Subway Court Battle Heats Up

CHICAGO The legal battle for control of Subway’s ad dollars has intensified, with a group representing many of the restaurant chain’s franchisees suing Doctor’s Associates International (the franchise owner) in an effort to block the terms of a new contract introduced earlier this year.

The lawsuit, brought by the North American Association of Subway Franchisees, was filed this week in Connecticut Superior Court in New Haven, Conn.

It comes on the heels of a separate action filed in June by the Subway Franchisee Advertising Trust Fund claiming the new deal violated the original 1990 Trust Agreement by placing ad funds under DAI’s control [Adweek Online, June 26].

“We respect our franchisor and its founder, Fred DeLuca, for what they have built,” said Kevin Brough, chairman of the NAASF, in a statement. “The new franchise agreement introduced by DAI on April 1, 2006, however, threatens to erode the foundations of the Subway system, by destroying franchisees’ trust in the good intentions of our franchisor, and violating one of our foundational documents, the 1990 Trust Agreement.”

The two sides have been working to create a new agreement since mid-April. The NAASF said terms reached during those negotiations were not included in an addendum submitted by DAI, forcing the new lawsuit.

“We feel that NAASF worked in good faith to come to a mutually acceptable agreement with DAI and [we] were disappointed that it had to come to this,” said Jim Hansen, chief executive officer of the NAASF. “Franchisees have more invested in this brand than anyone else, including the parent company; it is essential that their rights and investments be protected.”

A DAI representative declined comment, saying the franchisor has not yet seen the second lawsuit.

The Milford, Conn., chain spent $365 million on ads last year, and $100 million through the first quarter of 2006, per Nielsen Monitor-Plus.

Independent MMB in Boston is Subway’s lead agency.