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Loyalty programs remain popular, both with customers and with restaurant chain marketers, and for good reason. As such, companies eager to get more signups will gladly give free or discounted food to encourage signups, effectively paying for customers’ information for marketing purposes.
But we hadn’t seen an offer nearly as aggressive as the one Subway offered with its Sub Club loyalty program, one that gave customers a free Footlong sandwich with the purchase of three. And because customers could earn “stamps” toward that free Footlong on discounted subs, which remain routine at the chain, the result was a deal that could reach 50% or more on the regular price for all four sandwiches.
As we reported last week, Subway walked that all back just two months after the program’s introduction. The fourth-sub-free promotion will end on April 1 and the company will focus purely on its points-based system, after franchisees, led by the North American Association of Subway Franchisees, pushed back hard. In the meantime, customers can’t get stamps on discounted subs.
Customer frustration with fast-food prices has hammered traffic, resulting in a discount war that has lasted for nearly two years. Value remains crucial in the business, like it or not. But that cannot be the primary driver of a company’s marketing.
The big problem with Subway is that the chain ran discounts too long and executive after executive has struggled to break free from that addiction. The chain routinely falls back on discount-based marketing, and those discounts frequently involve all the company’s subs, including those with lots of expensive meat and cheese. No customer is as trained to shop on deals as the Subway customer.
And yet no franchisee is under as much pressure. Close to 30% of the chain’s shops have closed since 2015. Yes, Subway needs traffic and loyalty members to supply its still-enormous number of restaurants and, yes, value must be a part of that. But the chain will not get that traffic in a sustainable way until it gets customers excited about coming in the doors.
This week’s financial news
Wendy’s had a bad quarter. It is closing stores and giving franchisees the ability to not serve breakfast. And then Nelson Peltz decided to submit an SEC filing saying he was thinking about his investment in the chain and may buy it. The result is that I wrote a lot about Wendy’s recently.
In our latest look at the Fat Brands situation, we wrote about the role of the company’s controversial founder and CEO Andy Wiederhorn. And then the company was sued, again, over the use of cash during the bankruptcy process.
Burger King President Tom Curtis is apparently a glutton for punishment.
McDonald’s is going big into beverages, but you probably knew that already. It also took a victory lap on value after saying lower-priced Extra Value Meals and other offers brought in traffic late last year.
Should we be worried about the chicken business? Popeyes sales took a hit last year. Same for Wingstop.
Cheesecake Factory always reports 1% to 2% same-store sales growth like clockwork. Except, apparently, for last quarter. Not sure what to do with myself now.
But at least some things are still normal, like Texas Roadhouse reporting strong results.
Don’t be surprised to see Dutch Bros make more small acquisitions like its Clutch Coffee deal.
Number of the week
Wendy’s 2-year stacked same-store sales show just how much the company’s results have slowed over the past year.
Quote of the week
“My wife was not pleased.” -Curtis, on his willingness to give out his phone number to Burger King customers and solicit feedback.
On the blog
I wrote about social media, Wendy’s, more Wendy’s, McDonald’s and Andy Wiederhorn. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I spoke with Michelle Korsmo on the state of the industry and, if you haven’t listened yet, I chatted with Starbucks COO Mike Grams on the coffee shop giant’s growth plans. On The Week in Restaurants we talked about Subway, Wendy’s and Wingstop.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.