Nancy Luna/Insider
Subway franchisees have long rebelled against the chain's constant string of footlong deals and cheap sub promotions.
Some Subway operators have chosen not to honor deals, frustrating customers.
But soon, all franchisees must "honor all digital programs and promotions," according to a leaked internal memo sent to franchisees in September and viewed by Business Insider. The policy change comes as the chain hopes to complete its sale to private equity firm Roark Capital and as the sale has reportedly come under scrutiny from the FTC.
"Effective Dec. 28, 2023, all restaurants will be required to honor all digital programs and promotions, including loyalty rewards and digital discounts," the memo says. "In addition, loyalty incentive programs designed to attract new loyalty members are mandatory and will not be reimbursed by Subway."
The chain told Business Insider that "dedicated digital promotions generate a lift in digital sales for our franchisees."
"Healthy business growth is key to helping increase franchisee profitability," Subway told Business Insider in a statement. "The majority of digital transactions represent incremental sales for many of our franchisees, and the Subway app continues to be one of our strongest growth channels."
Subway app
The Subway app currently shows a deal for 50 % off a footlong sandwich when you buy one at full price. In the past, franchisees have been able to opt out of accepting these types of digital promotions.
A Subway franchisee from California questioned the legality of forcing operators to accept low-margin deals via the app. The operator asked to remain anonymous as franchisees are discouraged from talking to the media. The operator's identity is known to Business Insider.
"Isn't it considered price fixing to force people to take special offers," the franchisee said. "In the past, we've always had people opt out. I don't understand how they can do this."
The California franchisee said they honor digital deals to maintain good customer relationships.
"I don't opt out because I don't like to piss off the customers, but I know plenty of franchisees who have," the franchisee said.
Subway told the industry trade publication Restaurant Business that 90% of franchisees accept digital coupons.
The new app policy comes as Subway's $10 billion sale to Roark, which owns Arby's and Jimmy John's, is being investigated by the Federal Trade Commission, according to Politico.
"The Federal Trade Commission is investigating if the $10 billion purchase of Subway creates a sandwich shop monopoly with Jimmy John's and Arby's," the publication reported in late November, citing sources. "The government is focused in part on whether the addition of Subway gives Roark too much control of a lucrative segment of the fast food industry."
An FTC spokesperson declined to comment. Subway didn't respond to a request for comment on the alleged probe.
Subway's has spent the past few years shuttering thousands and trimming corporate staff. It has struggled with relevancy and has faced criticism over its menu, including a suit that cast doubt on the legitimacy of its tuna. Since 2021, the chain has overhauled its menu, adding new ingredients and deli-sliced subs to boost sales.
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