Along Avenue du GÃ©nÃ©ral-Leclerc, there is a Buffalo Grill, another Subway, a McDonald’s and a Burger King, before you get to the huge windows and mermaid logo of the Starbucks, over two air-conditioned floors on the corner of the Rue d’AlÃ©sia. It contrasts with the Subway — the walls are painted in warm colours, the music is jazzy, the tables and sofas welcoming, there are sockets for laptops: everything to encourage customers to stay as long as they like. A third of the customers ordered in English while I was there, and almost everyone was expensively dressed. Whereas Subway sandwiches cost less than €3 ($3.30), a Starbucks Frappuccino is more than €5 ($5.50).
With their established US networks and niches in the global fastfood market, Subway arrived in France in 2001 and Starbucks in 2004. Unlike the multinational Burger King, quoted on the stock exchange, with franchises often held by big middlemen (1), Subway is a network of small entrepreneurs (the “Subway family”), presented as close to their workforce and supportive of community projects. And unlike McDonald’s and Kentucky Fried Chicken (KFC), with their high-fat food, Subway claims to offer “healthy” products.
Starbucks wants to be seen as upmarket and responsible, and emphasises the freshness of its sandwiches, cakes and juices and the skill of its coffee roasters. It boasts of its fair trade coffee and good staff management. According to its charter, its employees are “partners”: “It’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard,” Starbucks CEO Howard Schultz has claimed (2). He is responsible for 21,000 Starbucks outlets in 60 countries, with a workforce of over 200,000.
After a successful career at Xerox and Hammarplast USA, Schultz bought Starbucks in 1987 for $4m, when it was a local Seattle chain created by two coffee lovers. Since then, through books and media appearances, he has worked to build its legend. He misses no opportunity to show his support for progressive causes: President Obama’s healthcare policies, same-sex marriage, a ban on carrying guns. In June last year, Schultz, casually dressed, appeared on Jon Stewart’s Daily Show on Comedy Central. “Today we announced that Starbucks would become the first US company to provide free college tuition for all of our employees,” he told a delighted audience. Only employees who work more than 20 hours a week qualify, and only for online courses, but this sort of announcement has helped Schultz reach 17th place in Fortune magazine’s list of “the world’s 50 greatest leaders”.
The most outlets
His counterpart at Subway, Frederick DeLuca, is also a favourite with the US media, as a self-made man. In 1965, aged 17, he opened his first restaurant in Connecticut with a $1,000 loan from a friend of his father’s, Dr Peter Buck, who still co-owns the brand. The concept — sandwiches freshly prepared to order — was an almost instant hit. By 1974, DeLuca and Buck had 16 US outlets and took the franchise route.
Since then, Subway, with 44,000 outlets in 105 countries, has overtaken McDonald’s as the fast food chain with the greatest number of outlets, though McDonald’s has a higher turnover. DeLuca, as head of a network of small entrepreneurs, vociferously defends his “family” and criticises laws that hamper small business. The environment for US entrepreneurs has “continuously gotten worse because there are more and more regulations,” he said in 2013. “It’s tough for people to get into business, especially a small business … If I started Subway today, Subway would not exist.” He is against Obamacare (“the biggest concern of our franchisees”), payroll tax and any increase in the minimum wage (“it will cause franchisees to raise prices”). DeLuca is part of the “fetish of the American entrepreneur”, the bold individual who, according to Charles Wright Mills, appeals to capitalist utopians (3).
To grow in the US and then worldwide, Subway devised an attractive model. Initial franchise costs are modest: $11,000 (€10,000) in France, $15,000 in the US, a third of what competitors charge. Opening an outlet does not entail high investment: $220,000 of which $88,000 is equity. There is no need for fryers, big kitchens, ice or soft drinks machines; just a toaster, a counter to display the food and a chiller for drinks. Franchisees, who bear the full risk of failure, pay Subway 12.5% of their turnover (compared to 11% for KFC and Pizza Hut and 7% at Pomme de Pain and Planet Sushi). Head office banks the returns, takes care of marketing and sends inspectors to check that every shop sticks to its specifications: the 13 stages of defrosting and cooking the bread, the layout, furniture, hygiene rules, pricing policy. “They decide, and we implement,” a Danish franchisee said. “If we introduced a change without informing Subway’s development agent, we’d be in trouble,” another told me (4).
