Part 6/9:
Subway's rapid expansion in the 1980s and 90s came at a price. While lower franchise fees initially attracted entrepreneurs, the franchising model proved unsustainable. Notably, franchisees are burdened by some of the highest fees in the industry, including an 8% royalty and a 4.5% advertising fee. This not only diminished profits but also fostered dissatisfaction among franchise owners.
Compounding the problem was a franchise agreement clause that allowed Subway to open multiple locations within the same territory, undermining the profitability of existing franchises. As a result, many Subway locations report earnings significantly lower than their competitors, such as Jersey Mike's and Firehouse Subs.