MC Exclusive: Subway India’s former development agents initiate arbitration against American entity

Subway India development agents

Subway India’s former development agents have initiated arbitration proceedings in New York against Franchise World Headquarters, a company that owns the global sandwich restaurant brand Subway.

They have claimed $100 million as damages as the American entity refused to extend their long-term contracts despite giving them assurances to do so. The agents have claimed that they have played a key role in establishing Subway restaurants in the country for nearly 20 years and their work accounted for nearly 70 percent of the Subway restaurants in India.

The matter

Sources close to the development told Moneycontrol that the development agent contracts, which were periodically renewed, were due for another long-term extension. However, the agents were informed that the renewals were globally on hold. For nearly two years the American entity cited it was contemplating a change of business model and contract terms and deferred the agreement renewal. However, it sold its India business to the Everstone group, sources said.

Subway on sale

The news of the arbitration comes at a time when Subway is reportedly nearing a deal to be itself sold to private equity firm Roark Capital for about $9.6 billion.

Wall Street Journal reported that a deal could be finalised this week, citing people familiar with the matter.

Roark Capital primarily invests in the franchised consumer and business services sectors. It has invested in Inspire Brands, which is the owner of Arby's, Baskin-Robbins, Buffalo Wild Wings and Dunkin' Donuts among others.

Subway, which has about 37,000 restaurants in over 100 countries, was founded in 1965 by 17-year-old Fred DeLuca and family friend Peter Buck.
The company has been owned by the founding families since its first outlet opened as ‘Pete's Super Submarines’ in Bridgeport, Connecticut.

For the first half of 2023, Subway saw a 9.3 percent increase in same-store sales in North America, as its moves to revamp its menus, remodel its restaurants and improve marketing efforts helped draw more customers even in the face of stiff competition.

Subway America has not yet responded to Moneycontrol's email requesting its comment on the issue.