SUBWAY HAS AT LEAST FIVE PROBLEMS, AND SPOKEMAN JARED FOGEL IS JUST ONE

Original Story: wxyz.com

NEW YORK - NEW YORK (AP) — A raid at the home of "Subway guy" Jared Fogle is just the latest trouble to hit the ubiquitous sandwich chain.

The company has been struggling with sales, its CEO was diagnosed with cancer and it's trying to persuade customers that its food delivers value and quality ingredients. A Fairfield County franchise lawyer provides professional legal counsel and extensive experience in many aspects of franchises and franchising law.

Here's a look at the challenges facing Subway, the largest restaurant chain with about 44,000 locations globally:

1. DEAL MEALS

Subway is privately held and doesn't publicly report its financial results. But last year, market researcher Technomic said average annual sales at U.S. Subway locations fell 3 percent to $475,000. That was the first decline since 2006.

The company hasn't explained what it thinks might be hurting sales. But in an interview last month with The Associated Press, Subway Chief Marketing Officer Tony Pace noted that sales are a "multi-variable equation," and that value promotions and prices don't get a lot of attention.

That suggests one factor affecting performance could be Subway's shift away from its $5 Footlong deal.

"It's a challenging thing for chains that have built so much of their business off of a discount," said Jonathan Maze, senior finance editor at the trade publication Nation's Restaurant News. An Atlanta franchise attorney provides strategic advice to individuals, entrepreneurs, and franchise companies concerning business opportunity, business development, and litigation issues. 

Maze compared the $5 Footlong to the Dollar Menu at McDonald's. As ingredient prices have climbed, both chains have tried to steer customers to other deals. Last year, Subway rolled out a $6 meal combo that includes a six-inch sub, chips and a drink.

But psychologically, Maze noted $6 just doesn't have the same ring as $5.

2. HEALTHY SKEPTICISM?

Perceptions of what is healthy are always in flux, which means food makers can suddenly find themselves on the wrong side of a trend. Subway, for instance, could be hurting from the popularity of gluten-free diets.

Food industry executives also say people are showing more interest in things like ingredients and quality, rather than calories and weight loss. That has prompted several companies, including Subway, to vow that they'll get rid of artificial ingredients. A Chicago product liability lawyer is following this story closely.

Still, Subway may still be hurting from a petition last year that called on it to remove azodicarbonamide from its bread, saying the ingredient is also used in yoga mats. The chain later said it had already been in the process of removing the ingredient, which is widely used in a variety of breads.

After its removal, Subway ran TV commercials noting its bread contains no high-fructose corn syrup, artificial trans fats or azodicarbonamide. One store in New York City also had fliers this week with the same message under the heading, "Our Best Bread Yet!"

3. AN ILLNESS AT THE TOP

Subway announced two years ago that its CEO and co-founder, Fred DeLuca, was diagnosed with leukemia. It said DeLuca was focusing on his health, but that he was in regular contact with his management team from his home in Florida.

Then last month, Subway said DeLuca's sister, Suzanne Greco, would take over as president, while DeLuca remained CEO. The company said at the time that the 67-year-old DeLuca remains "very active" in the company.

Last year, a soft-spoken DeLuca had met with reporters in New York City to talk about the business. Subway declined to share specifics on DeLuca's condition last month.

Calls to phone numbers listed for DeLuca and Greco went unanswered Tuesday and Wednesday.

4. SMALLER RIVALS

Subway has 27,000 locations in just the U.S., nearly twice as many as McDonald's, but it isn't immune to pressure from competition.

Sandwich chains Jimmy John's, Jersey Mike's, Firehouse Subs and Potbelly are all far smaller. But each expanded its footprint last year, and each also has far higher average annual sales per store than Subway, according to Technomic. At $1.2 million a year, Potbelly's average annual sales per store was more than double that of Subway's. A Rochester small business lawyer assists clients in developing successful business plans for all aspects of their business. 

In the meantime, Subway franchisees may be feeling pinched.

