Subway’s Value Meals Are A Hit For Everyone
Franchise Times Magazine:
Jim Underwood, owner of eight Subway stores in Alabama, was a bit hesitant when his franchisor first introduced $5 footlong subs more than a year ago. Lower prices make the franchisee’s job tougher because they’re the ones who have to squeeze a profit out of those lower prices.
Underwood isn’t hesitant anymore. “I’m paying a little extra food costs, and am getting a little less on the bottom line as a percentage,” he said. “But I had the best year ever, profit-wise, in 2008. So how could I really complain too much? It worked.”
He’s not the only one who had a good year. Subway’s sales were up 17 percent last year, according to the restaurant-consulting firm Technomic—a hefty amount for such a giant chain. Much of the credit goes to that $5 promotion, timed perfectly at the outset of a recession that would turn diners into value-conscious consumers.
There is also evidence that the promotion provided a boost to the sandwich sector as a whole. Several of Subway’s competitors, including Quiznos and Blimpie, responded with their own deals, making the chains desirable destinations for the frugal diner. According to figures from UBS Investment Research, sandwich sector traffic has outpaced overall growth in quick-service dining since Subway came out with its $5 footlong promotion last spring.
NPD Group, a market-research firm, likewise reported that the sandwich sector outpaced the QSR segment from December through February.