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Subway exploited immigrants and victimized franchisees, bombshell lawsuit alleges

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Subway exploited immigrants and victimized franchisees, bombshell lawsuit alleges

Subway’s massive chain of sandwich shops has become a hotbed of financial exploitation for overseas immigrants, victimizing those it has tapped as franchisees and even driving some to ruin, an explosive lawsuit claims.

For years, the fast-food giant has recruited immigrants, mostly from Asia, to expand a US chain that a decade ago had spanned more than 25,000 locations nationwide. While aspiring entrepreneurs believed they were buying into the American Dream, some instead were caught in a loosely managed corporate network that was rife with corruption, according to a suit filed last month in Nevada state court.

In particular, the suit claims that some of Subway’s so-called “business development agents,” or BDAs – typically large franchisees themselves who were also given managerial power to oversee hundreds or even thousands of locations in a given territory – have systematically socked unwitting franchisees with nitpicking rules and costly fees.In some cases, rogue BDAs have used Subway’s overgrown schedule of rules and fees to steal away the stores of other franchisees, according to the suit. Even worse, the BDAs are given access to franchisees’ books, enabling them to determine which locations are ripe for cherry-picking, the suit claims.

Raj Mehta contends that Subway pressures franchisees into opening more stores.

“Subway is allowing its BDAs to profit off the backs of minorities, Indian Americans and/or Indian immigrants who have oftentimes invested their entire life savings on their franchises,” according to the suit, which was filed last month in Nevada state court.

The incendiary allegations come as Subway is scrambling to get a tighter handle on its 56-year-old chain, which critics say co-founder Fred DeLuca expanded into a nationwide web of regional fiefdoms run by the BDAs. In some cases, BDAs have used intimidation tactics against smaller franchisees who were actively recruited by Subway from abroad, according to the suit.

“Subway was trying to capitalize on the concept of the American dream. They were telling immigrants in other countries to get your cousin here to fund your Subway and that is what happened,” said Mark Shearer, an Ohio-based attorney who has represented Subway franchisees in arbitration cases, and who isn’t involved in the latest suit in Nevada.

Headshot of Chirayu Patel
A lawsuit claims that, as a Subway business development agent, Chirayu Patel hectored franchisees.
LinkedIn

“I know for a time there were ads in the Middle East and India where Subway was targeting these people specifically,” Shearer added. “Subway wants naive franchisees who don’t understand their rights.”

According to the Nevada suit, Subway on average charges $15,000 in fees to open a new store – far less than McDonald’s or Burger King, which charge around $45,000 in franchise startup fees. That smaller up-front fee attracts a less-sophisticated operator – even when it comes to simple English and math skills, according to the suit. About 50 percent of Subway’s locations are owned by minorities, compared to 30 percent of franchises overall, according to International Franchise Association figures cited by the suit.

Asked about the Nevada lawsuit, a Subway spokeswoman said in a written statement that the company “is proud of its diverse franchisee network, many of which are small or minority-owned business owners.” She added that the company’s “current recruitment strategy focuses on experienced franchise operators with strong business acumen” and that applicants “may be required to take a standardized test.”

“Our lower cost of entry makes us an attractive investment opportunity and we then work hand-in-hand with our dedicated franchisees to provide them with the tools and support needed to grow their business and ensure long-term success,” the company said.But for some powerful BDAs, according to the Nevada lawsuit filed by former franchisee Raj Mehta, the strategy was to recruit franchisees who were willing to pay the fees and foot the bill to open an ever-greater number of Subway locations – whether it was in their best interest or not.

Subway “fueled its expansion by ‘encouraging’ its immigrant franchisees to open stores within blocks of existing locations under the subtle threat that if they did not do so, then Subway would recruit another franchisee to open a competing store in the immediate vicinity,” according to the suit.

