• Report: #315931

Complaint Review: Doctors Associates - Subway Restaurants

  • Submitted: Sat, March 08, 2008
  • Updated: Tue, September 08, 2015

  • Reported By:New Haven Connecticut
Doctors Associates - Subway Restaurants
325 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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This post is just my opinion. Take it for what it's worth. I've been involved with the Subway chain for a long time, and I never thought I would hear myself admit this. But I have come to believe that Subway headquarters is the worst bunch of crooks and con artists in the industry, and they won't hesitate to ruin your life. If you're considering becoming a Subway restaurant owner, development agent, vendor or employee for this chain, you should read this before you become a victim of the biggest ripoff in the industry! If you're an existing Subway owner, my sympathy goes out to you. All I can say is cut your loses and sell now while your store is still yours.

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.

Anonymous
New Haven, Connecticut
U.S.A.

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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REBUTTALS & REPLIES:
1Author 9Consumer 3Employee/Owner
Updates & Rebuttals

#1 REBUTTAL Owner of company

Agree with everything exposing Subway here

AUTHOR: Charlotte NC Franchisee - (USA)

 Subway is nasty to its franchisees. Deluca is beyond greedy keeps opening more stores killing sales of existing stores. The oldest justice in the world Deluca has cancer.

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#2 REBUTTAL Individual responds

Subway's dirty laundry

AUTHOR: just2muchfun - (USA)

It's so ironic that Jared was arrested and Suway is reported to know about what was happening.  When we opened our store. Jared was scheduled to attend our grand opening.  The day of the opening he called and says he won't attend.  Scumbag!  Let me say when Jared gets out of jail.  He will write a book and air all Subway's dirtly laundry.  Fred and Doc. A**. will go down.  This has to make all the franchiese owners feel some vindication.  After years of rule and tyrany.  Pay back is a Motha....I feel horrible for the victims of Jared and he should do time.  I hope he loses his money nd his wife takes every penny.  He is sick and needs help.  So...I said don't worry subway will get what they deserve. Ruining the ;lives of so many people.  God bless all the owners and the victims.  Keep your beliefs and praise god.

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#3 Author of original report

SSDD

AUTHOR: - ()

I remember when I targeted and overcame internal shrinkage in my Subway stores in the early 80's. Fred asked me to share my accomplishments with other owners because he knew with fatter profits would come additional marketing funds and as a result higher sales, aka Fred's paycheck. He even ran some S-T-S articles sharing my success at stomping out internal theft, waste, pilferage and consumption. However, somewhere in the late 90's the term "shrinkage" disappeared from the Subway corporate dialect. Seems Fred had other plans for the widespread loss that franchisees still suffered from. Not long after it was replaced with Fred's new profit angle "royalty theft", no doubt another predatory scheme concocted by "Lenny the AX". Co-incidentally about that time Fred was overheard mentioning at a national trade show that he would stop at nothing to reach his goal of one of the 10th richest men in America. His multi year run on the cover of Fortune 500 was evidence he had begun his quest to the top. Apparently Liz, his family, his belief in a higher power than himself and his morals were all liabilities in the way of that goal. He was dragged in front of the Feds more than once for his abuses and has faced countless individual and class action suits by franchisees, landlords and others. His actions directly spurred the writing of national franchise reform acts that are in place in many states today. If you're being bashed with royalty theft and compliance fines, seek out a knowledgeable attorney like the one who filed the above thread. Fred has been up to no good for so long, he has left a tangible trail of weaknesses that experienced litigators can use to put him off. Make him spend a dollar to win a dime and he will simply sniff you and walk on by.

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#4 General Comment

I have been there. We were lucky

AUTHOR: Glad to be out - (USA)

To all the owners who posted here I feel your pain.  I to was put throuhg the ringer by subway.  I have so many issues that my hands will fall off typing.  All I can say is stay positive.  Get a good lawyer who deals in this tye of situation.  Out lawye gave us our life back.  We sold our stores and made some money form the sale.  I will say there were days where we cried and was ready todo something rash.  Let's keep it at that.  All I can say is have a plan to get out.  It might take years but, once it's over your freeeeeeeeee. I look back and thank god it's over.  Let's say we were duped out of our store by the inspector who didn't like us.  That's is only a microcasm of activity that were were subjected to.  Audits BS.  Compliance errors.  Yeah right.

