In March 2008, Milford, Conn.-based Subway shook up the sandwich segment with what began as a limited-time offer of any footlong sub for the shockingly low price of just $5.
In a way, it was a return in focus to Subway’s once-signature sub, which over the years had slipped in popularity compared with smaller 6-inch versions. At $5, however, cash-strapped consumers were happy to give the larger sandwich another try.
Calling the response to the offer “nothing short of phenomenal,” Subway officials soon after made the deal a permanent part of the 30,700-plus-unit chain’s “Every Day Value Menu,” offering eight footlong sandwich options for $5. Options include the meatball marinara, cold-cut combo, spicy Italian, veggie delight, black forest ham, oven-roasted chicken breast, BLT or tuna.
Competitors responded with their own sandwich deals: Denver-based Quiznos earlier this year debuted a new streamlined “Torpedo” menu item for $4. The Togo’s chain based in San Jose, Calif., last month launched a promotion offering seven sandwiches for $3.99; and Arby’s in some markets has been offering $5 combo meals that include various sandwiches, such as the Roastburger.
According to The NPD Group, based in Port Washington, N.Y., discounts are a powerful driver in the sandwich world. For the quarter ended in April, NPD found that 33 percent of all visits to sandwich purveyors were prompted by deals, up 27 percent from a year ago. And 25 percent of those deal visits involved discounted pricing, NPD said.
Tony Pace, chief marketing officer for the Subway Franchisee Advertising Fund Trust, or SFAFT, Subway’s consumer marketing arm, was the architect of the $5 footlong promotion.
How did the $5 footlong get its start?
It all started with a franchisee in Florida named Stu Frankel, who started it as a weekend promotion. Some other folks adopted it throughout the week and it looked like it was doing well.
It was pretty clear there were some pretty good business dynamics, while being smartly profitable. So we developed the program and brought it to the chainwide board, and it launched March 22, 2008.
How did it affect sales?
We were doing well before that, but this took our success to a new level. At the time, Subway was up [in same-store sales] in the low- to mid-single digits. We had a good year in 2007, but like any business we were trying to continue to the next level. We hadn’t really solved the question of how to do value in a way that was most germane to Subway. But the $5 footlong was it. By 2008, same-store sales were in the teens and the $5 footlong was the main contributor to that.
Why did you choose the $5 price point?
It was the right valuation given our economics. We also think going to a round number was a smart thing to do. Within consumer retailing, most go to X dollars and 99 cents. We thought it made more sense to be transparent with consumers and not use that 99-cent number. There was a simplicity to $5 footlong. We were not trying to play any games with consumers and I think they appreciated that. I have noticed that since we started this, and had success with it, others in the category are going to round numbers.
Now the sandwich segment is crowded with meal deals under $5. How does Subway respond to that without eroding the brand?
We think value is not just price. We deliver a sandwich built on freshly made bread, with lots of choices for what kind of meat or cheese. It’s made to your order, and we think there’s a lot of value in that. We think value is a combination of what you get as well as the price.
Did all franchisees participate in the $5 footlong offer?
We had high participation. There were some places where it didn’t make sense to do it.
Have franchisees complained about difficulties making a profit on the product?
The margins are pretty good on this. There are always people that are going to have issues, but numerical results were pretty powerful. We consider the $5 footlong a brand, and we have to manage that with an eye toward profitability and food costs.
BONUS POINT “The Subway $5 footlong is beating the s**t out of us…so it’s all about going back to basics now; let the main thing be the main thing.”—Jimmy John Liautaud founder, Jimmy John’s Gourmet Sandwiches Champaign, Ill., at a conference last November
You will see variations of it in the future. We’ve been doing some of that by offering variety and extensions already. Last fall we did a chicken pizzaola as a $5 footlong LTO, for example.
And we’re not only selling $5 sandwiches. But that was a good place to put a stake in the ground and it’s worked well for us.— [email protected]