Letter from a Forlorn Subway Franchisee

Editor's note: A Subway franchisee writes that when buying the franchise, the encroachment clause of their franchise agreement was taken with "a grain of salt." Now there is remorse. They have agreed that the following content can be published on Blue MauMau. Such letters from aggrieved owners in various franchise systems will be published under this column, Forlorn Franchisee from time to time. The following letter was written to Mr. Bob Purvin, Chair of the American Association of Franchisees and Dealers.

Dear Mr. Purvin,

I hope you don't mind my contacting you, I know it must seem bold, but you seemed like the person with whom I needed to speak.  I am a multi-unit Subway franchisee, writing to you with hope that you will kindly offer me some common insight.  I have been in the dark.  I'm certain I'm not the first who has been at your door step.  

As you might guess, I am dealing with gross encroachment.  I have successfully fought off three previous attempts, but have recently lost the battle over a proposed Walmart site.  I will spare you the rest of the particulars since, the fact is, I am aware that I signed an agreement, and thus understand that, on my single issue at least, I appear to have no further recourse.

I am embarrassed as I realize, for perhaps the first time, exactly what my franchise agreement is all about.  I thought it was about me going into business.  I understood, of course, when I signed the Franchise Agreement that there was the possibility of competition from within, but I was not deterred by it.  Probably the biggest reason is that I took the statement with "a grain of salt."  I had faith in my practices, and the term "compete" did not connote negativity for me.  Further, despite the warning, the likelihood of DAI [Doctor's Associates Inc., which is the corporate name of the Subway sandwich chain] seeking to compete with me seemed almost absurd. Logic dictated that DAI needed my business to succeed as much as I did—so why would they compete with me? 

The relevant wording in the contract seemed incidental--a formality.  It seemed no more than a legal disclaimer, much like that which is printed on cigarette packs warning the risk of cancer.  Perhaps the single most reason I was not deterred, however, was an assumption of good faith on my part.  There may even have been some unconscious, naive reliance on my part that somewhere there must exist a regulatory body that would protect from one party grossly disadvantaging another. 

What I've realized is that what I initially regarded as "remote possibility" was in fact inevitable and common practice within the Subway community--so much so, that the Franchise Agreement, in this case, would be more appropriately titled the "Encroachment Agreement," and we, the "franchisees" more aptly named the "encroachers."  It seems to me the both the circular and the Franchise Agreement, as presently worded, are deceptive in that neither appropriately emphasizes that the real risk is, not in the "possibility" but rather, in the "inevitability" that DAI must compete with its franchisees because its first goal is to expand prolifically.  While we believed we were entering into business, and a chance of success for ourselves, we unknowingly agreed to forego our own interests, and instead bind ourselves to assist DAI grow at our expense.  

The Franchise agreement points out risk of competition, even from within, but it does not point out the certainty of such relative to  its goal of indefinite, aggressive growth.  In doing so, DAI has, in my opinion deceived, not some, but all of us.  From the outside, one would look at Subway's growth over the years as impressive, and as a sign of success--certainly a sound investment.  It is not until one is on the inside, until after one is invested, however, that one can truly grasp the gross manner in which Subway has multiplied and intends to continue doing so. 

Because of DAI's lack of complete disclosure, we have unwittingly agreed to forfeit our success, and to become the "encroachers." Without knowing, we have invested in DAI's development, rather than, and at the expense of, our own.  Many of us have invested our life savings in doing so.  All of us believed we had a chance at our own success, or none of us would have signed away our savings.    

At the risk of sounding ridiculously naive at this point, is there nothing criminal in this?  Is there any way to rectify this? What can we do and where do we begin?

Perhaps I'm reiterating what so many before me have already, and perhaps I truly am naive.  Nonetheless, I hope you will be so kind as to shed some light.  I understand you may be too busy to respond in which case I wish you success, and I thank you for your endeavors.  I must ask that this email be kept confidential, however, as I am no match for Fred Deluca [co-founder and president of the Subway sandwich chain].  I'm sure you understand.  I purchased your book online tonight, and will anxiously await its arrival.  I hope it has some of the answers I seek.

Best regards,
Forlorn Franchisee