I wish I could help owners but scared to post a number for contact.  Sometimes all you need is someone to talk to.  You feel alone and helpless.  your not alone.  Be strong.  i say again Be Strong.  it's hard i know.  your thinking it';s easy for me to say this being out scott free, but no no no. I still look back and cry and wonder WTF did i do.  Turn to god and prey.  I am not a religious person but, it did help.  I so want to put a burner phone number here.  Not to bash the company but to have a shoulder to cry on.  Sometimes just someone to talk to is all we need.  So put any money you can away and try and move on.  I used to do the WISR by hand and loved the days before computers and the dreaded Tuesday night inventory.  It inventory for the company not you.  Employees stealing robbeies that is just the beginning.  

so good luck and god bless.  

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#5 Consumer Comment

documentary

AUTHOR: Antoineh - (France)

Hello, I'm a french journalist working for french television. I'm currently investigating on Subway. If anyone accept to talk to me about the way Subway treat their franchisees, please contact me: antoine.hirchy@gmail.com It would be very helpful, thank you.

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#6 Consumer Comment

documentary

AUTHOR: Antoineh - (France)










 
Hello, I'm a french journalist working for french television. I'm currently investigating on Subway. If anyone accept to talk to me about the way Subway treat their franchisees, please contact me: antoine.hirchy@gmail.com It would be very helpful, thank you.
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#7 Consumer Comment

worst investment you would ever do.please don't

AUTHOR: anonymous - ()

I am subway franchisee since 2007.there practice is highly illegal.they open 3 new store in 10miles area with total population less than 10 thousand.our sale is less than $2000.00 a week you cant pay any bills or rent.it is the same suituation for othe owner who opened the store.

subway store sales are down by 15% in year 2014 and by 25% in jan 2015 so please don't make mistake of buying this headache you would be better off doing minimum wage job.

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#8 REBUTTAL Owner of company

Depressed Subway Owner

AUTHOR: Carey - ()

 I agree with everything this person said. My husband and I bought 2 stores now and have no idea how we can pay our bills. I am at a loss for words. I can't believe we own a Subway and the minimum wage employee is better off than we are. I just had an employee ask me yesterday if we offer maternity leave coverage or vacation pay. HAHA I have two kids and my family doesnt have health insurance or go on vacations. I did not have maternity coverage. I did payroll the day after I gave birth.

I had no idea Subway could constantly fine you for minor things and threaten to take your store away. Our stores our now for sale and the sad thing is I feel bad to not warn people about Subway but I just want out anyone that will buy our stores I just have to take the money and run.

As an owner you might make 8% if lucky. You have employess that do not care about you or your store. That complain and dont show up for work. They are a constant problem that you cannot take one day off from. Customers are Customers and is self explanitory. But between Customers and Employees complaining its overwhelming at times. Which I would happily deal with If I was making more money or did not have to be raked over by corporate constantly threatening to take your store away.

So if your baseboards are dirty one month then your fan has dust on it the next month you are considered out of compliance and get a fine. If something happens to be dirty the second month. Well you are in arbitration which means more fines and letters to take the store away. I am praying they really cannot do that because are stores are not that bad to have them taken away. The way the monthly evaluation is, is totally personal opinion. I mean we have had the store for years and all the sudden the field consutant will say you need a handwashing sign. Which is fine but why didnt we need this for the last 3 years? And worst of all the field consultant talks bad about us behind our backs to our employees. Like why cant we afford a storage unit for things that need to be stored. He has told an employee to take our register out in the rain so we will have toget a new one. He has even told them we do not do enough for them!! He constantly wants to talk to us. About what? What is talking to him going to help. He will just tell us what we should be buying that month. Doesnt he think I would get this stuff if I could afford it? I think he thinks we should be kissing his butt like other owners do. I actually wonder if we kissed his butt if our evaluations for each month would get better.

I know that people will say well a lot of this is just part of owning a business. But to make 8% of profits and have to be told by corporate constantly you have to buy new equipment, you have to fix lot of different things in just one month, constantly spending money or they will mark you out and you will loose your store. And then customers and employees complaining constantly about each other. Stealing from you and scared to fire someone because they will cost you more money because no matter what they get unemployment. Anyone that says this is just the cost of doing business and owning a business. You deal with all this. See thousands and thousands of dollars go through your hands and if lucky you get8-10% of it.

There is so many stories and things Subway corporate has done to us that seems illegal like build another Subway on top of ours which caused our business to go down 30%. Which really started our demise financially. So many things they have done that deserve some type of lawsuit. But I know their agreement you sign is impossible to do anything to them. I just wish someway people hear this and know what is going on.