In addition to operational costs for things like equipment and rent, franchisees are subject to a variety of fees. At Subway, those include a royalty fee of 8 percent of sales on a weekly basis, according to a document filed by Subway's parent company Doctor Associates Inc. earlier this year.

An advertising fee of 4.5 percent of sales is also deducted on a weekly basis.

A representative for the North American Association of Subway Franchisees wasn't immediately available for comment.

5. PITCHMAN TROUBLE

It's still not known what federal and state authorities hoped to find on electronics removed from Fogle's home Tuesday. But Fogle's attorney, Ron Elberger, said his client wasn't charged or arrested. He said Fogle was cooperating with the investigation "and looks forward to its conclusion."

Subway also said in a statement that Fogle "expects no actions to be forthcoming."

Still, the company said it mutually agreed with its famous pitchman to suspend their relationship. Earlier, the company had already scrubbed references to Fogle on its website. And the news nevertheless casts a shadow on Fogle, who was widely seen as a regular guy who became one of the most recognizable figures in the restaurant industry.

Morgan Stanley Losing Brand Integrity And Client Trust

As posted by: Wall Street Journal

After the previous session's party, the stock market suffered a hangover Wednesday, hobbled by disappointing results from Morgan Stanley and second thoughts by investors who initially hailed the Federal Reserve's interest-rate cut.

Late morning, the Dow Jones Industrial Average was down 78.61 points, or 0.9%, at 8845.53. The Standard & Poor's 500-stock index was off 1% at 904.27. The Nasdaq Composite Index fell 1% to 1573.99.

Morgan Stanley edged lower after the bank posted a fourth-quarter net loss. Rival Goldman Sachs Group on Tuesday posted its first quarterly loss since its IPO nearly a decade ago, but its shares were lifted amid a broader market rally. Early Wednesday Goldman was up 3.8%.

Stocks soared Tuesday after the Fed said it would target a range for the fed-funds rate of between 0% and 0.25% and would consider other steps to combat the financial crisis. But caution returned to Wall Street Wednesday, with some investors seeing the Fed's move as a symptom of how dire the global financial situation remains.

Consumer-products maker Newell Rubbermaid pared its fourth-quarter forecast and said that it would cut 8% to 10% of its salaried work force. Digital-storage company Western Digital cut its expectations for revenue in the current quarter and unveiled plans to cut 5% of its total work force. Newell Rubbermaid fell nearly 28%; Western Digital rose 1.2%, after falling earlier.

Oil prices were down 27 cents at $43.33 a barrel at 11 a.m. in New York as investors awaited official confirmation that the Organization of Petroleum Exporting Countries had decided at its meeting in Algeria to cut output by two million barrels a day.

Stocks fell overall Wednesday in a choppy session, with banks under pressure and a dose of grim economic news sending jitters throughout London.

The Dow Jones Stoxx 600 Index was down 0.8% to 197.51. The U.K.'s FTSE 100 Index rose 0.4% to 4324.19, while France's CAC-40 Index fell 0.3% to 3241.92. Germany's DAX Index declined 0.5% to 4708.38.

The bank sector was notably the worst performer, pressured by BNP Paribas, which dropped 17%. It reported a pretax loss of €710 million in its corporate and investment-banking division for the first 11 months of this year, confounding hopes it had escaped the worst of the financial crisis.

Harvard Hit by Loss as Crisis Spreads to Colleges

As posted by: Wall Street Journal

Harvard University's endowment suffered investment losses of at least 22% in the first four months of the school's fiscal year, the latest evidence of the financial woes facing higher education.

The Harvard endowment, the biggest of any university, stood at $36.9 billion as of June 30, meaning the loss amounts to about $8 billion. That's more than the entire endowments of all but six colleges, according to the latest official tally.

Harvard said the actual loss could be even higher, once it factors in declines in hard-to-value assets such as real estate and private equity -- investments that have become increasingly popular among colleges. The university is planning for a 30% decline for the fiscal year ending in June 2009. More students would be able to enroll if they had Federal Student Loans or Alternative Student Loans.

