Jared Fogle and Subway. The two names went together—Jared became, if not famous, at least well known by his many years as the face (and body) of Subway sandwich shops. And Subway’s famous SUBWAY brand was integrally tied to Jared. Until it all came crashing down in the summer of 2015.

Jared seemed like the perfect spokesperson for Subway. Jared’s story was that he had lost over 200 pounds by exercising and eating Subway sandwiches. His folksy, almost “aw shucks” image played well with American consumers. By 2011, Subway had become the largest fast-food chain (by units) in America, surpassing even the venerable and ubiquitous McDonald’s hamburger chain, according to the Wall Street Journal.

In jarring contrast to his public image, Jared agreed to plead guilty to federal child-sex and child-pornography charges on August 19, 2015. Wow. This is the ultimate in brand damage. I think we can all agree that any legitimate brand tied directly or indirectly with child sex or pornography will be treated with great revulsion by the American consumer.

So what is a great brand owner supposed to do under such circumstances? There is no public evidence at this time that Subway knew of Jared’s activities before the feds’ raid on July 7, 2015. And further, Subway took immediate and decisive action to distance itself from Jared on or shortly after July 7.

The Subway brand (owned by Doctor’s Associates Inc.) is taking a blow—the extent of which is left to be determined. Subway has likely already hired a pricey PR firm to help it navigate the months and years to come. Subway may even consider rebranding or changing its logo to convey to consumers a “fresh start.”

Such fresh starts can be accomplished even in the face of terrible circumstances. For instance, the maker of the TYLENOL pain reliever was able to recover its brand strength and market share even after a terrible tampering scare in the 1980s when several people died. But even though the manufacturer of the TYLENOL-branded pain reliever was not responsible for the tampered product, it took decisive action at considerable cost. Johnson & Johnson undertook an expensive recall, provided new tamper-proof packaging, engaged in new PR/advertising campaigns, and gave itself time to give consumers the opportunity to build trust in the brand again.

But what kinds of lessons can be learned?
For one, up-front diligence:  any individual who will be so tied to a company’s brand needs to be fully vetted before entering an agreement with the company. Further, the drafters of a “celebrity” endorsement agreement need to think through the unthinkable—what happens if the celebrity spokesperson turns out to have a dark side? It is not unreasonable for a celebrity licensing agreement to include a criminal-background-check provision and one stating that any whiff of criminal activity (particularly related to child sex and child pornography) is grounds for immediate termination and return or partial return of fees paid. And a provision mandating future, periodic background checks could be written into the agreement.

Even without a specific spokesperson, a brand can be damaged when a stock licensed image is identifiable on a brand owner’s website or marketing materials and the person associated with the image turns out not to be as sweet or thoughtful as presented. Again, due diligence conducted up front may save troubles down the road for a brand owner.

In the Subway case, there are even more complications, since Subway is primarily a franchisor. Such potential damages to the SUBWAY brand could impact franchise agreements and, more pointedly, franchise valuation. My partner Shannon McCarthy will address franchise issues in Part II of this blog article.