The US sandwich chain Subway has ambitious plans for expansion in Germany. But its German franchise owners are unhappy with their side of the bargain. Many are struggling to keep their businesses afloat.
Sonja Birkel thought she knew exactly what she was getting into. After all, she and her partner David Mauk had spent years working as district managers for McDonald’s — a position that gave them ample opportunity to familiarize themselves with all the tricks of the fast food trade.
Birkel and Mauk thought they could use their know-how to start their own business — as franchisees for Subway, the US sandwich chain. Full of hope, they scraped together their savings, took out a loan for €184,000 ($243,000) and opened a new fast food outlet in the town of Michelfeld in the German state of Baden-Württemberg.
In the beginning, everything went better than they could possibly have hoped. The Subway system, which allows customers to select their own bread and fillings for their sandwich, was a big hit with customers. The two new entrepreneurs made as much as €16,000 a week.
But after three months, turnover began to decline, eventually averaging out at about €6,000 a week. What with the costs of rent, electricity, personnel, interest and advertising, combined with high prices for tuna, chicken and bread and the fees charged by Subway, in the end nothing was left over for Birkel and Mauk.
“We didn’t earn a single cent even though we ourselves often stood behind the counter for as long as 12 hours a day,” Birkel complains.
After 15 months, bankruptcy was unavoidable — and the restaurant in Michelfeld was sold for just €20,000. “We lost everything we had spent years working for,” Birkel concludes bleakly.
Is their story just an unfortunate one-off, a regrettable accident in Subway’s global kingdom? Apparently not — at least not in Germany, where 295 licensees are now running 418 restaurants with a total annual turnover of €106 million ($140 million). “A conservative estimate would be that 30 percent of the Subway franchisees in Germany are just scraping by at the subsistence level,” says Bernd Fassbender, president of the Franchisee Association Germany (DNFV).
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