As Subway Restaurants franchise owners await word on a possible auction of the sandwich giant, a California woman who sued Subway has asked a court to end her lawsuit that alleges the company employed false advertising of its tuna sandwich.
Subway opposes the woman’s motion in part because it would allow her to sue again at another time. She said she could no longer continue the case now because of severe morning sickness and “debilitating” conditions of her pregnancy as she expects a third child.
Subway wants the judge to dismiss the case and force the woman’s lawyers to pay at least $618,000 of the company’s legal bills, according to Reuters.
The tuna lawsuit turns amid Subway’s efforts to find a buyer for the company. Little has been made public about the potential auction, but what news has leaked has not been encouraging for Subway.
The New York Post reported in April that Subway has been forced to adjust bidding deadlines because of weak interest in the auction. Hopes that the company might sell for as much as $10 billion now seem unrealistic, with insiders forecasting a sale price closer to $7 billion, the Post reported, citing unnamed sources.
Initial bidding began in February. A second round reportedly awaits.
One question is how much a sale would affect Subway corporate’s relationship with franchise owners. Another question is whether other large franchise brands will bid on Subway. As it is, the most interested suitors appear to be large private equity firms, according to reports from the Post and Bloomberg News.
“Subway likely will be sold but price is an issue,” the Post quoted one source as saying.
Subway is one of the largest restaurant chains in the world. In an in-depth look at Subway and at how much an average Subway franchise owner makes, StartupNation found these key points:
- Initial investment in a Subway franchise is often lower than outlays for other franchises: Expect a franchise fee of $15,000 plus an estimated $207,000 to $477,000 to invest in a store, according to Subway’s estimates.
- Success depends not just on total sales, which can be affected by location, competition and other factors, but also on how well franchise owners manage labor, food and other costs.
- The benefit of Subway is not in owning a Subway franchise so much as owning multiple Subway franchises, according to several Subway franchise owners who posted about their experience on the StartupNation community forum. Posters say that multi-unit owners get the most out of the experience.
In early 2023, Subway confirmed that it had hired JPMorgan to explore a possible sale of the company. Coming off a strong 2022 that saw its same-store sales climb 9.2%, Subway said its strategy was paying off.
In the California lawsuit, plaintiff Nilima Amin wants to dismiss the case in San Francisco federal court without prejudice, which would let her sue again when she feels better, Reuters said.
Since January 2021, Amin has filed several complaints that dispute Subway’s claim of using “100 percent tuna,” according to CT Insider.
Subway is asking the judge to dismiss the case and require the lawyers to pay $499,000 in attorneys’ fees, about $87,000 in experts’ fees and nearly $32,000 in other costs, CT Insider reported.
“Unless there are consequences for the plaintiff’s counsel’s litigation tactics, this kind of behavior will never stop,” Subway said in its filing. “On top of the considerable and unnecessary expense of litigation, the reckless allegations made in this lawsuit caused a media frenzy that severely harmed Subway, its individual franchisees and the Subway brand. Inter alia, Subway had to invest substantial resources to fight the misinformation that the plaintiff and her counsel knowingly propagated to Subway’s tremendous detriment.”
This article was originally published on April 10, 2023, and updated on May 13, 2023.