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Subway reportedly institutes new policy for owners of shuttering restaurant locations

Stephanie Pagones

Subway franchisees will now have to take additional steps before closing their stores in an apparent bid by the restaurant chain to prolong the process and delay the rate of closings, according to a report.

The sandwich chain has instituted a new policy mandating that store owners who opt not to re-sign their five-year leases complete a questionnaire and work with a headquarters-based committee regarding their decision, the New York Post reported. The change has been instituted after more than 2,300 Subway franchise locations were shuttered in the past three years.

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“The brakes are on to stop the closures,” a former territory manager told the Post. “The company is coming to its senses and realizing that every store is valuable.”

A spokesperson for Subway told the outlet the procedural changes were intended to assist the troubled store owners who are looking to find new owners.

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“Subway places a tremendous value on its network of small-business owners,” the spokesperson told the Post. “And as such, aims to ensure viable Subway locations remain open. We help franchise owners find buyers for their restaurants whenever possible.”

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“What local marketing have you done to help increase sales?” the questionnaire asks store owners, in addition to instructing them to “explain in detail what steps you have taken to try to make this shop viable.”

The Milford, Connecticut-based company does not own its eateries and instead relies on franchisees and the fees collected from them -- franchisees pay a 12.5 percent fee (gross sales, excluding sales tax) each week, with 8 percent going toward franchise royalties and 4.5 percent toward advertising.

Over the past three years, 2,331 restaurants have closed, including 1,100 in 2018.

“I think the form means they are putting a stake in the ground and that they don’t want to see any more stores close,” a West Coast franchisee told the outlet.

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Subway store operators also claimed the company has begun enforcing its 20-year franchise agreements, which take effect at the end of their five-year leases, according to the Post. The 20-year agreements have never previously been enforced. The Subway spokesperson would not comment on the operators’ claims.

Subway did not return FOX Business' request for comment.

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