Subway, NAASF reach agreement to move ahead with Pepsi switch

Subway has cleared the final hurdle in its switch to PepsiCo (NASDAQ:PEP) after the North American Association of Subway Franchisees ("NAASF") dropped their opposition to the switch from Coke (KO).

Subway announced it was switching to Pepsi products last March with a 10-year deal to swap Coke for Pepsi across the sandwich chain’s 20,000 restaurants beginning January 1. Under the agreement, Subway restaurants would now offer Pepsi beverages including Gatorade, Lipton, Aquafina, and Mountain Dew, corresponding with Frito-Lay snacks.

But the large franchise organization advised its members not to sign the 10-year contract due to a lack of transparency from Subway. The organization argued that Subway left key financial details out of the contract. For its part, Subway threatened resistant franchisees with termination, or at the very least, being beverage-less on January 1. Eventually, the two sides came to an amicable agreement, removing any remaining roadblocks to a system-wide adoption of PepsiCo (PEP) beverages.

“We are ready to go,” said Anne Fink, president of global foodservice at PepsiCo at an industry conference, according to Bloomberg. While there remain a few holdouts among Subway franchisees, Fink assured that it is “not a material number.”

Subway is owned by private equity group Roark Capital.