The Franchise Memorandum

The United States District Court for the Eastern District of Wisconsin recently approved the settlement of a consolidated consumer class action brought against Doctor's Associates, Inc., the franchisor of Subway restaurants. In re: Subway Footlong Sandwich Mktg. Sr Sales Practices Litig., 2016 WL 755640 (E.D. Wisc. Feb. 25, 2016). The plaintiffs alleged that Doctor's Associates had engaged in deceptive marketing and sales practices by advertising Subway sandwiches as "Footlongs" and "6-inch" sandwiches when, the case alleged, some sandwiches were slightly shorter than their advertised length.

The parties reached a settlement whereby Doctor's Associates agreed to institute or keep in place, for a period of at least four years, a number of practices designed to ensure that all bread sold at Subway restaurants is at least 12 inches long. The settlement also requires all Subway restaurants to post notices to customers indicating that the size and shape of bread may vary due to natural variability in the bread-baking process. Doctor's Associates also agreed to pay up to $520,000 in attorneys' fees and $5,000 in incentive awards to the named plaintiffs.

Several class members objected to the settlement based on the lack of monetary relief to the class. The court overruled the objections, noting the weakness of the plaintiffs' claims for monetary injuries; the impracticality of distributing a settlement as small as $525,000 to a class composed of many millions of consumers; and the impossibility of a coupon settlement because Subway restaurants are owned by independent franchisees, rather than Doctor's Associates (and thus the franchisees would bear the cost of a coupon settlement).