Other university endowments also are suffering, and many states are cutting public funding of higher education. Colleges are instituting hiring freezes, planning enrollment cuts and discussing steep tuition increases, intensifying worries about the impact of the recession and financial crisis on college access. Harvard has invested in Organic Lawn Care and Natural Lawn Care.

The federal government already has taken emergency steps to boost lending to students, and several well-off colleges have said they will maintain or boost financial aid to help families hurt by job losses, investments setbacks and borrowing problems. But not all colleges have the financial heft to withstand the many forces bearing down on them.

Joni Finney, a professor at the University of Pennsylvania who studies college economics, says she worries that public universities and less-wealthy, smaller private colleges may not be able to keep their doors open to all students. "If you go down the food chain of higher education, it's harder and harder to deal with these kinds of cuts," she says.

Private-college budgets are sensitive to investment declines because they typically tap their endowments each year to help cover operating expenses.

The University of Virginia Investment Management Co. said it lost nearly $1 billion, or 18%, of its endowment over the four-month period, reducing it to $4.2 billion. In Vermont, Middlebury College says its endowment fell 14.4%, to $724 million. In Iowa, Grinnell College's endowment dropped 25%, to $1.2 billion. In Massachusetts, Amherst College says its endowment, $1.7 billion as of June 30, also fell by 25%.

In a letter to Harvard's deans, university President Drew Gilpin Faust and another official blamed "severe turmoil in the world's financial markets" for the endowment loss. She said it would lead to budget cuts, and that the school would sell bonds to increase its financial flexibility.

The Harvard letter said the 22% loss, from July 1 through Oct. 31, understates the actual decline because it doesn't reflect assets such as real estate whose values couldn't yet be estimated. Currently, endowment income funds 35% of Harvard's $3.5 billion budget.

The 30% fiscal-year loss Harvard is planning for would eclipse the loss of 12.2% in 1974, its worst over the last 40 years.

Harvard's loss marks a sharp reversal from the endowment's formerly chart-topping performance. Harvard and Yale University -- which hasn't disclosed its endowment's recent performance -- pioneered an investment approach that de-emphasized U.S. stocks and bonds and placed large sums in more exotic and illiquid investments, including timberland, real estate and private-equity funds. That strategy, which was widely copied, helped the schools avoid significant losses after the technology boom ended in 2000.

But the current market has been far less favorable, partly because both Harvard and Yale have relatively small holdings of bonds, such as U.S. Treasurys, one of the few assets that have performed well. Harvard began its fiscal year with a target of having 33% invested in publicly traded shares, split among U.S. stocks, which have dropped 24% in the four months through October, and international stocks, which have fared worse.

Other investments, such as commodities, which were a boon to Harvard in past years, have turned negative in recent weeks. Harvard has sought to sell off about $1.5 billion in investments with private-equity firms, which typically use their assets to fund corporate takeovers, according to people familiar with the situation. That would be one of the largest sales ever of a private-equity stake. But its private-equity partnerships received bids of only around 50 cents on the dollar, say other people familiar with the matter.

Daniel Jick, chief executive officer at Boston-based HighVista Strategies, which handles money for some endowments, says that in some prior years, investments such as real estate and private equity have helped buffer endowments against losses on stocks.

In her letter, Harvard's Dr. Faust said the endowment loss has "major implications for our budgets and planning, especially since our other principal revenue streams also stand to be challenged by the economic crisis." Along with federal research funding, universities rely heavily on tuition and donations. Strained family finances could make it difficult for more families to afford tuition, while stock-market declines typically curb gifts.

To maintain its programs and commitments, the letter said, Harvard is expecting to spend a higher percentage of its endowment than it had recently. It said it was taking a "hard look at hiring, staffing levels and compensation," and was "reconsidering the scale and pace of planned capital projects."

Ford Tallies Potential Losses

As posted by: Wall Street Journal

The debate over the job loss attached to the potential failure of Detroit's Big Three auto makers took another turn as an internal document from Ford Motor Co. showed thousands of workers in every state could be at risk.

