Franchise Crisis Recovery: What Domino's and Subway Did

Franchise crisis recovery runs on three clocks: the affected store in hours, the brand's public statement in days, and the whole system's economics in months or years. Domino's ran all three after its April 2009 video crisis, and its domestic franchise stores posted 14.2% same store sales growth in the first quarter of 2010. Subway ran the same three clocks after 2015 and reported net restaurant growth again in 2023.

A franchisor is the company that owns a brand and licenses it. A franchisee is an independent owner who runs one or more locations under that license. A national advertising fund is the pool of franchisee payments that buys brand-wide advertising. This article uses those terms for two documented cases, Domino's in 2009 and 2010 and Subway from 2015 to 2024.

Why is a crisis harder to fix in a franchise system?

A crisis is harder to fix in a franchise system because the franchisor controls the brand's message while independent owners control the stores where customers see it. Domino's showed that split in its fiscal 2009 annual report. As of January 3, 2010, the company listed 4,461 domestic franchise stores run by 1,161 franchisees, plus 466 Company-owned stores. EPR calculates from those counts that roughly 90% of Domino's domestic stores belonged to independent owners.

The same filing names the risk in plain terms. Domino's wrote that franchisees are independent operators, and that actions by them or their employees outside the company's control can damage its reputation and its stock price.

The filing also says franchisees' employees are not Domino's employees, and that the standard domestic franchise agreement requires owners to run training programs for their store staff. That structure explains why the two people in the 2009 video answered first to a franchise owner and only second to the brand.

Subway describes the same structure. Its April 30, 2024 release says its restaurants are owned and operated by franchisees. When the brand's longtime spokesperson became a legal story in 2015, every one of those restaurants carried the same brand name into the headline.

The two cases show what recovery looks like when the problem starts in one store and when it starts in a national campaign.

What did Domino's do in the first 48 hours of its 2009 video crisis?

Domino's located the Conover, North Carolina store about six and a half hours after its first warning, had the franchise owner end both employees' employment on April 14, 2009, and posted its president's apology video on Wednesday, April 15. The sequence comes from an Institute for Public Relations case study of the response.

The warning reached Domino's at 4:30 p.m. on Monday, April 13, when a blog webmaster emailed the company about videos of two employees tampering with food. Readers of the consumer blog Consumerist matched images in the videos to a drive-through window and found the store, an independently owned franchise. By 11:00 p.m. Domino's had the location and the names.

On Tuesday morning, Domino's chief of security spoke with the franchise owner, who dismissed the two employees that day, according to the case study and Nation's Restaurant News. Tim McIntyre, the Domino's spokesman who led the response, told ABC News that Domino's contacted the franchise owner, gave him the information it had and told him to take quick and decisive action.

Two other store-level steps appear in the record. A Domino's spokesman told ABC News that the store was shut down to be restaffed and disinfected. McIntyre also said Domino's copied the uploader's apology email, which said no tainted food was sent to customers, and shared it verbatim, according to the same report.

Domino's first chose not to issue a national press release and aimed its replies at the audiences already discussing the videos. McIntyre later described what that missed as "the perpetual mushroom effect of viral sensations," according to the case study. By Wednesday afternoon the main video had nearly a million views and accounted for five of twelve Google results for the brand's name.

Reputation data moved as fast as the views. The case study cites YouGov, an online research firm that surveys 1,000 consumers a day, as showing Domino's reputation going from positive to negative within a few days. The story also crossed borders: the case study says outlets in Peru, China, Greece and the United Kingdom ran it, and media in Australia and other North American markets implied the store was local.

That reach put Domino's international owners in the story. At the end of fiscal 2009, the company listed 4,072 international franchise stores, and its annual report says most international markets operate under master franchise agreements, in which one franchisee holds rights to a country or region. A crisis in one North Carolina store was therefore a risk to owners on several continents.

J. Patrick Doyle, then president of Domino's USA, recorded an unrehearsed apology in one take on a camcorder. The team posted it under the same title and tags the original uploader used, so it appeared in the same searches. The case study reports that Doyle said the actions of two individuals could harm a system where 125,000 people work for local business owners. That sentence spoke to owners as well as customers.