Franchise applicants do not need to have experience or qualifications. Since Subway has little to lose, it actively tries to sign up new entrepreneurs. In 1998 the economist Dean Sager described Subway as “the biggest problem in franchising … one of the key examples of every [franchise] abuse you can think of.” The French site Blog-franchise.fr wrote in 2013: “The majority of franchisees survive through everyday slavery.”
Probably because of a confidentiality clause, most franchisees refuse to talk about their contracts. One who runs a shop in the Lille area agreed to speak anonymously: “Subway wants to open restaurants everywhere and there is no real market analysis. Sometimes you get three Subways all competing with each other within 500 metres. In order to survive, many people have to open several shops.” (This corroborates data from the Observatoire de la Franchise, which says that 70% of new Subways in France are opened by existing franchisees.) He complained about Subway’s royalty demands: “You have to pay them every week, even when business is bad. It’s easy to get into debt. Especially as you have to deal with the brand’s official suppliers and there’s no room for manoeuvre on prices.”
Bankruptcies are common
I asked a Subway regional development manager about franchisees’ problems, and he referred me to their PR agency, the British firm McKenna Townsend, which insisted that, apart from a few isolated cases, franchisees are very happy. Yet bankruptcies are common. According to Capital magazine, between 2008 and 2010, 45% of French Subways changed hands.
The pressure put on shop managers is passed on to their staff. According to a CNN investigation using data from the US Department of Labor, US outlets committed 17,000 labour regulation violations between 2000 and 2013: unpaid overtime, illegal withholding of pay in cases of till shortfalls, unfair dismissal. DeLuca blamed his franchisees, saying these were cases of “violations at the store level … three or four years ago, we started working closely with the Department of Labor to partner with them to help educate our owners on the right thing to do.” Subway employees have few ways of standing up to their bosses: “They are very small businesses with just a few employees, and it’s almost impossible to unionise,” said Olivier Guivarch, responsible for the hotel, tourism and restaurant sectors at the French Democratic Confederation of Labour (CFDT). “In France, [Subway employees] don’t have workers’ councils, union reps or other representative institutions. It’s easier to get established in integrated companies such as Starbucks.”
Starbucks runs its own shops, in order to maintain the brand’s standards and be able to choose locations carefully (5). Subway, with its haphazard development strategy, opens restaurants indiscriminately; Starbucks advances town by town, concentrating on places with a good flow of people — main streets, shopping centres, business districts, historic town centres, stations and airports — which it saturates to stifle competition. It has succeeded in establishing itself in countries with almost no previous coffee culture, such as China (which had 1,300 shops in 2014).
Locations are chosen to match target markets, and the company’s self-image. As Paula Mathieu, a specialist in rhetoric has shown, there is a story intended to dramatise “the Starbucks experience” (6). According to Schultz, this “is defined by what we have characterised for a long time as Starbucks really becoming this ‘third place’ between home and work — an extension of people’s front porch, or people’s home office.” The baristas are encouraged to make customers feel special by chatting to them, using first names and talking about racial inequality in the US (the aim of the Race Together campaign launched by Starbucks this March) or roasting techniques.
Starbucks customers are supposed to be getting more than a simple drink, identical from Dubai to Rio de Janeiro — it is meant to be a gastronomic experience. The use of Italian(ate) names (latte, macchiato, Frappuccino), the rule that baristas must throw away any espresso that has remained unmixed for longer than 10 seconds because it will have lost its flavour, the promotional brochures (“Each coffee bean requires a unique balance of temperature and time to reach its individual peak of aroma, acidity, body and flavour”), reinforce the idea that the products, cleverly balanced between scientific precision and passion, can only be appreciated by discerning people. This is how it taps into a similar clientele the world over: well-off students, professionals, tourists and expats, who view it both as a familiar refuge and a distinctive destination where they can exercise their good taste. “We created the gourmet coffee business,” Schultz boasted.
