Operational Risk Management in Food Service: The Subway Case
This paper examines operational risk management in the context of Subway's recurring foodborne illness incidents across multiple countries. The analysis identifies training and food handling practices as preventable operational risks within the franchise model and proposes a comprehensive mitigation strategy including standardized training protocols, clear job responsibilities, regular audits, supervisory oversight, infrastructure improvements such as surveillance cameras, and stronger vendor relationships. The paper demonstrates how multi-layered controls and organizational structure adjustments can reduce the likelihood and impact of food safety failures in a franchise-based business model.
- Understanding Operational Risk in Food Service: Defining operational risk and employee liability in organizations
- Subway's Pattern of Foodborne Illness Incidents: Multiple salmonella and food poisoning cases across three continents
- Root Causes and Risk Factors: Training and handling failures as preventable operational risks
- Mitigation Strategy: Training and Standards: Establishing standards, job clarity, and safety-focused training
- Mitigation Strategy: Oversight and Auditing: Supervisory layers and periodic audits with enforcement penalties
- Mitigation Strategy: Infrastructure and Supply Chain: Surveillance technology and vendor relationship management
- Conclusion: Integrated approach to reducing foodborne illness incidents
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What makes this paper effective
- Uses a specific, real-world case (Subway) to ground abstract operational risk concepts in concrete business problems.
- Provides quantified risk context (CDC data on foodborne illness prevalence) to establish why the problem matters beyond Subway.
- Structures mitigation recommendations logically by stakeholder (head office, franchisees, individual employees) and approach type (standards, training, infrastructure).
- Acknowledges the franchise model's unique challenges and how they create compliance and oversight gaps.
Key academic technique demonstrated
The paper applies operational risk theory (drawn from Horcher 2005) to a specific industry failure. Rather than treating the foodborne illness incidents as isolated events, it systematically identifies the operational vulnerabilities that allow them to recur—particularly the gap between corporate standards and franchise-level execution. This demonstrates causal analysis: moving from "what went wrong" to "why the system allowed it to happen" to "how to redesign the system to prevent recurrence."
Structure breakdown
The paper opens by defining operational risk and introducing Subway's repeated food safety failures as a case study. It then diagnoses root causes (training and handling deficiencies), supported by CDC epidemiological data. The bulk of the paper outlines a multi-pronged mitigation strategy: establishing standards, clarifying job responsibilities and empowerment, implementing training emphasis on safety, deploying dual-layer supervisory oversight, conducting audits with consequences, installing surveillance infrastructure, and strengthening supplier relationships. The conclusion reinforces that these combined steps are achievable and necessary for risk reduction.
Understanding Operational Risk in Food Service
Operational risks tend to focus on employees and finding ways to ensure that employees are not a source of wealth reduction for the company. Among the operational risks identified in Horcher (2005) were those related to training, fraud, theft, and managing exposures to certain risks that arise in the course of operations. There have been many examples of operational failures over the years. While most fraud occurs at the highest levels of the organization—such as Enron—other companies have faced operational issues as their primary challenge. Operational risk encompasses a broad range of internal control failures, from inadequate processes to employee error.
Subway's Pattern of Foodborne Illness Incidents
One notable instance of operational failure involves Subway, which faced a salmonella outbreak in the United Kingdom in a major outbreak (Poulter, 2008), but has also faced similar situations in Canada (Mickleburgh, 2011) and the United States (Blau, 2012; Falkenstein, 2010). Food poisonings increase the risk of legal action that could devastate franchisees and have a strongly negative impact on the brand. Yet, these incidents seem to occur quite frequently at Subway locations.
Root Causes and Risk Factors
Food poisoning is usually a training and handling issue. Occasionally, it can be traced to a supplier, but again often involves training and handling issues within the supply chain. The CDC estimates that each year one in six Americans gets sick from eating food, so given the number of meals Subway serves, its track record might not be statistically horrible. However, this is clearly something that can and should improve, because the brand depends on it. An estimated 3,000 Americans die each year from foodborne diseases.
The CDC notes that foodborne illness arises when bacteria are allowed to grow, which happens inside food—especially meat and leafy vegetables—on cutting surfaces, or on the hands of food workers (CDC, 2014). While Subway's supply chain risk is a distinct concern, the operational risk associated with workers failing to adhere to basic sanitation standards is an entirely preventable operational risk.
Mitigation Strategy: Training and Standards
There are several ways for management to mitigate this risk. First, the organizational structure of Subway must be considered. Individual stores are owned by franchisees who receive training manuals from head office. However, Subway prefers to work with experienced franchisees, so much of the training is left to the franchise owner. The first step for Subway is to ensure that there are strict training standards and that franchisees agree to follow them. This step can mitigate legal risk for Subway and help ensure that the franchise owner bears most of the risk associated with operations.
For the franchise owner, mitigating this risk starts with establishing standards if Subway has not already provided them. It is recommended that these standards be stricter than local food handling regulations. Working to minimum standards is cheaper in the short run but also means that any failure results in the company being at risk. Therefore, the first step is to establish clear standards.
The second step involves job descriptions. Safe food handling cannot be the responsibility of only one or two people—it must be everybody's responsibility. Therefore, employees need to have a certain degree of empowerment over food safety issues so that they can always make the right decisions. The third step is training, so that everyone who works at Subway has a high level of understanding of their safety expectations. Arguably, safety must be an emphasis in training even more than other aspects of the job, because the downside risk is far more serious. It is important that employees can successfully identify risk factors—for example, that bad food does not always smell bad.
Mitigation Strategy: Oversight and Auditing
In terms of supervisory oversight, there should be lead personnel and backups responsible for enforcement. At all times, there should be two people who are not only trained on safety but also directly instructed to conduct audits and inspections at regular intervals. While this is a job for the entire team, senior people should take extra responsibility. This multiple layering of responsibility will prevent incidents from occurring.
Periodic audits—either from the franchisee (who probably owns several franchises) or head office—will help ensure a higher level of enforcement, especially when coupled with severe internal penalties. When there is a high risk that issues will be found and dealt with at the corporate level, there is that much higher level of motivation within the company.
Conclusion
There are many different steps to reduce operational risk, and if they are followed then Subway can surely reduce the number of incidents with foodborne illness.
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