- Report: #315931
Report - Rebuttal - Arbitrate
Complaint Review: Doctors Associates - Subway Restaurants
Doctors Associates - Subway Restaurants325 Bic Drive Milford, Connecticut U.S.A.
Doctors Associates - Subway Restaurants CEO Fred DeLuca Subway Preforming Predatory Royalty Theft Audits, Boosting Compliance Violations, Suspected of Spying, Seizing Stores Without Just Cause, Preying On Owners! Milford Connecticut
*REBUTTAL Owner of company: Agree with everything exposing Subway here
*REBUTTAL Individual responds: Subway's dirty laundry
*Author of original report: SSDD
*General Comment: I have been there. We were lucky
*Consumer Comment: documentary
*Consumer Comment: documentary
*Consumer Comment: worst investment you would ever do.please don't
*REBUTTAL Owner of company: Depressed Subway Owner
*General Comment: Looking for contacts
*General Comment: Subway's Oppressive and Illegal Tactics
*UPDATE EX-employee responds: Yes it's true, I was a franchisee for this chain for many years
*UPDATE EX-employee responds: Ripped off by Subway in Atlanta
*UPDATE Employee: An agreeing franchisee who has been damaged beyond repair by Doctor's Associates (DAI)
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Read Fortune magazine archives on how this chain led by president Fred DeLuca (nicknamed BendoveritsFred) has caused a record number of unhappy franchisees, defrauded landlords and violated laws. Discover why after a six year study, U.S. House of Representatives' Dean Sagar concluded: "Subway is the biggest problem in franchising and emerges as one of the key examples of every abuse you can think of." Says Cliff Marshall, a franchise consultant for more than 30 years: 'If anyone in my family ever asked whether they should buy a Subway, I would say absolutely not, no way. A Subway franchisee who asked to remain anonymous for fear of retaliation said the system "is a total mess." Go here learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm
Learn how DeLuca violated Connecticut's Unfair Trade Practices Act by pressuring independent SFAF board members to block owners he didn't like from running for office. Apparently he has no respect for legal statutes or fair play. Go here to learn more: http://franchisepundit.com/index.php/2005/05/28/what-to-learn-from-this-subway-lawsuit/
Read how DeLuca's franchise agreement forces owners with a legitimate grievance to submit to arbitration where there is no jury, few rules, and the outcome is binding. Arbitration companies compete ferociously for Subway's business and DeLuca uses that leverage to stack the deck in his favor. Florida attorney Keith Kanouse says, "I've seen over 300 franchise agreements, and Subway's is the worst." Go here to learn more: http://franchisepundit.com/index.php/2005/07/05/subways-deluca-loses-battle-with-franchisees/
In a perfect example of poetic justice, the Wall Street Journal recently announced that DeLuca lost a NASD arbitration claim, in which he alleged the UBS caused him $193 million in damages Not only did the DeLuca trusts fail to recover any of their losses, they also were ordered to pay $50,000 to reimburse UBS for document-production costs. Some owners were delighted to hear DeLuca got a taste of his own medicine, but others worry that it will only fire his drive to abuse them more to make up his losses.
If you think Subway owners make good money, think again. A store owner in the US nets less than $26,600 in profit, barely above the poverty level for a family of five. To earn a decent income, they must often work 60 to 70 hours a week and invest in multiple stores. The main problem is encroachment of stores. Even with more than 27,000 Subway's already open, DeLuca keeps building more. The result? Average revenues per store are down some 8% from when they peaked way back in 1994! Go here to learn more: http://books.google.com/books?id=yNFN1OpnkBkC&pg=PA100&lpg=PA100&dq=subway+franchisees+lowest+paid&source=web&ots=l-dgtBas1-&sig=Of1ObbDdfXuZsckQcO2Vp54RAV4&hl=en
Consultant Marshall estimates that 25% of franchisees are unhappy and suffering, while about 40% are "just getting by and making a few dollars. Barely a third are happy and doing fine, though many of those owners are also development agents who control the number of competing Subways in their vicinity." Steve Sager, a departed Subway agent estimates that half the franchisees in the Northeast are suffering. What does DeLuca have to say about this? "It bothers me that people lose money, but I don't lose sleep over it. This is America." I imagine DeLuca and co-owner Peter Buck sleep pretty soundly indeed, both being ranked by Forbes as the 207th richest men in America. Go here to learn more: http://www.forbes.com/lists/2005/54/BNPG.html
For most people, reaching billionaire status would be enough, apparently not for DeLuca. He recently rewrote the franchise agreement, stripping owners rights and doubling already inflated royalty fees for stores out of compliance of written guidelines. It also eliminates protection against encroachment, encouraging development agents to stack stores. He even added a loophole to take back the lucrative Subway advertising trust which he vested to owners years ago. With apparent impunity DeLuca pronounced his new agreement retroactive for all existing owners! Almost immediately field inspectors began bloating corporate profits through increased compliance fines. Ignoring past policy, inspectors now mark owners out of compliance in several areas for each deficiency! Go here to learn more: http://findarticles.com/p/articles/mi_m3190/is_23_40/ai_n16463127
