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Subway Australia says it 'makes no apology' for helping franchise owners increase profits amid explosive claims of underpaying staff and a 'toxic culture of bullying'

  • The Fair Work Ombudsman has confirmed it is investigating Subway, following an investigation by The Sydney Morning Herald and The Age which aired allegations of underpayment and bullying of staff.

  • A Subway spokesperson told Business Insider Australia that franchisees are responsible for their own compliance standards. The spokesperson added that the company makes "no apology" for implementing changes aimed at helping franchisees become more profitable.

  • The Victorian Trades Hall Council has described Subway's Australian operations as housing a "toxic culture of bullying and intimidation" within some of its stores.

  • The investigation comes as Subway — which has the most locations of any of the world's fast food chains with 42,000 restaurants in more than 100 countries — is closing stores globally at a rapid rate and is experiencing declining popularity in Australia.

Subway is no longer more popular than Hungry Jack's or Domino's in Australia — and a fresh scandal alleging chronic underpayment and bullying of staff could accelerate the sandwich chain's global downward slide.

The Fair Work Ombudsman has confirmed to Business Insider Australia that it is investigating Subway, following an investigation by The Sydney Morning Herald and The Age which aired allegations of underpayment and bullying of staff.

A number of former Subway employees have spoken out about being paid under the award wage for long periods of time, with one telling The Sydney Morning Herald and The Age that he was also forced to undergo unpaid training at the so-called Subway University.

Another former employee told the publications she was underpaid by $1300 and was bullied by franchisees. She claimed she was sent passive-aggressive texts by a franchisee, who told her she was being watched remotely via security cameras.

A Subway spokesperson is seemingly also blaming the franchisees, telling Business Insider Australia that business owners operating under the sandwich chain's brand need to ensure they are compliant with Australian rules and regulations.

"Subway takes these matters very seriously and franchise owners are expected to meet all regulatory, financial reporting, workplace and employment requirements," the spokesperson said. "Non-compliance is unacceptable and can lead to termination of an owner’s franchise agreement."

The Victorian Trades Hall Council, a trade union body, has tweeted that Subway is guilty of a "toxic culture of bullying and intimidation", and praised the union-backed Young Workers Centre for bringing the underpayment issue to light.

In response to the suggestion that some Subway franchisees are unhappy about being forced to foot the bill for mandatory renovation costs, the spokesperson didn't mince words.

"Subway makes no apology for innovating to increase the profitability of franchise owners and adapting to the changing needs of Australians," the spokesperson said. "Subway’s menu changes, enhancements and initiatives are contributing to strong sales growth, increased franchise owner profits and allowing the brand to remain competitive in a market with more consumer choice than ever before."

Remaining competitive is a game that Subway is increasingly losing. The sandwich chain — which has more locations than any other fast food outlet, with 42,000 across more than 100 countries — is experiencing major global decline.

Subway has closed thousands of stores in the past three years, with over 1,000 locations shuttered in 2018 alone. Between 2012 and 2016, the average revenue per franchise slipped from US$482,000 to US$422,000.

The decline is believed to have been exacerbated by the shock news in 2015 that Jared Fogle, a spokesperson who was formerly the face of the brand in global advertising campaigns, was charged with child pornography-related crimes in the US. The chain has also arguably been the victim of over-expansion, opening 8,200 stores in just an eight-year period in the 1990s.

In Australia, Subway's popularity has followed a similar trend.

According to the most recent Roy Morgan data, Subway's popularity in Australia has declined by 3% from 2013-2014 to 2017-2018, dropping below Hungry Jack's and Domino's.

Allegations of bullying and ripping off staff are unlikely help turn that trend around — but an apology might.