In one corner are the company and consultant Kenneth Armstrong, who are pushing to spend the entire ad budget on national media, eliminating the $40 million Subway spends on local ads.
On the opposing side are a number of franchisees, who have brought in the Television Bureau of Advertising and are lobbying to move the full budget to local agencies, eliminating $60 million spent on the national level.
TENSIONS BOIL OVER
Tensions boiled over when Riney was asked in the spring to create a media plan to bring all spending national. Anger about the plan, combined with franchisee dissatisfaction with Riney's creative, combined to throw the account into review last week.
"Riney was just a funnel [and franchisees] found it guilty by as sociation," said Joe Hart, a franchisee in Atlanta and chairman of Subway's Franchise Advertising Fund Trust. The trust is an independent
12-member board of franchisees who administer ad funds accrued from
operators contributing 2.5% of weekly sales.
RESPONSE TO GROWTH
A company spokeswoman said the review is in response only to Subway's
quick growth, rather than any controversy surrounding Riney, which was
invited to participate.
Barry Krause, managing director of Riney, said only, "We will continue
relentlessly in providing ideas and support to help further build the
Subway business." Subway is the largest client of Riney's Chicago office.
In a unorthodox move, Subway, with about 12,000 stores nationwide, is
said to have invited virtually all of the 100 or so small agencies that
handle Subway business on the local level to participate in the review for
the national account. Subway also intends to trim the number of local
agencies handling its business.
WHAT FRANCHISEES WANT
At the core of the controversy are Subway's franchisees, many of whom
have been at odds with the parent company for years. One such franchisee
is Mike Johnson in Gastonia, N.C.
"We'd like to have all the ad money spent locally," Mr. Johnson said.
He claimed Subway is "bleeding the fund" at the corporate level,
spending ad dollars on a number of non-ad matters, such as various
overhead expenses and even "legal fees to evict some franchisees."
Mr. Hart, the franchise trust chairman, flatly denied the allegations, as
did the Subway spokeswoman.
"The idea that we are taking money out of the trust is ludicrous," Mr.
Hart said, adding that while the trust pays rent to Subway from the ad
fund, the amount is reasonable.
Mr. Hart said that at the behest of Mr. Armstrong-brought in by Subway's
corporate office-Riney drew up the controversial media plan and presented
it in April.
Based on Spot Quotations & Data, the Riney plan showed how by using more
weeks of national commercials-including 15-second spots-a 100% national
campaign was more