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Subway gains control of SFAFT in suit settlement
June 1, 2010
*Update 6/7/10
Subway parent company Doctor's Associates Inc. and the Subway Franchisee Advertising Fund Trust (SFAFT) have settled four years of litigation, reports Blue MauMau. The settlement allows DAI to regain control of the SFAFT.
From the story:
In the case, Jeffrey Offutt, Trustee v. Doctor's Associates, Inc., a federal judge issued his written decision that the parent company has the right to make changes to its franchise agreements in a manner that enables it to divert funds from the SFAFT and direct them into a new advertising trust fund. In his May 4 order, Judge Alvin W. Thompson affirmed his oral decision made on December 21, stating that the settlement agreement now reached among the parties was "fair, just and reasonable under the facts, relevant law and other circumstances of the case." …Today there is in excess of $600 million a year that passes through the advertising fund, for which franchisees pay 4.5 percent of their gross sales. The settlement affects Subway franchise owners worldwide.
The Subway franchisee group filed suit in 2006 goal to prevent DAI from changing its national advertising benefits program, guaranteed under a 1990 Trust Agreement signed by the franchisor and the trustees of SFAFT. The franchisee group has been protesting an amendment to the agreement DAI introduced in 2006, which franchisees contend contradicts the original agreement. The amendment took the control of the national advertising program from the franchisee-elected trustees.
DAI said in a statement that the agreement "will benefit (the) Subway family worldwide by integrating the work of both teams for the common goal of building sales and profits for Subway franchisees.
SFAFT offered no comment on the settlement.
Other franchisee-franchisor suits
Subway's franchisees are not the only group that has been upset over their franchisor's decisions regarding advertising funds. Last year, Burger King franchisees sued their franchisor when Burger King Corp. attempted to divert soft drink rebates, which franchisees have relied on for operating funds, to increase the company's advertising budget. That lawsuit was withdrawn earlier this year when franchisees agreed to a new plan that calls for the company to cease matching franchisees' local marketing contribution. Franchisees agreed to make up that difference in local ad spending over the next two years.
*Update includes statement provided by DAI.
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