Franchisees Sue to Control Ad Dollars

LOS ANGELES The association representing Subway franchisees is suing the franchise owner over control of the chain’s advertising, according to a statement issued today by the Subway Franchisee Advertising Fund Trust (SFAFT).

According to the franchisees group, the lawsuit filed today in Connecticut’s Ansonia-New Haven Superior Court is the result of an April change to the 1990 franchise agreement by Subway founder Fred DeLuca and the Doctor’s Associates Inc. (the franchise owner).

The franchisees contend that “certain terms … allow DAI, at any time it chooses, to redirect franchisee advertising contributions away from SFAFT to a separate entity created by DAI.”

“Fred DeLuca had it right when he agreed to the current trust structure,” said Tom Seddon, CEO of SFAFT, in a statement. “As an entrepreneur himself, Fred recognized the importance of empowering the small-business owners of Subway franchises with control over advertising and marketing programs.” The statement accuses DeLuca of now wanting to “unilaterally assume control” over the program.

According to Seddon, the franchise owners have stated “that it has no intention of diverting franchisee advertising fund contributions from SFAFT, so we truly don’t understand why they are unwilling to simply change the franchise agreement to reflect that.”

A Subway representative said the company hoped an “amicable resolution” could be reached.

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

The client consolidated its advertising at independent MMB in Boston last July.