Even more unconscionable, DeLuca devised a scheme to rip off owners by claiming high internal loss is royalty theft. Using proprietary software he sniffs out owners suffering from excessive shrinkage and forces them to undergo intense internal audits. Owners who can't account for every portion of lost, wasted or stolen meat are labeled thieves and fined up to $50,000! Those who fight DeLuca's illicit attacks are threatened with criminal prosecution or store seizure. Coincidentally, "shrinkage", a term prevalent throughout the restaurant industry, has been stricken from the Subway training curriculum since DeLuca's royalty theft crusade began. Just coincidence? Go here to learn more: http://subwayfranchisee.blogspot.com/2005/04/compliance-issues-at-subway-real-or.html
What help can store owners who suffer from chronic shrinkage or compliance problems expect? Does DeLuca offer additional training and support to help them get their losses under control and their stores back into compliance? Just the opposite! He dangles eviction notices over their heads and charges them huge fines! The U.S. Small Business Administration even stopped lending to Subway owners until DeLuca removed a contract clause that gave him the power to seize any store without cause. Go here to learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm
Franchisees fear that DeLuca may have bolder plans to cannibalize the chain. For years he pressured owners to abandon cash registers in favor of computer POS systems, despite dependability issues and a higher cost to own. When he encountered resistance, he simply ordered POS systems mandatory. Then he required all owners to connect their POS systems to headquarters, giving DeLuca access to every store's transactions. Using his "spy" software to monitor stores chain wide, now DeLuca can efficiently target owners ripe for royalty theft audits and spot inspections, boosting corporate revenues. Go here to learn more: http://storefrontbacktalk.com/story/081006Subway.php
DeLuca appears intent to use new technology against franchisees. Some owners suspect that the Subway Technology Department's pet video surveillance vendor DTT USA has conspired to help DeLuca spy on owners through live camera feeds being installed in stores. If DeLuca can tap into ring ups and video evidence then use it against them, they might as well kiss any hope of a profitable future good by. Is it coincidence that DeLuca's new contract gives him full rights to transmitted data? If you're a Subway owner, here's a hot tip; If it seems every time you have a minor compliance violation (ie: an oven door latch that won't stay shut or a POP display is out of date), a field rep mysteriously shows up on your doorstep for a spot inspection, Big Brother is watching! If this happens to you, obtain a copy of your DSL provider's server logs and have them scrutinized by an IP expert. If you are being spied on, take your findings immediately to the FCC.
Want more proof that Subway corporate is corrupt? Investigate Subway's legal beagle Leonard Axelrod (nicknamed Lenny the Ax), the architect of Subway's contracts. You'll have to dig deep, the evidence is buried. If you're diligent, you'll uncover how Axelrod was disbarred for brainstorming a scheme to defraud landlords. An Illinois appeals court concluded that there was 'overwhelming' proof that Subway had committed "far reaching fraud". An Illinois jury awarded a landlord $10 million in punitive damages after concluding that Subway had defrauded him. DeLuca spent $1.3 million to resolve 72 similar claims. Go here to learn more: http://findarticles.com/p/articles/mi_m3190/is_n49_v29/ai_17847096
Once landlords wised up to Subway's shell game, Axelrod brainstormed his dirtiest trick; a way to skip arbitration by signing leases with landlords and then subletting stores to unwitting franchisees, unaware they were being used as de facto landlords. This way Subway can quickly evict a store owner in a lease dispute and DeLuca can screw the landlord out of the lease. An Illinois court has called the eviction/ arbitration provision "unconscionable". Go here to learn more: http://nextraterrestrial.com/pdf/FDeluca-Fortune%20March%2016%201998.htm
What effect has DeLuca's predatory actions had on the Subway chain? At a recent franchise convention & trade show, it was all too obvious. Attendance and morale were at an all time low. Store owners sulked by, all emotion drained from their faces, not unlike holocaust survivors. Some wore shirts printed with "I Survived a DAI Audit". They huddled in small groups, searching for some relief from this nightmare. Sadly, Subway was once the greatest opportunity in the industry. Today it's just the greatest con job in the industry. Don't fall for it!
If you are affiliated with the Subway chain and believe you've been victimized by them, I urge you to add a comment to this post by clicking on the "File a Rebuttal" button below, or file your own report by clicking on the "File a Report" button next to it. RipoffReport.com posts are monitored by numerous law firms around the country. Your identity will remain confidential but will allow them to contact you in the event a class action suit or criminal complaint is imminent. Any criminal act that Subway staff may be guilty of negates the arbitration clause you are currently bound to.
New Haven, Connecticut
This report was posted on Ripoff Report on 03/08/2008 06:53 AM and is a permanent record located here: http://www.ripoffreport.com/r/Doctors-Associates-Subway-Restaurants/Milford-Connecticut-06460/Doctors-Associates-Subway-Restaurants-CEO-Fred-DeLuca-Subway-Preforming-Predatory-Royalt-315931. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.
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