A tad harsh for the what appear to be the actions of a single idiot employee. Appropriate action would be apologize, they did, and terminate the employee, which the didn't say. I didn't see evidence that the Franchisee had any sort of ongoing incidents.
IF the manager did back the employee and refuse service, then the actions should be harsher. A manager speaks for the owner.
If the manager did indeed back this idiot employee drastic action needs to be taken by the franchise owner and Arbys.