From

Carey in KY 

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#9 General Comment

Looking for contacts

AUTHOR: Lorraine Millot - (United States of America)

To all Subway's victims,

I'm a French journalist working for the French daily Liberation looking for victims of Subway malpractices with their franchisees. Would you contact me for interviews over the phone? This is an urgent request.
Many thanks,
Lorraine Millot
U.S. Correspondent for the French daily Liberation
Tel: 301 652 23 71
Email: lorrmillot@gmail.com
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#10 General Comment

Subway's Oppressive and Illegal Tactics

AUTHOR: Brandon - (USA)

I am a current franchisee and also an attorney, and after 20 years with Subway, have to say that I agree with many of the comments of this report.  I have represented two people who are part of the "Subway family" and who were beaten down and afraid to continue the fight against Subway's oppressive behavior.  Now, the store that my wife and I own was just "audited" and Subway is attempting to extort over $6000 from us due to an audit that they refuse to reveal the methods of.  We refuse to pay anything, because we are honest hard-working business people, and flatly deny Subway's assertion that we have stolen from them.  Not only do we deny it, but our records prove it, but that has not been enough for the store owners who don't also happen to be attorneys or cannot afford an attorney.  There are currently 10 other store owners in NH undergoing the same pressures, but who will have to pay for an attorney to fight it, or just give in and pay it.  I am now an elected representative in NH and will be looking at other ways to control Subway's oppressive behavior.  This is all coming from a privately-owned company that makes tens of millions of dollars every week.  As the owner's wealth has grown, every piece of evidence (including that of my previous clients) shows that he (Fred Deluca) has become more greedy and more oppressive to the point where I sometimes wonder if he is delusionally paranoid about the store owners stealing from him.  You would think that Subway headquarters would attempt to assist store owners if they thought there was a problem - instead they come down with a sledge hammer and beat owners into submission, with the threat of terminating the franchise.  More to come, as this owner is not bowing to their illegal practices.

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#11 UPDATE EX-employee responds

Yes it's true, I was a franchisee for this chain for many years

AUTHOR: Carmella - (U.S.A.)

Yes, Fred DeLuca and Peter Buck of DAI (Doctors Associates Inc.) AKA Subway headquarters have crossed over to the dark side. They are canibalizing their own franchisees in their zest to reach the top 10 richest men in America status. Everything written here is true.

So how in the heck does Bendoveritsfred keep getting awarded Entreprener of the year? It's easy when your net worth is $billions and you invest seed money to further your cause. I stumbled on this article that explains perfectly DeLuca Vader's master plan using the cash registers and security cameras in every store. Big brother is doing more than watching, he's feeding!!

http://www.bizop.ca/blog2/due-diligence/new-technology-for-franchisors.html

Share your horror story with me and I'll help you spread the word and stop the slaughter. juanna.blomee@yahoo.com
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#12 UPDATE EX-employee responds

Ripped off by Subway in Atlanta

AUTHOR: Carmella - (U.S.A.)

Cookie, you're not the first or the last one to be assulted by "bend over-its Fred". He has left thousands of crushed careers in his path as he compulsively lusts for his ultimate dream - to be on Fortune 500's top 10 riches men in America list. How many thousands of franchisees does he have to pile up to reach his goal? My suggestion: cut your losses and get out while you're still in one piece.
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#13 UPDATE Employee

An agreeing franchisee who has been damaged beyond repair by Doctor's Associates (DAI)

AUTHOR: Cookie - (U.S.A.)

Thank you for filing your report. I was beginning to think that we were alone here in Atlanta. I am a franchisee (along with four more franchisees) in the Atlanta area, who have been severly damaged.

My store was threated and Subway literally tried to take it from me. They attempted to evict me even thought my rent was current. It is a very long story, but I wanted to sell my store back in May 2007, after this legal action started. Subway refused to allow me to sell and attempted to have my sublease terminated due to arrearages that were owed. I had to hire an attorney and was able to hold them off for a while, but it was not until an advocacy group intervened, that Subway slowed down and "allowed" me to sell. I dealt with the full range of the Subway legal team, from Len Axelrod, to Tricia Lee, to Gerald Benda (local council) and not one of them were remotely truthful or ethical.

I sold my store for $80K less than a store that (my partner and) I purchased 18 months prior (a store that had identical sales but needed at least $60K for remodeling). Because I was forced to sell before I was evicted (I ran out of money to defend my store), I could not really negotiate a reasonable price. After paying at least $30K in attorney fees, you can see how severly I was financially damaged.

I cannot even begin to explain the emotional, physical and fincancial damage that Subway has caused me. I am thankful and grateful to be out of my Subway store. These wounds are still fresh because I just sold the store in May (2008), less than one month ago. I just wanted to share my horrible/terrifying experience as a Subway Franchisee.
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