Subway Franchisee Association Files Suit.

The North American Association of SUBWAY Franchisees, Inc. (NAASF), acting on behalf of more than 14,500 SUBWAY(R) restaurants in North America, today announced it has filed suit against Doctor’s Associates Inc. (DAI), the franchisor of the quick-service restaurant chain.

NAASF’s lawsuit, filed today in Connecticut Superior Court in New Haven, Conn., seeks to prevent DAI from violating the established rights of Subway franchisees to transfer and renew their franchises under the terms of their franchise agreements. They also seek to prevent DAI from depriving franchisees, who are the beneficiaries of the Subway Franchisee Advertising Fund Trust (“SFAFT”), of the benefits of their independent national advertising program, guaranteed to them under a 1990 Trust Agreement signed by their franchisor and the Trustees of SFAFT. Under the provisions of the Trust Agreement, Trustees elected by franchisees control the advertising program, which also is funded by franchisees.

The NAASF lawsuit comes on the heels of another suit filed against DAI June 26 by the Subway Franchisee Advertising Fund Trust (SFAFT). That suit seeks to block SUBWAY founder Fred DeLuca and DAI from violating the terms of the SFAFT Trust Agreement by improperly attempting to usurp control of the national advertising program from the franchisee-elected Trustees, to whom DAI gave complete stewardship of the program in the 1990 Trust Agreement.

“We respect our franchisor and its founder, Fred DeLuca, for what they have built,” said Kevin Brough, chairman of NAASF. “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.”

Since mid-April, NAASF has been working with DAI to come to a mutually acceptable franchise agreement. However, after several rounds of proposed changes on key issues in which NAASF thought it and DAI had come to an agreement, DAI refused to include the changes in the addendum. DAI’s choice made it evident that, while “considering” NAASF’s proposals, it did not feel bound to negotiate a mutually acceptable agreement or agree to honor the Trust Agreement. Therefore, NAASF’s only recourse was legal action.

“We feel that NAASF worked in good faith to come to a mutually acceptable agreement with DAI and were disappointed that it had to come to this,” said Jim Hansen, chief executive officer of NAASF. “We worked to the best of our ability to find common ground to protect all the stakeholders of the Brand. Franchisees have more invested in this Brand than anyone else, including the parent company; it is essential that their rights and investments be protected.”

“Our goal was to seek a collaborative franchise agreement that would be fair to all stakeholders. When we realized that DAI wouldn’t budge on several key items critical to the franchisees‘ rights, we felt we had no choice but to ask the court to enforce the Trust Agreement and to protect our members’ rights under their franchise agreements. It’s important to note that this suit isn’t seeking monetary damages — we just want to protect the rights of the individual franchisees, which NAASF represents,” added Hansen.

NAASF, which was formed in 2000 and is headquartered in Coral Gables, Florida, is the independent franchisee association that represents Subway Franchisees in North America. The association maintains a Web site for its members at https://www.naasf.org/ . Headquartered in Milford, Conn., the SUBWAY(R) restaurant chain is the world’s largest submarine sandwich franchise, with more than 26,000 locations in 84 countries.

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