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Franchisees Run Better Chains

Keith Miller, Subway multiunit franchisee

SACRAMENTO — Franchisee Keith Miller argues that franchise chains can outperform the competition when they put owner-operators in charge of national functions like marketing and the supply chain.  Want proof? Then look no further than America’s largest franchise chain by number of stores – Subway.

Les Winograd, spokesperson for Doctor’s Associates Inc, the franchisor of Subway sandwich shops, says: “We would not be where we are today if it wasn’t for the hard work and dedication of Subway franchisees.” He adds, “The ideas that they bring are welcome contributions that have gone a long way towards making the Subway chain a vital and successful brand.”

Likewise, Miller praises the wisdom of his franchisor. But he also tells a fascinating story about how Subway franchisees aren’t just listened to. They don't just come up with interesting sandwiches concoctions from the front sandwich lines. Subway franchisees have been put in charge of supply chain purchasing and until recently national advertising.

During tough economic times, the $5 footlong was invented, supplied, marketed and retailed nationally by franchisees.

The results?

In 2009, Bloomberg reported, “the $3.8 billion in sales generated nationwide by the $5 footlong alone placed it among the top 10 fast-food brands in the U.S. for the year ended in August, according to NPD Group. That puts the $5 menu's success just a notch behind KFC [led by another franchisee marketing cooperative]…” During the recession, one of its competitors, Quiznos, made misstep after misstep. Quiznos used a traditional top-down management approach of franchisor executives telling store owner-operators what to do. Thousands took it to court for alleged hidden kick-backs that benefited the franchisor but pumped up store costs for franchisees. Then there was its special million sub giveaway (free subs). That promotional cost Quiznos franchisees roughly $2.25 on a normal $5.29 six-inch sandwich. At the same time, Subway franchisees not only found areas to flatten costs with their $5 footlong promotional but they also made $1.20 per sandwich while increasing sales.

The much smaller Quiznos chain shrank by over a thousand units. Subway grew. It has added over 10,000 locations in the past six years.

A Subway franchisee for 24 years, Keith Miller has volunteered considerable effort and his own money to lead important events to help the franchise industry. He is the former chairman of the North American Association of Subway Franchisees (the independent association for Subway franchisees), treasurer of the Coalition of Franchisee Associations, vice-chairman of the International Franchise Association’s franchise relations committee and a member of the drafting committee of the Universal Bill of Rights for Franchisees.

In this 9:55 minute interview, Miller speaks with Blue MauMau about how both a franchisee purchasing and an advertising cooperative helped put Subway in front.

Click on the arrow next to the speaker icon to hear the interview.

In this podcast series, Blue MauMau spends five to ten minutes on key issues facing the franchise industry with top leaders and future game changers. Each interviewee discusses one issue.

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