Subway now has about 22,000 US restaurants – all owned by franchisees, and eclipsing McDonald’s 14,000 and Starbucks’ 15,200 locations for the title of biggest US fast-food chain. Nevertheless, Subway’s number of locations has shrunk by more than 10 percent over the past decade, as opening a restaurant near an existing outlet can cannibalize its sales.

Subway sign
Fifty percent of Subways have minority ownership, according to International Franchise Association figures cited by the suit.
NurPhoto via Getty Images

The story of many of those closures has been brutal, according to critics and multiple lawsuits that have been filed against Subway. The chain for years used a rule book some 350 pages long to evaluate franchisees, with each containing at least 10 compliance points – creating more than 3,000 ways for a store to fall afoul of the rules, the Nevada suit claims.

Examples of petty infractions include smudged windows and improperly sliced cucumbers, according to Mehta’s suit – and the consequences could be dire. A franchisee marked out of compliance by a BDA can be forced to pay a higher royalty rate to Subway – as much as 10.5 percent of gross sales, up from 8 percent, the suit claims.

It was the alleged playbook employed by Chirayu Patel, Mehta’s former BDA, to sign up other Indian Americans to run restaurants in his territory – before he used “hit men” to write up new franchisees for alleged violations of Subway’s rule book, the suit claims. Likewise, franchise agreements pushed by Patel and Subway also force new restaurant owners to buy their sandwich ingredients from pre-picked suppliers at set prices – even if they could find better deals elsewhere, the suit claims.

Bringing franchisees to the brink of bankruptcy with his fees and clampdowns, Patel – who owned his own stable of Subway restaurants, along with overseeing a territory in California and Nevada – would then acquire the distressed locations for a pittance, according to the suit.

“Patel is an Indian American and most of his victims are Indian Americans,” the suit claims. “Stated simply, Patel finds it easiest to prey on those with whom he has the most in common and exploits the relationship of trust instilled between people who come from the same culture and circumstance.”

Subway BDAs typically own restaurants in the territories they oversee – an arrangement the suit claims is an “extreme” conflict of interest. Because of their positions as regional managers, the BDAs can see the books of the Subways in their territories, knowing which restaurants are most profitable, the suit says.

Subway in 2017 terminated the agreements for Mehta’s two stores in Reno, Nev. – allegedly for minor violations of the rule book, the suit claims. Patel then used his power as a business development agent to stop Mehta from selling his two restaurants to a qualified buyer for $472,000, according to the suit.

Patel took one of the restaurants for himself and resold it, keeping the proceeds, the suit claims. The suit claims Mehta is out more than $4 million when including lost opportunity, investment and profits.

Franchisees can’t sue Subway itself because of clauses they sign in their contracts that force them into arbitration. Attorneys for Mehta claim in the suit, which accuses Patel of racketeering, that another co-plaintiff could be named and that they will bring other franchisees as witnesses.

John Chidsey
Under CEO John Chidsey’s leadership, Subway is on a “transformational journey,” the company told The Post.
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Patel recently stepped down from his BDA position at Subway corporate amid a separate lawsuit that said he stiffed his workers out of nearly $40 million.

In an e-mail to The Post, Patel said his staff members were “following Subway legal requirements to protect our customers and brand.” He declined to comment further, citing pending litigation.

“Now I can finally spend more evenings home and hopefully learn to play some golf,” he said in an e-mail last month to franchise owners.

Meanwhile, another Subway franchisee, Puneet Kalia, has made similar racketeering charges against Patel in two suits being heard in Nevada and California. Those suits, like Mehta’s, allege Patel’s Letap Group engaged in violations of those states’ racketeer influenced and corrupt organizations acts, also known as RICO laws.

Over the last several years, Subway has begun to phase out its BDA system and has started to run some territories itself. In a second written response to queries by The Post, a Subway spokesperson said the company is “on a multi-year transformational journey” under Chief Executive John Chidsey, a former Burger King executive who took the helm in November 2019.