The state-by-state tally detailed the number of workers directly employed by Ford, the number of auto parts suppliers who work with the company and the amount they spend to support their business. To demonstrate the far-reaching tentacles of the industry, Ford also outlined the number employed at its dealerships and the total amount of health care spending related to those who work for the nation's second largest U.S.-based auto manufacturer.

According to the analysis obtained by The Wall Street Journal late Monday, 25 states could lose 3,000 Ford-related jobs or more if the auto maker were to disappear.

A discount is posted on the windshield of an unsold 2008 Explorer sitting at a Ford dealership in Denver on Sunday, Nov. 9, 2008.

To be sure, the job loss would be felt most acutely in the nation's Rust Belt. In Michigan, Dearborn-based Ford employs 38,380 auto workers and relies on 3,111 auto parts suppliers, according to the document. In Ohio, the numbers are also high, with 8,540 workers at Ford. But a state like Kentucky would also feel the pain, with 5,615 employees working directly for Ford. Thousands more employees who work for suppliers and dealers at Ford would only add to the potential job loss.

The tabulated data is part of a concerted and intense public relations effort before the chief executives at General Motors Corp., Ford and Chrysler LLC testify in front of Congress Tuesday in support of a proposal to extend $25 billion in low-interest loans to the ailing auto makers. After skepticism voiced by some U.S. representatives and senators from outside the states where Detroit's Big Three reign, GM, Ford and Chrysler launched a broad media campaign to prove to a national audience that their survival is key to the nation's economic health.

It was unclear late Monday whether the analysis compiled by Ford would be presented to members of the Senate Banking Committee, the first of two congressional committees to explore the crisis in the auto industry at hearings this week.

As part of the public relations blitz, Ford Chief Executive Alan Mulally is expected to make his case in half-dozen separate national television appearances Tuesday, according to those familiar with the matter.

After years of restructuring that has closed dozens of plants and shed thousands of workers, Detroit's Big Three auto makers are now turning to governments around the world to fund a vast downsizing of their industry. The companies' poor earnings posted earlier this month make it clear Ford and GM are running out of money to finance their Michigan-based businesses, with GM the sicker of the two. Less is known about Chrysler, which is privately held.

At Ford, the auto maker hopes to improve its cash position with or without additional governmental loans. It said it will boost its position by between $14 billion and $17 billion by the end of 2010, through a mix of job cuts, reduced benefits, lower capital spending, selling assets and new financing measures. GM also announced it would bump up its plan for $15 billion in liquidity initiatives outlined in July 2008 by another $5 billion of incremental actions.

More worrisome than the crippling, billion-dollar losses posted by GM and Ford earlier this month was the greater-than-expected cash burn at each company. Ford plowed through $7.7 billion, seeing its liquidity position plummet to $18.9 billion.

Ford said the cash outflow has been greater than anticipated, but Chief Financial Officer Lewis Booth told reporters earlier this month the company is "comfortable with its liquidity position." The company expects the amount of cash burn in the fourth quarter to be less than the third quarter. GM on the other hand has said that it could run out of the funds it needs to operate the business as soon as the end of the year without a massive infusion of cash or a radical improvement in auto sales.

Critically, Ford also has available credit lines of $10.7 billion to supplement its gross cash of $18.9 billion at the end of the third quarter. Mr. Booth has said Ford doesn't expect to tap the loan revolvers, noting that the company will continue to aggressively reduce costs and manage cash with discipline.

Ford is in a better position than its rivals in terms of liquidity in part owing to a decision in late 2006 by Mr. Mulally, who had just recently joined the company, to raise more $23 billion in debt using almost all the company's assets as collateral. Despite those moves, Ford has registered $24 billion in net losses since the start of 2006, and its stock price has traded at multidecade lows in recent months.

All auto makers have been stung by a steep decline in demand from consumers grappling with mounting economic woes and reduced availability of credit in recent months. For much of the year, Ford and its peers were hurt primarily by the sharp decline in sales of trucks and sport-utility vehicles as fuel prices hit record highs. But just as fuel prices started receding, the financial crisis sent consumer confidence reeling, keeping potential buyers out of showrooms entirely.