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
picture alliance | Getty Images

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 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.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics


Prioritize DEI and Crush Your ROI Goals — How Inclusive and Authentic Marketing Drive Business Growth

There's one business hack that's winning, though it's often overlooked: Diversity, equity and inclusion is good for business — and just plain good.


Jon Taffer's 10% Rule Is the Productivity Hack That Could Change Your Life

The "Bar Rescue" superhost is back with a new season and a new crop of hospitality businesses in desperate need of tough love.

Science & Technology

AI May Not Take Your Job, But Someone Using AI Likely Will — Here's Why.

Artificial intelligence is becoming ubiquitous across marketing and public relations agencies. These tools can increase productivity, but there are risks to consider.

Business News

Another Taylor Swift-Related Job Opportunity Just Opened Up — Here's How to Qualify

As the superstar embarks on the next leg of The Eras Tour, a UK-based museum is hiring a Taylor Swift advisor.

Starting a Business

This Black Founder Was Denied a Business Loan and Set Out to Prove the 'Gatekeepers' Wrong. He's Made More Than $500,000 So Far — But It's Just the Beginning.

Rob Gooljar, founder of IRIS blossom, started an Instagram account to share his love of floral arrangements — then the requests started rolling in.

Growing a Business

9 Hidden Reasons Your Customers Will Leave You

Understanding why customers are leaving your business takes attention, not assumptions. Read on for proven ways to catch issues early and keep more clients around for the long run.