An employee makes a sandwich in a Subway store
Some franchisees complain of alleged pressure to buy ingredients from certain suppliers whether or not they offer the best deals.
REUTERS

“To ensure we’re delivering a gold standard of support for our franchisees, we also evolved the business developer model. In certain markets across North America, a traditional franchisor/franchisee model was adopted with the introduction of Subway Market Operations (SMO),” the spokesperson said. “Both the SMO teams and business developer roles have evolved to be more focused on training and operations support to our franchisees.”

But much of the country is still covered by BDAs, some of whom have allegedly done a lot of damage – and not only among new immigrants.Jack El Turk, a franchisee in the Cleveland area who was represented by Shearer, the Ohio attorney, sued his development agents for allegedly abusing their positions, terminating him, and not allowing him to sell his restaurant. He was forced by the courts into arbitration with Subway and in 2018 reached an agreement where he left the Subway system in exchange for being allowed to sell his restaurant.

The lighted interior of a Starbucks at night
Subway has more stores than either Starbucks or McDonald’s.
Bloomberg via Getty Images

Charles Fritschler in Massachusetts sued Subway and his development agents for allegedly inducing him to buy restaurants they knew would fail. In 2020, he was also forced by the courts into arbitration.

Such arbitrations show the contentious relations Subway has with its franchisees: Subway initiated 702 arbitration actions against US franchisees in 2017, said John Gordon of Pacific Management Consulting Group, citing documents filed with the Federal Trade Commission. That compares to one by McDonald’s, two by Dunkin’ and none by Pizza Hut, Burger King or Wendy’s.

Aggressive tactics against franchisees are gaining some national critics. Franchisee Advocacy Consulting, a group that lobbies for franchisee rights, in late September asked the FTC to investigate alleged abusive practices at Subway, as well as several other chains, including 7-11.

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Sports world reacts to John Madden’s death

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Sports world reacts to John Madden’s death

Legendary NFL coach and broadcaster John Madden died Tuesday morning at 85, the NFL announced. News of the football icon’s passing hit Twitter on Tuesday evening, and athletes, coaches and broadcasters from across the sports world reacted.

Fellow broadcasting legend Dick Vitale, who is currently battling cancer, called Madden “the greatest analyst of all time of any sport” in his Twitter tribute.

Former Yankees pitcher and notable Raiders fan CC Sabathia said “your legacy will live forever.” Madden coached the then-Oakland Raiders from 1969-78, a couple of years before Sabathia, a Vallejo, California native, was born. Lakers star LeBron James had similar words about Madden’s lasting legacy, adding an infinity emoji.

Former tennis star and social justice activist Billie Jean King recalled meeting Madden as a “privilege.”

Radio voice of the Rangers Kenny Albert, a five-sport broadcaster who’s been with FOX Sports since its inception in 1994, shared a photo circa 26 years ago to remember Madden.

ESPN’s Bomani Jones took a bit of a shot at current color commentators, noting that Madden “set an unreachable standard.”

Frank Caliendo, who’s made a career out of impersonations, including one for Madden, said he was surprised how emotional he felt.

Several football players, and others, including Saints running back Mark Ingram II and former Cowboys receiver Dez Bryant, credited Madden with being part of the reason why they love football.

Rams wide receiver and NFL MVP contender Cooper Kupp quote the late coach in his tribute: “The road to Easy Street goes through the sewer.”

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Miles McBride’s Knicks role will lessen with Kemba Walker’s resurgence

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Miles McBride’s Knicks role will lessen with Kemba Walker’s resurgence

MINNEAPOLIS — The Knicks got back another body in rookie point guard Miles McBride, who was cleared from protocols Tuesday and rejoined the team in Minnesota.

But there is no longer any hype for the rookie’s return. Kemba Walker is back as the starting point guard and coming off winning Eastern Conference Player of the Week honors with four standout games, including his Christmas Day spectacular. The Knicks have gone 2-2 since Walker regained the starting job.

