between all locations and storefronts.

Subway seems to have taken a tough turn in a new set of rules for franchisees that was released this week that has many franchise owners up in arms, to say the least.

Related: New Licensing Agreement Paves Road for Subway-Branded Products

A new bombshell report from the New York Post says that stores are only permitted to shut down via an "act of God" (which is meant to cover the most extreme natural disasters like a hurricane, tornado or earthquake.)

This would exclude stores from having permission to close in case of any other kind of inclement weather, emergency or understaffing situation.

"When I was a franchisee, my Subway was just outside the 9/11 frozen zone," former franchisee and current attorney Paul Steinberg told the Post. "Since terrorism would not be an act of God under NY law, if this new franchise agreement had been in effect, Subway could have taken my store."

Related: Subway will implement these changes to avoid more closures

If franchisees choose not to sign the new agreement, they will be subject to a 10% royalty fee which they must pay to Subway corporate.

Subway franchisees currently pay an 8% royalty fee, which is already considered high in the realm of the fast food industry.

Other additions to the new contracts include not being able to speak negatively about Subway in any manner and giving corporate permission to control prices and hours.

There are currently around 22,500 Subway locations in the United States and unlike most chains, every single one of those restaurants is franchised.

The chain reportedly closed over 2,000 locations last year due to the pandemic.

Related: Why This Oakland Cop Became a Subway Franchisee

Emily Rella

Entrepreneur Staff

Senior News Writer

Emily Rella is a Senior News Writer at Entrepreneur.com. Previously, she was an editor at Verizon Media. Her coverage spans features, business, lifestyle, tech, entertainment, and lifestyle. She is a 2015 graduate of Boston College and a Ridgefield, CT native. Find her on Twitter at @EmilyKRella.

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