Freshii founder woos Subway franchisees

TORONTO — Freshii has made an ostentatious bid to lure franchisees away from rival Subway as it looks to more than triple its footprint over the next two years.

Matthew Corrin, founder and CEO of the Toronto-based restaurant chain, released an open letter Tuesday to Subway franchisees with a “sincere proposal” to convert some of their submarine shops into Freshii outlets.

“This is not a takedown,” Corrin said in an interview.

Subway, which operates more than 44,600 restaurants in 112 countries, could prosper if it unloaded 14,000 locations, Corrin said. He estimates willing franchisees can make the switch for US$75,000 per store.

“What that requires is Subway’s blessing,” he said.

Subway, a private company headquartered in Milford, Conn., offered no immediate response to Freshii’s proposal.

“We will not be providing a statement today on the open letter,” it said in an email Tuesday.

As of Sept. 25, 2016, Freshii had 244 stores in 15 countries, according to financial documents. In February, a month after it went public, Freshii announced it would enter the United Kingdom in its efforts to grow to 840 locations worldwide by the end of 2019.

Freshii and Subway operate on similar business models, appealing to health-conscious diners who want food on the run. But Corrin says Subway, founded more than 50 years ago, has lost relevance in today’s hyper-competitive food retail sector.

“Freshii is probably the healthy fast-food option for this generation,” he said. “Subway was the healthy fast-food option for, you know, generations before us.”

The unique pitch comes at a time when Subway has found itself fighting reports by the CBC that said samples of its chicken products based on testing showed that they contained on average between 42.8 per cent and 53.6 per cent chicken DNA. Subway has disputed the reports.

Subway has struggled over the past few years with softening sales and customer counts as their business model didn’t evolve with the market, said Robert Carter, executive director of food service for market research firm NPD Group.

“Years ago, Subway was really well known for, you know, the perceived health and wellness, the fresh food, the customization,” he said.

“In today’s restaurant market, that’s the price of entry.”

He said Subway’s market share remains strong and the company has started addressing some of its shortfalls by launching a digital app and phasing out antibiotics from its meats in the U.S.

It’s unlikely Subway will entertain Corrin’s proposal, Carter said, adding that it is probably a good way to drum up publicity for Freshii — something Carter said Corrin excels at doing. Corrin brushed aside any suggestion his letter to Subway was a publicity stunt.

This isn’t Corrin’s first public letter to another major fast-food chain.

In 2015, he wrote to Steve Easterbrook, president and CEO of McDonald’s, challenging the company to open a Freshii outlet in one of its American locations as a one-year test. Corrin, who argued that would boost the company’s profits, said two months ago he didn’t hear back from McDonald’s.

He said he is confident he’ll hear from Subway soon and the two parties will enter into serious conversations on his proposal.

Freshii made its bid ahead of its first financial report to be released Wednesday. The company debuted on the Toronto Stock Exchange in January after a $125-million initial public offering of its stock.

Follow @AleksSagan on Twitter.

Aleksandra Sagan, The Canadian Press

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