Subway soda war forces owners to choose Pepsi over Coke or risk losing franchises
Subway franchise owners – many of whom are in revolt over the chain’s $6.99 footlong sub promotion – face the risk of losing their businesses in a heated skirmish over the company’s change in soda suppliers, The Post has learned.
Parent company Roark, which bought the family-owned chain in April, plans to switch from Subway’s long-time contract with Coca-Cola to Pepsi at the start of the year and had given franchise owners a Friday deadline to sign the new 10-year pact, sources said.
Those that fail to agree risk the ability to “serve beverages in 2025, which may result in the default of your franchisee agreement,” according to an email recently sent by Subway Franchise Support Services that was viewed by The Post.
But a Subway franchise group that represents about half of its 20,000 North American restaurants has balked at urging members to sign the deal because the financial details have been kept under wraps, several owners told The Post.
“The continued insistence that we sign this agreement without full disclosure…including detailed costs of products and service fees, is wholly unacceptable,” Bill Mathis, chair of the North American Association of Subway Franchisees (NAASF), wrote in a recent private blog sent to members that was seen by The Post.
“This lack of transparency is tantamount to asking us to sign a blank check, which no reasonable business owner would agree to.”
Roark – which also owns Dunkin’ Brands and Arby’s – uses Pepsi at all of its other chains.
The owners suspect Roark gets a bulk price discount and doesn’t want its franchisees knowing the rate, and perhaps any rebates it might collect for themselves, sources said.
Subway had shared the details of its prior 20-year contract with Coke and the franchisees own the Coke equipment.
Robert Zarco, an attorney for NAASF has advised members to respond to Subway when they get such “frivolous letters” by telling them that “I dare you to terminate me.”
“There is no possible way any court can enforce an agreement that specifically sets forth that the beverage supply agreement which they are not showing us supersedes the participation agreement they want us to sign,” he told The Post.
Roark, and Subway did not return calls for comment.
Mathis has also advised the group’s members to ignore the $6.99 promotion, as The Post previously reported.
The promo, slated to run through Sept. 8, was revealed to franchisees on an Aug. 15 conference call that one franchisee dubbed an “emergency” meeting, as it was organized just a week earlier, The Post reported.
Aside from the soda wars and rebellion over the footlong promo, NAASF is also demanding that Subway CEO John Chidsey scrap the meat slicers that were mandated for all stores last year.
“Injuries are taking place, which is of great concern,” Mathis wrote in a letter sent to Chidsey on Aug. 14.
Mathis, who did not provide further details about how many have been hurt, also railed that Subway “has not provided data showing that slicers are driving profits, sales, and customer counts” since they were installed to better compete against upstart Jersey Mike’s.
Subway said that slicing the meats is saving the company $25 million a year because it doesn’t have to buy pre-cut slices and those savings are passed on to store operators, sources said.
The slicers were among several grievances directed at Chidsey during the franchise group annual meeting Wednesday at the Seaspice Brasserie and Lounge in Miami, sources told The Post.
Chidsey was not in attendance. He has infuriated franchisees since taking over as CEO in November 2019, not only with orders to discount sandwiches but directives to perform costly renovations despite razor-thin margins.
Another contentious issue has been the relatively new Fresh Loc Lids used to cover the meats.
Mathis said the lids could dissuade customers who demand “total transparency.”
“For a company that spent many years talking about having fresh food made in front of the customer, it’s a 180-degree shift to now ‘hide’ our food,” Mathis wrote in his letter to Chidsey speaking for all the NAASF directors.