DeLuca claims to have invented the healthy fastfood business. In 1998 Jared Fogle, a 21-year-old American who weighed 192kg, went on an unusual diet: for a year, he ate only Subway sandwiches — turkey for lunch and vegetarian for dinner, avoiding cheese and mayonnaise. He lost over 110kg. Men’s Health magazine featured it as “the Subway diet”. Subway rode the wave. In 2002 it adopted the slogan “Eat fresh” and turned its logo green as a sign of “naturalness”. To increase its credibility, it formed partnerships with the American College of Cardiology and the American Heart Association. Fogle became the chain’s Ronald McDonald, the Subway guy. He has appeared in over 300 Subway ads, for which he has received $15m. Michelle Obama thanked Subway for getting “kids excited about eating their vegetables” (7).
By presenting itself this way, Subway penetrated the health-conscious market and opened up markets closed to its fried-food competitors, including hospitals, high schools and university campuses. This greenwashing was profitable: between 1998 and 2011, according to USA Today, Subway’s US sales went from $3.1bn to $11.5bn.
But food is not “healthy”, “natural” or “fresh” just because it’s raw. Subway vegetables are tasteless, grown year round in overheated greenhouses, and picked when barely ripe (or still green) to allow time for transport. A sign in each outlet advises that sliced ham, turkey and beef are not recommended for people who are allergic to milk and soya — the meats come from factories where animals are just materials combined and transformed with water, salt, sugar, stabilisers. In the US, Subway is supplied by the giant West Liberty Foods, which also supplies Walmart and Costco hypermarkets. This June, Subway was accused of over-using antibiotics to treat its animals (8).
There are relatively healthy sandwiches but most customers add sauce and cheese, and side orders of fries and soft drinks. The chain’s recommended combinations are especially calorific: the 30cm versions of the flagship Big Philly Cheesesteak and Meatballs Marinara sandwiches have 1,000 and 750 calories, compared to 540 for a Big Mac.
Starbucks’ repositioning at the forefront of ethical business was as much of an accident as the Fogle phenomenon. In 1999 the World Trade Organisation summit was held in Seattle, prompting anti-globalisation protests all over the city. Starbucks shops were targeted because they export an American lifestyle while exploiting peasants in the South. Schultz and his strategists were worried they would become a symbol of imperialism like McDonald’s and Nike, and launched an operation to improve the corporate image. In 2000 Starbucks signed a partnership with TransFair USA, which promotes fair trade. In 2004 it established its own ethical label, undertaking to pay 20-30% above the market rate for coffee, and set a floor below which it would not go if market prices fell sharply. It improved workers’ benefits: in the US, they can get health insurance (if they work more than 20 hours a week), buy shares at a discount (after a year’s service) and take home one free pack of coffee a week.
But its global policy is aggressive towards suppliers and employees. Between 1991 and 2013, global coffee sales went from $30bn to $70bn, but the share that went to producers dropped from 40% to 10% (9). Starbucks contributed to that change. It has had lobbyists in Washington since 2004, pushing for lower customs barriers with its supplier countries (10). In 2006-7, it brought Ethiopia before the US courts to stop the country trademarking the names of three coffee regions. To avoid paying tax on profits in countries in which it operates, it transfers the money to tax havens through a company in Switzerland (11). As a member of the powerful Grocery Manufacturers Association, along with NestlÃ©, Kraft Foods, Proctor & Gamble, it promotes free trade. It acts like every other multinational in the agribusiness sector.
Its baristas, like Subway’s “sandwich artists”, have to take orders, encourage customers to spend more, prepare drinks, operate the till, clean tables and toilets, empty bins, wash up and smile, for a wage only just above the minimum, tips included.
