Subway’s new 20-year franchise contracts mean the chain could take over stores if they close for snowstorms, powercuts, or terrorist attacks, legal experts said

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Subway’s new, tighter rules for franchisees mean the sandwich chain could take control of franchise stores if they close during extreme events more than once a year, lawyers have said.

Franchise stores that close for more than one day a year without permission — barring “an act of God” — could be taken over by the company thanks to new contracts it started introducing in May, Insider’s Kate Taylor and Nancy Luna reported.

This means that franchisees could lose their stores if they closed them multiple times due to a snowstorm, powercut, or terrorist attack, the New York Post reported, based on interviews with legal experts.

The new contracts also include clauses barring franchisees from criticizing the chain and requiring them participate in reward programs and marketing promotions – some of which, such as the $5 Footlong, have been a point of contention among franchisees.

Read more: Subway cofounder Fred DeLuca ruled the company like a demigod and pursued wives of franchisees. How one man sent the world’s biggest fast-food chain into a tailspin.

The new contracts last 20 years and are being given out to new franchisees as well as existing ones whose contracts are expiring. If franchisees don’t want to sign, their royalties rise to 10%, up from 8%.

Legal experts told The Post that “an act of God” just covers the most severe and unexpected of natural disasters, such as a flood or an earthquake, and is unlikely to cover events such as snowstorms, electrical outages, and terrorism.

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“When I was a franchisee, my Subway was just outside the 9/11 frozen zone,” Paul Steinberg, an attorney and former New York Subway franchisee, told The Post. “Since terrorism would not be an act of God under NY law, if this new franchise agreement had been in …read more

Source:: Businessinsider

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