#Subway turns blind eye to boss accused of stiffing workers out of $38M

Questionable tuna isn’t the only thing the Subway sandwich chain is standing behind.

The embattled fast-food giant continues to back a top regional manager who recently settled a lawsuit that alleged he underpaid nearly 3,000 workers by $38 million, miffed franchisees complained to The Post.

The suit claims that Chirayu Patel, who’s also a franchisee, stiffed workers out of overtime pay, didn’t pay them for all of the hours they worked and didn’t allow them meal or rest periods.

That same manager — who oversees more than a thousand Subway locations in California — already had been exposed in 2019 for underhanded practices that led some franchisees to lose their businesses. Subway stood by him then, too.

Privately held Subway, based in Milford, Conn. — which recently caught heat from some franchisees when it hired firebrand soccer player Megan Rapinoe as a TV spokeswoman — declined to comment, including answering questions as to why it continues to stand by Patel.

“The overarching message at Subway is anything goes,” a lawyer who has represented Subway franchisees told The Post.

Franchise attorney David Paris, who is not involved in the Patel case, said it is unusual for a large national chain not to take action when a franchisee is allegedly underpaying workers.

“There would be a full-scale investigation in other brands. They would be all over it,” he said. “I think it is incumbent on Subway to do something.” Paris, of law firm Paris Ackerman, said Subway’s lack of action tarnishes its brand.

Subway corporate never was named in the suit for alleged underpayment. Doctor’s Associates, Subway’s parent company, did answer a subpoena in 2018 as part of the proceedings, so the home office was aware of the suit, a source said.

It’s estimated Patel owns around 15 Subway restaurants in Northern California, according to a source familiar with the matter. Even with those holdings, Patel claimed he couldn’t afford to pay the workers any more than the settlement that was reached July 30: It amounted to $188 per worker, or $550,000, according to court filings.

A source familiar with the situation said Subway’s silence speaks of a lack of leadership at the chain, whose sales fell to $8.3 billion in 2020, according to market researcher Technomic, from $12.3 billion in 2013.

“They did not think of getting rid of him,” the source said. “The morality did not play a role. My sense is, quite frankly, Patel got the benefit of Subway being screwed up.”

Patel told The Post: “We have always practiced business to the highest Subway standards and in accordance with state laws,” declining to comment further.

It’s not the first time Patel has been accused of bad behavior at Subway: Along with his franchises, he’s also the Subway “development agent” for much of Northern California. It was in that role that he was exposed in a 2019 New York Times story for another questionable practice.

As a development agent, Patel oversees about 1,000 Subway restaurants, for which he gets a percentage of sales. Headquarters uses these agents to sell franchises in a given territory and to oversee compliance with corporate standards.

In 2019, Patel allegedly sent his own inspectors to certain restaurants that were competing with him — or that he wanted to buy — to find problems so he could force them out of business. Violations allegedly included minor infractions like finding handprints on glass doors or cucumber slices that were a bit too thick.

A source said under Fred DeLuca, the founder and CEO of Subway who died in 2015, that kind of thing wouldn’t have been tolerated. The new CEO, John Chidsey — who used to run Burger King — has been criticized as not engaging much with franchisees. He didn’t comment.

Subway development agents around the country in 2017 were getting a reputation for going after select franchisees for minor infractions pressuring them to shutter or sell their stores, The Post reported at the time.

The chain initiated 702 arbitration actions against US franchisees in 2017, compared to one by McDonald’s, two by Dunkin’ and none by Pizza Hut, Burger King or Wendy’s.

The theory was Subway wanted to make the chain smaller. Now, Subway is instead forcing restaurants to stay open as the chain is shrinking too quickly, sources said.

“I don’t understand how Subway could turn a blind eye to this guy,” Paris, the attorney, said. “It’s definitely suspicious.”

Yet, Patel, more than two years later, still manages the territory, along with owning his own restaurants, sources said. Patel, when he owned 70 stores, was likely paying Subway $1.5 million to $2 million a year in royalty payments, the source familiar with the situation said.

Many Subway franchisees have been upset at CEO Chidsey since the pandemic for reasons that include rewriting new operating contracts that allow stores to close only one day a year except for an act of God, and for a short-lived 2-for-$10 promotion they say forced them to sell subs at a loss.   

It’s the latest in a string of ham-handed responses that raise the question of who’s minding the store at the sandwich chain with 22,000 locations across North America.

This spring, Subway hired soccer star Rapinoe for a national ad campaign. But many of its restaurants are in socially conservative areas where customers don’t like the idea of athletes not saluting the flag. Management likewise fought claims that the tuna in its sandwiches was fake, but not before the story exploded and took on a life of its own, making it hard to stamp out.

Most pressing is a sharp drop in sales over the last several years, although the company says it’s turning that around with a recent menu revamp: Same-store ales in August, for instance, were up 4 percent compared to the same period in 2019, according to the chain.