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Subway's franchisee association signals a more aggressive stance

The North American Association of Subway Franchisees said it has hired Robert Zarco, signaling a different tack in its relationship with the franchisor.
Subway
Subway franchisees have hired a high-powered attorney. | Photo: Shutterstock.

The North American Association of Subway Franchisees (NAASF), an independent group of the sandwich chain’s operators, on Thursday said it has hired Robert Zarco to represent the association as its general counsel.

Such a move could be viewed as a ramp-up in the association’s aggressiveness in its relationship with Subway.

Zarco, who is with the Miami-based firm Zarco Einhorn Salkowski, represents several franchisee associations, including the National Owners Association, a group of McDonald’s franchisees.

He is not typically known for his passivity: Just last week, he filed a lawsuit in North Carolina against Bojangles on behalf of that chain’s franchisee association.

Yet in a statement, Zarco struck a conciliatory tone, saying the goal is to “promote congeniality and comradery among the membership as well as with the franchisor.”

“We recognize the tremendous value NAASF provides to its membership and we are eager to aid NAASF in its admirable mission of supporting its talented membership in creating a mutually beneficial relationship with the franchisor,” Zarco said.

That said, relations between NAASF and Subway have been at a nadir of late. Subway under current management has been concerned that the association promotes an antagonistic relationship with the brand. It also believes that the association represents only a small percentage of the franchisee base, though NAASF said the percentage is 35% to 50%.

NAASF, on the other hand, has been frustrated with what it believes is a deliberate attempt to ignore the group. And franchisees in general have been frustrated with some of the brand’s moves of late, such as a requirement that each of them accept digital coupons. It is also pushing franchisees to remodel locations.

Franchise relations is important for a brand like Subway. Franchisees operate all the company’s 20,000 U.S. locations, so their satisfaction with the state of the brand goes a long way toward determining its strength. They’re particularly important given the pending sale of the brand to the private-equity firm Roark Capital.

Subway franchisees have closed 7,000 locations since 2015, as high costs coupled with their low unit volumes led to large numbers of closures. The brand in recent years has taken several steps to build unit volumes, with an upgraded menu and marketing. Its new snack lineup, meanwhile, appears to be generating strong consumer demand.

“NAASF and the Zarco Einhorn Salkowski firm recognize that sustained profitability arises primarily from franchisees acting in a unified manner and working in close collaboration with the franchisor to resolve systemic issues without having to initially institute dispute resolution measures,” NAASF and Zarco said in a release.

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