The cost to owners was real. The case study reports, citing a WCNC News report, that other franchise stores in the Charlotte, North Carolina area saw sales fall by 50%, and that one franchise owner ran a full-page newspaper ad to win customers back. The video crisis lasted days. Repairing what owners and customers thought of the pizza took the rest of the year.

How did Domino's fix the system after the video crisis ended?

Domino's fixed the system by changing its core pizza and by changing how much franchise owners paid into national advertising. The fiscal 2009 annual report says the company introduced its "Inspired New Pizza," a change to its core recipe, in the fourth quarter of 2009. It launched the product with the "Oh Yes We Did" campaign and the website pizzaturnaround.com.

The video and the recipe were separate problems. Domestic franchise same store sales fell 5.2% in 2008 and rose 0.6% in 2009, according to the same report, which points to a product problem that began before the video. EPR's coverage of that campaign is in the Domino's Pizza Turnaround case study.

Franchise owners paid for the national message. In 2008 each domestic store contributed 4% of retail sales to the national advertising fund. In 2009, stores in active advertising co-operatives chose to add 1 percentage point, which made 5%. Also in 2009, domestic franchisees amended their master franchise agreements to contribute 5.5% of retail sales to national advertising and to drop the required market-level contributions starting in 2010.

EPR's reading is that this amendment gave the brand one funded national message at the moment it needed one. Domino's reported the result on May 4, 2010: domestic same store sales grew 14.3% in the first quarter, which the company attributed to increased store traffic from the new pizza, according to its first quarter 2010 earnings release.

The breakdown matters in a franchise story. Domestic franchise stores rose 14.2% and Company-owned stores rose 14.7%, against a 1.1% gain and a 0.1% decline in the first quarter of 2009. Domino's first quarter 2010 quarterly report called the 14.3% its largest quarterly domestic same store sales growth since its initial public offering.

What did the 2009 video year cost Domino's franchise owners?

Domino's domestic franchise store count fell from 4,558 to 4,461 during fiscal 2009, a net loss of 97 stores, according to the fiscal 2009 annual report. The company-owned count fell by 23 in the same year, and the international count rose by 346.

The decline did not start with the video. Domestic franchise stores numbered 4,584 at the end of 2007 and 4,558 at the end of 2008, so the count was already drifting down before April 2009. The annual report does not assign the 2009 loss to the video, and EPR does not either.

The comparison base also limits what the 2010 numbers prove. Domino's first quarter of 2009 ended on March 22, 2009, according to its first quarter 2009 quarterly report, three weeks before the video. The 14.3% gain in the first quarter of 2010 therefore compares against a period the video had not touched, and the release does not separate the effect of the recipe from the effect of the recovery from the video.

Owners judge a recovery by figures like these, not by statements. The next section shows how Domino's kept those owners inside the plan.

How did Domino's keep its franchise owners inside the recovery?

Domino's kept owners inside the recovery through three standing structures that existed before the crisis: advisory boards, shared supply chain profits and a defined advertising fund. The fiscal 2009 annual report says the company runs several franchisee advisory boards, regional franchise teams and online newsletters, and that owners contribute to system-wide initiatives through those boards.

The filing's strategy language points the same way. Its mission statement names franchisees first, and it says the company's strategy puts franchisees and Company-owned stores at the foundation of its decisions, under a principle of one united brand, system and team. A brand that already treats owners that way has less to rebuild when a crisis arrives.

The filing also says Domino's generally shares 50% of the pre-tax profit of its regional dough and supply chain centers with domestic franchisees who buy all of their food from the company, and that it issued a record level of those payments in 2009. It reports a domestic franchise contract renewal rate above 99%.

The advertising fund has a legal home as well. Domino's says contributions go to Domino's National Advertising Fund Inc., a not-for-profit subsidiary. The money buys media, and it also pays for market research, field communications, public relations, commercial production and talent. Public relations is on that list, which means the fund rules a franchisor writes in advance decide whether crisis communications can be paid from owner contributions.

Franchise agreements and state franchise laws govern those rules, and they differ by brand. The filing notes that Federal Trade Commission rules and various state laws require a franchise disclosure document, and that state laws can limit how a franchisor terminates or refuses to renew an owner. A brand that wants to change fund rules mid-crisis should expect to need owner approval, as Domino's did in 2009.

How did Subway respond when its spokesperson became the crisis?

