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who borrowed $1,000 from a family friend to open a sandwich shop in Bridgeport, Connecticut. DeLuca was seventeen at the time. Today Subway has about fifteen thousand restaurants, second only to McDonald’s, and opens about a thousand new ones every year. DeLuca is determined to build the world’s largest fast food chain. Many of the complaints about Subway arise from its unusual system for recruiting new franchisees. The chain relies on “development agents” to sell new Subway franchises. The development agents are not paid a salary by Subway; they are technically independent contractors, salesmen whose income is largely dependent on the number of Subways that open in their territory. They receive half of the franchise fee paid by new recruits, plus one-third of the annual royalties, plus one-third of the “transfer fee” paid whenever a restaurant is resold. Agents who fail to meet their monthly sales quotas are sometimes forced to pay the company for their shortfall. They are under constant pressure to keep opening new Subways, regardless of how that affects the sales of Subways that are already operating nearby. According to a 1995 investigation by Canada’s Financial Post, Subway’s whole system seems “almost as geared to selling franchises as it is to selling sandwiches.”

It costs about $100,000 to open a Subway restaurant, the lowest investment required by any of the major fast food chains. The annual royalty Subway takes from its franchisees — 8 percent of total revenues — is among the highest. A top Subway executive has acknowledged that perhaps 90 percent of the chain’s new franchisees sign their contracts without reading them and without looking at the FTC filings. Roughly 30 to 50 percent of Subway’s new franchisees are immigrants, many of whom are not fluent in English. In order to earn a decent living, they must often work sixty to seventy hours a week and buy more than one Subway.

In November of 1999, Congressman Howard Coble, a conservative Republican from North Carolina, introduced legislation that would make franchisors obey the same fundamental business principles as other American companies. Coble’s bill would for the first time obligate franchise chains to act in “good faith,” a basic tenet of the nation’s Uniform Commercial Code. The bill would also place limits on encroachment, require “good cause” before a contract can be terminated, permit franchisees to form their own associations, allow them to purchase from a variety of suppliers, and give them the right to sue franchisors in federal court. “We are not seeking to penalize anyone,” Coble said, before introducing his plan for franchise reform. “We only seek to bring some order and sanity to a segment of our economy which is growing and may be growing out of control.” Iowa adopted similar franchise rules in 1992, without driving Burger King or McDonald’s out of the state. Nevertheless, the IFA and the fast food chains strongly oppose Coble’s bill. The IFA has hired Allen Coffey, Jr., the former general counsel of the House Judiciary Committee, and Andy Ireland, a former Republican congressman who was the ranking member of the House Small Business Committee, to help thwart greater federal regulation of franchising. While in Congress, Ireland had criticized franchisees who sought legal reforms, calling them “whiny butts” who came running to the government instead of taking responsibility for their own business mistakes.

After congressional hearings were held on Coble’s bill in 1999, the IFA claimed in a press release that federal regulation of franchising would interfere with “free enterprise contract negotiations” and seriously harm one of the most vital and dynamic sectors of the American economy. “Small businesses and franchising succeed by relying on marketplace solutions,” said Don DeBolt, the president of the IFA. Despite its public opposition to any government interference with the workings of the free market, the IFA has long supported programs that enable fast food chains to expand using government-backed loans.

For more than three decades the