Food & Beverage

How Subway can recover from Jared

How Subway can recover from Jared
How Subway can recover from Jared

[Editor's note: This story has been updated to reflect the mutual decision between Subway and Jared Fogle on Tuesday afternoon to suspend their relationship.]

As child pornography allegations circle around Jared Fogle—best known as weight-loss guru "Jared from Subway"—experts say the fast food chain runs the risk of tarnishing its reputation permanently if it doesn't handle the situation appropriately. However, with so much speculation and few hard facts, it might be smarter to pause before making any major decisions to completely sever ties.

Read More Subway, Jared Fogle suspend relationship amid child porn investigation

"It's a very tricky balancing act," said Will McInnes, chief marketing officer of social media analytics company Brandwatch. "There's 24 or 48 hours between the smoke clearing and reality emerging. There's not a great deal they can do but stay very close to the events as they unfold."

"The smart thing for a brand is to wait and see what occurs," added Ken Ungar, founder & president of U/S SportsAdvisors.

NBC affiliate WTHR reported that the FBI raided the Subway pitchman's home in Zionsville, Indiana, early Tuesday. The search warrant alleged that Fogle may be connected with a child pornography investigation, according to the report.

It follows the news the former executive director of the Jared Foundation, Fogle's organization that aims to combat childhood obesity, was arrested in April on child pornography charges.

Fogle did not respond to requests for comment.

Subway initially said earlier on Tuesday in an emailed statement to CNBC that they were "very concerned and will be monitoring the situation closely." Later that afternoon, the chain announced the two parties decided to suspend their relationship.

"Subway and Jared Fogle have mutually agreed to suspend their relationship due to the current investigation," a Subway representative said in an email statement to CNBC. "Jared continues to cooperate with authorities and he expects no actions to be forthcoming. Both Jared and Subway agree that this was the appropriate step to take."

Sarah Aitken, chief marketing officer of the Americas at creative advertising agency Iris Worldwide, said there is no harm in issuing a short statement that clarifies Subway is aware of the situation without denouncing its relationship with Fogle. To end things immediately could be seen as a negative, especially if any allegations end up to be unfounded.

It's important to note that the company is just halting their partnership at this time, meaning there is still a chance that the two could work together in the future.

"Whether he is guilty or not, Subway is currently being associated with child pornography, and so the most important thing to act on is to clarify that they take allegations of this nature very seriously with a short brand statement," Aitken said. "This isn't immediately cutting all ties with Fogle. It is saying that the brand of course stands against crimes of this nature and will help with any investigation if required."

Subway spokesman in hot water
Subway spokesman in hot water

While the public is smart enough to know that the actions of one individual don't represent the brand, Subway is already mentioned in numerous ill-humored jokes on social media regarding the report.

The fast food chain isn't a publicly traded company so it's unclear how this will affect its worth, but the experts say it can affect its public image. Still, Jim Harper, partner at St. Louis agency Boxing Clever, said the backlash will be only for the immediate news cycle.

"It's always going to hurt in the short term, even when the brand didn't do anything themselves," he said. "Their PR will have to address that they hung their hat on him."

Read More

But, even if not convicted, Fogle's future with the company may be murky despite his excellent track record. He had been a spokesman for Subway for more than 15 years, after he proclaimed that he lost more than 200 pounds thanks to eating smaller portions of healthier Subway sandwiches and exercising more. Subway's chief marketing officer Tony Pace told the New York Daily News that Fogle was accountable for one-third to one-half of Subway's growth over the period he worked with them.

While other celebrities like Hugh Grant and Pee Wee Herman were linked to sexual misconduct and recovered, child pornography is a completely different crime. Aitken said just being associated with it—even if the charges end up being unfounded—is a black mark. Eventually, Aitken said, Subway should probably move on.

"A brand is about memory and association," she said. "They need to get as far away from this as possible and disassociate themselves from the scandal around him."

Aitken added that representatives and sponsored individuals always come with a risk for brands. Most contracts come with a morality clause that will allow companies to end the relationship.

"As a result, crisis plans are something that need to be well articulated with a crisis team ready to go at a moment's notice if those risks become a reality," she said.

Boxing Clever's Harper said while Jared's weight loss story was a perfect marketing vehicle to appeal to Americans, there's plenty more people who can fill his role.

"They held onto the relationship with him for so long," Harper said. "This could be an opportunity for them to reboot."

Even before the scandal, the chain had been featuring more athletes through its Famous Fans of Subway campaign, including Russell Westbrook, Mike Trout, Michael Phelps and Robert Griffin III. U/S SportsAdvisors' Ungar said we may see Subway heavily focusing on their other representatives in order to distance themselves.

CORRECTION: Jared's last name is Fogle.