“It’s great,’’ coach Tom Thibodeau said. “He had a great week. He’s playing great basketball. The team winning helps him get recognized and he was a big part of driving that winning. It’s great for the team.’’

McBride was also spectacular in his last outing before getting COVID-19, when he played the entire second half Dec. 16 in Houston and seemingly earned a spot in the rotation. In fact, McBride had strung together two decent outings before he was ruled out. But things have changed since his emergence and McBride is likely back to being a bit player.

Without a practice, McBride wasn’t even expected to see time when the Knicks faced the Timberwolves to kick off a four-game road trip.

Miles McBride
NBAE via Getty Images

Of course, with Walker’s arthritic knee, anything is possible. The Knicks play Detroit on Wednesday in a back-to-back, so it’s uncertain whether Walker will complete both contests. In addition, Immanuel Quickley is out of COVID-19 protocols but Thibodeau wasn’t sure he was ready for meaningful minutes.

That left Walker against the depleted Timberwolves, who were missing their three top players (Anthony Edwards, Karl-Anthony Towns, D’Angelo Russell), all because of COVID-19 .

Kemba Walker
Kemba Walker
USA TODAY Sports

When McBride got sidelined by the virus and Derrick Rose needed ankle surgery, Walker was resurrected by Thibodeau and it’s been a stunning comeback story.

Though Thibodeau has clear reservations about Walker based on his nine-game banishment due to his defensive malaise as an undersized point guard, he admitted after the Christmas Day triple-double against Atlanta that Walker is playing “much more aggressive.”

Walker’s triple-double that featured 10 points, 12 assists and 10 rebounds was a lot different than his prior outing, when he scored 44 points against Washington.

“I thought his passing was terrific,’’ Thibodeau said before the Knicks resumed their schedule.

“Kemba had control of the game. The game tells you what to do. That’s what I loved about the way he played. I don’t think he forced anything. They puts size on him and were aggressive in their pick-and-roll coverage. He didn’t fight it. He attacked pressure the way you like to attack pressure. You don’t fight pressure with pressure. Don’t try to split it. Get rid of it, go to the backside. Let the game tell you what to do.’’

The Knicks coach is finally seeing all the elements of what Walker can do. Before his demotion, Walker was nothing more than a no-defense, 3-point shooter whose plus-minus was an abysmal minus-122.

Thibodeau was also concerned about his durability in sitting out two of the three back-to-back sets. The last load management game in Atlanta in late November triggered Thibodeau’s decision.

But now it’s only superlatives from Thibodeau in judging the last four games.

“Sometimes it’s going to be his shooting, sometimes it’s his penetration and getting in the paint to force a collapse and sometimes they’re being aggressive with their traps get rid of the ball quickly,’’ Thibodeau said. “The overall play, his rebounding. When your guards rebound, those are key to fast breaks. The more guard rebounding we get the better we can be. ‘’

The Knicks still have three players in protocols — centers Nerlens Noel and Jericho Sims and the newly infected Wayne Selden. Quickley and Kevin Knox were cleared on Christmas but were held out for conditioning.

No matter. The Knicks go as Kemba goes.

“He’s much more aggressive,’’ Thibodeau said. “That was the challenge. At the beginning of the year he and Evan were two new starters. Sometimes guys are trying to fit in. he’s being very aggressive which is the way we want him to play. Not deferring at all. When he and Julius [Randle] are aggressive like that our team is different.’’

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Bar raises dramatically for Zach Wilson in matchup with Tom Brady, Buccaneers

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Zach Wilson and Tom Brady

When Zach Wilson stares across the MetLife Stadium field at the opposite sideline this Sunday, it won’t be Trevor Lawrence he’ll be looking at as his game-day counterpart.

Lawrence, drafted by Jacksonville one spot before the Jets selected Wilson at No. 2 overall last April, is a contemporary.