Subway responded to the 2015 crisis around its longtime spokesperson Jared Fogle in two statements six weeks apart: a mutual suspension on July 7, 2015, then a statement on August 18, 2015 that it had no relationship with him. Each statement matched what was publicly known on that day.

On July 7, 2015, the Associated Press reported that FBI agents and Indiana State Police raided Fogle's home. Subway said it was very concerned and tied the raid to an earlier investigation of a former employee of the Jared Foundation, Fogle's charity. Later that day, a Subway spokesman said the company and Fogle had mutually agreed to suspend their relationship. Fogle's attorney said he had not been arrested or charged.

By August 18, reports said Fogle was expected to plead guilty to federal charges. The Associated Press report that day quoted Subway saying the chain had "already ended our relationship with Jared." Nation's Restaurant News described that wording as clearer than the company's earlier statement.

The next day, per CNN's report on the plea deal, Subway said his actions were inexcusable and did not represent its brand's values. The AP noted that Fogle was not the only reason for Subway's growth. It reported about 11,800 U.S. stores in 1999, the year before his first Subway commercial. That caution applies to the recovery numbers as well.

Subway's April 30, 2024 release reported three years of sales growth and positive global net restaurant growth for the first time since 2016, across nearly 37,000 restaurants. QSR Magazine reported that Subway had lost around 7,000 U.S. restaurants since the start of 2016 and that the 2023 growth came mostly from international expansion. Neither source ties the closures to the Fogle case alone, so the 7,000 figure measures the size of the system's challenge, not the price of one decision.

The QSR Magazine report also lists the pace of the recovery. Net restaurant closures were 1,043 in 2021, 571 in 2022 and 443 in 2023. More than 18,000 restaurants worldwide had been updated to the brand's contemporary design by February 2024, including a record 4,000 remodels in North America in 2023. North American same store sales rose 5.9% in 2023, and Subway finished the year with 12 straight quarters of positive same store sales, per the same report.

Roark Capital completed its purchase of Subway on April 30, 2024. Subway did not disclose the price, and the Wall Street Journal reported about $9.6 billion, according to the Hartford Business Journal. When the agreement was announced in August 2023, VMSD reported that Subway CEO John Chidsey said the deal reflected the value of the brand and its franchisees, and that the company would keep a "win-win-win approach" for franchisees, guests and employees. EPR's profile of that period is in the Subway franchise PR case.

What do the two cases show about recovery timing?

The two cases show that franchise crisis recovery splits into a store clock measured in hours, a brand clock measured in days to weeks, and a system clock measured in months to years. EPR uses the term "three clocks" in this article as a way to compare the cases, and the clocks do not run at the same speed.

Domino's brand clock closed in two days, and its system clock showed up in sales on May 4, 2010. Subway's brand clock closed in six weeks, and its system clock showed up in its 2024 release. EPR's reading is that Subway's store clock never started because the 2015 problem had no address: owners shared the sign above the door, not one location. A brand that works only on the statement has addressed one of three clocks.

Which numbers should franchise owners see during a recovery?

Franchise owners should see four numbers during a recovery: same store sales split by owner and company stores, net restaurant count, contract renewal rate and owner payouts. Both brands reported at least two of them in public filings and releases.

A brand that publishes these figures to owners gives them evidence for a decision they have to make anyway: whether to keep investing in a location carrying the brand's name.

What should a franchise brand decide before a crisis starts?

A franchise brand should decide five things before a crisis: who contacts the affected owner, where the public statement appears, what happens when facts change, how owners fund a national response, and which numbers will show recovery. Each decision comes from one of the two cases.

Other franchise cases on EPR show the owner side of these decisions. The Planet Fitness franchise marketing case covers a 2026 national ad fund change, and the guide to how franchises run social media covers how corporate and local voices share one channel. For crisis cases outside franchising, see the 1982 Tylenol crisis case study and EPR's crisis communications coverage.

The takeaway for franchise brands

A franchise crisis is solved at the store, in the statement and in the owners' economics, and a brand that works only on the statement has fixed one of three problems. Domino's tied the three together within a year, and Subway's record shows the third can take most of a decade. The decision the evidence supports is to write down, before a crisis, who calls the owner, where the brand speaks and how owners would fund a national response.