An independent group of Subway franchisees is recommending operators don’t accept a new $6.99 Footlong offer, despite company incentives for them to do so, saying that it continues the chain’s historic reliance on discounts as a marketing tool.
The North American Association of Subway Franchisees, or NAASF, urged its members not to participate in the program, saying that the company needs to stop with “menu-wide discounts,” even though this one features a $1-per-sandwich incentive from the company.
“At what point is enough?” the association wrote. “When are we as franchisees going to say enough is enough and tell Subway to stop continuing to devalue our product?”
“Subway has been running the same playbook,” NAASF added. “We are in worse position today than we possibly ever have been, and it stems from this very subject we are talking about today, menu-wide discounts.”
Subway in a statement said that the $6.99 offer drove “profitable sales on average for franchisees” when it ran last year. The company also called it an “optional” program but noted that it is subsidizing operators’ participation, which should go toward improving per-store profitability. Subway expects strong participation.
“In today’s economic environment, offering guests value is a competitive necessity,” Subway said in a statement. “Subway’s approach is based on data-driven insights that balance consumer needs while helping protect franchisee profits. Data shows that last year’s optional $6.99 Any Footlong digital offer helped drive profitable sales on average for franchisees.
“The $6.99 Any Footlong digital offer that begins today is an optional program for franchisees, and we expect strong participation. Subway is investing in a subsidy for participating restaurants to help drive restaurant-level profitability.”
The conflict comes during a challenging time for Subway, which has seen sales struggle so far this year amid bad weather and a difficult operating environment that has hurt many other fast-food chains, according to several different operators.
“Many people we have talked to say this is the worst the morale has ever been in Subway and many of these great entrepreneurs have been with the brand 30 and 40 years,” NAASF said.
But there are also concerns that the sandwich sector broadly is facing unique challenges at the moment. Firehouse Subs, owned by Burger King owner Restaurant Brands International, saw weak sales and profitability last year, the company said earlier this month. Executives blamed that problem on “broader U.S. sub-sandwich category challenges.”
“The entire foodservice industry is facing challenges,” Subway said. “Subway is delivering both short- and long-term strategies to help our franchisees succeed, with an emphasis on being the freshest, most affordable and most convenient sandwich option on the market.
“Recently, there have been several initiatives to support franchisees as external headwinds continue, such as subsidies on short-term digital offers and softening select development requirements.”
For Subway and its franchisees, the question of marketing is significant. The company is looking to boost sales at a time when consumers are reluctant to dine out.
The sandwich giant has spent much of the past couple of years, through its sale to the private-equity firm Roark Capital, which was finalized last year, working to upgrade the menu and boost marketing. The company upgraded ingredients, kicked off a new marketing campaign, added new premium subs and slicers and then a new snacking platform.
But Subway has also been looking for a way to bring value customers to the brand as consumer frustration over rising fast-food prices hits a fever pitch.
That has drawn the ire of a number of franchisees, who say the company has spent too much time historically discounting its entire menu. They argue that full-menu discounts cheapen the menu, particularly after Subway added several premium items to the menu in recent years that feature extra meat. Some of those sandwiches cost $13 or more normally, making it a steep discount.
Operators are fearful of their own thinning margin and the closed locations that result. Subway franchisees in the U.S. have closed 7,000 locations since 2015 due to weak sales and profits, more than any other restaurant chain in history.
In its posting, NAASF said that a $6.99 offer, along with the $1 incentive, is likely to attract a number of franchisees who need the sales. “Many restaurants are desperate for a shot in the arm and will have a difficult time saying no to this promotion,” the association said. “Subway knows with the $1 added, it puts franchisees in that tough spot where it might make some sense, short term.
“But a piece of paper showing what might and might not happen has been going on too long and at the end of it, a proven track record of failure, store closures, lost profits and people."
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