This Sunday at MetLife, the Jets rookie quarterback won’t be staring at a contemporary on the other sideline. He’ll be staring at the GOAT.

Tom Brady.

The bar raises dramatically for Wilson and the Jets, who are coming off of their feel-good, get-well win over the woeful Jaguars and Lawrence this past Sunday.

Brady and Buccaneers, who are 11-4, NFC South division champions and seeking to repeat as Super Bowl champions, play the Jets, who are 4-11 and seeking more signs of development from their rookie quarterback.

To say this is a step up in competition for Wilson and the Jets going from Lawrence and the Jags to Brady and the Bucs is as obvious as pointing out that Tampa Bay receiver Antonio Brown has had a few off-the-field incidents during his otherwise stellar NFL career.

There hasn’t been a lot to keep the interest of the Jets fan this season — other than watching Wilson’s development. That took an unfortunate pause for the four games Wilson missed with a knee injury, but he’s been back for five games and has looked like a better quarterback, throwing only two interceptions in those games (none in the last three) since returning from his injury.

The problem, though, is that Wilson hasn’t been producing enough touchdowns, throwing for three of them and rushing for four others in the past five games.

Zach Wilson and Tom Brady
Zach Wilson and Tom Brady
N.Y. Post: Charles Wenzelberg; AP

Baby steps, though.

Wilson was the better quarterback this past Sunday when matched up with Lawrence, who threw for more yards than Wilson did, but Wilson ran for 91 yards, including his electric 52-yard scoring jaunt, and made key throws when he needed them.

Wilson will not win Sunday’s game against Brady and the Bucs throwing for the 102 yards he had against the Jaguars. He and the Jets will need more.

Consider this: Brady enters the game having thrown 37 TD passes and for 4,580 yards this season and averages a league-high 305.2 passing yards per game.

Then this: The Buccaneers average 29.5 points per game this season, second most in the NFL.

And this: Wilson doesn’t have a single 300-yard passing game, averages 183 passing yards per game and has thrown seven TD passes in 11 games.

Seven TD passes is a pedestrian two-game total for Brady.

Wilson and the Jets are playing with house money anyway in what always has been a developmental season, so Sunday against Brady should, at its very least, be a great measuring-stick learning experience for Wilson, who’s studied Brady on tape.

Wilson revealed this month that he watched film of Brady before the Jets played the Eagles on Dec. 5 in an effort to pick up tips on how Brady worked against the Eagles defense when he played them earlier in the season.

“I thought it was really cool to see kind of how he went through his whole process, how he navigated the pocket, different things like that,” Wilson said at the time.

On Sunday, Wilson gets to see that process up close as Brady tries to dissect a Jets defense that has yielded 29.9 points per game this season, the most in the NFL.

That puts an added onus on Wilson to produce on the other side of the ball, because he knows Brady is going to get his. Wilson will likely need to produce four TDs — any way he can — for the Jets to simply remain competitive with the Super Bowl champs.

That’s a lot to ask of a 22-year-old kid who’s produced just 11 TDs in his 11 starts, up against Brady, who’s thrown 618 TD passes and for 83,784 yards in his remarkable career.

It, too, is a lot to ask playing against an aggressive Tampa Bay defense that’s ranked No. 9 in the NFL in points allowed (20.8 per game) and is led by former Jets head coach Todd Bowles, who’d surely like to send a holiday message to his former employer.

If you don’t think Bowles will be blitzing the bejesus out of Wilson, then you probably think Antonio Brown is a living saint.

The good news for the Jets is that Wilson has shown incremental improvements, particularly when it comes to his decision-making and quicker releases on his throws.

“He’s coming along, he’s getting more comfortable, he’s calmer back there,’’ Jets coach Robert Saleh said Monday. “He’s in a great headspace and it’s going to be fun to watch him grow, continue to grow.’’

A big part of that growth will take place this Sunday as he watches the GOAT operate from the opposite sideline at MetLife.

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