To Starbucks, employees are interchangeable. “If another shop needs someone extra, or if we’re overstaffed, the store manager can easily tell you to go and help out elsewhere,” a Parisian barista said. “In our contracts there’s a mobility clause: they can ask you to make a permanent change of shop, and full-time employees don’t have the right to refuse.” To monitor its “partners” — ethically — there is a system called Customer Voice: “For the past three or four months, [after] every few orders a second slip is printed off along with the till receipt, asking the customer to complete a questionnaire online to give feedback on their experience. It gives them the chance to win the equivalent of a large latte every day for a month.”
There’s strong pressure to stop workers voicing their opinions. In 2005 Daniel Gross, a New York barista who wanted to create an Industrial Workers of the World (IWW) chapter in his shop, talked to the New York Times. Schultz immediately sent an email to all his US workers taking issue with Gross’s position; Grosswas sacked a few months later (12). Since then Starbucks has fiercely opposed unionisation, or ensured it is not troublesome. In 2013 the first elections of workers’ representatives in Starbucks France were a victory for the CFDT, but when I tried to contact two of its representatives, one, a Paris store manager said he was unavailable for several weeks and the other, a shift supervisor, didn’t want to speak without management approval.
High staff turnover, small-scale operations, franchising system and hierarchy make it difficult to organise the workforce in the fastfood sector. In 2014 union delegates from more than 30 countries met in New York to discuss collective action. They listened to the experiences of New Zealand’s Unite organisation, one of the few firmly established in the sector. In 2005 Unite activists burst into a Starbucks in Auckland and called on the baristas to stop work (13). This was repeated in other shops, and in less than six months, 2,000 people had signed up to the union, which kept up its interventions (such as saturating a company’s phone switchboard with calls to disrupt its delivery system). The fastfood giants gave in, and in 2006 a collective agreement was signed. Since then, more than 30,000 young workers have entered the union and wages in New Zealand’s fastfood sector have increased by 50%.
Translated by George Miller.
(1) Burger King’s biggest franchisee, a company based in New York State, has over 560 restaurants. See Thomas Frank, “The real cost of a cheap burger”, Le Monde diplomatique, English edition,February 2014.
(2) Howard Schultz with Joanne Gordon, Onward: How Starbucks Fought for its Life Without Losing its Soul, Rodale Press, New York, 2012.
(3) Charles Wright Mills, White Collar: the American Middle Classes,Oxford University Press, Oxford and New York, 1951.
(4) Quoted in Henrik Antonsson, Lukas EngstrÃ¶m and Vytautas Verbus, “Innovation within Fast Food Restaurants: the Role of the Local Restaurant Manager”,JÃ¶nkÃ¶ping International Business School, 2011.
(5) To conquer a new country, Starbucks sometimes forms a joint venture with a local partner: Autogrill in Belgium, Sazaby League in Japan, Grupo Vips in France, Spain and Portugal. It later buys out the partner.
(6) Paula Mathieu, “Economic Citizenship and the Rhetoric of Gourmet Coffee” (PDF), Rhetoric Review,vol 18, no 1, Autumn 1999.
(7) “Remarks by the First Lady at Subway’s Let’s Move! Announcement”, White House, Washington DC,
23 January 2014.
(8) Open letter to Frederick DeLuca from 60 associations in health and the environment, 23 June 2015.
(9) Kelsey Timmerman, Where Am I Eating? An Adventure Through the Global Food Economy, Wiley, Hoboken (New Jersey), 2013.
(10) Jeanne Cummings, “Cautiously, Starbucks puts lobbying on corporate menu”, The Wall Street Journal,
12 April 2005.
(11) Tom Bergin, “Special Report: How Starbucks avoids UK taxes”, Reuters, 15 October 2012.
(12) “National Labor Relations Board v Starbucks Corporation”, United States Court of Appeals, Second Circuit, New York, 27 April 2011.
(13) Erik Forman, “Supersizing Pay in New Zealand”, Labor Notes,no 407, Detroit, February 2013.