In some respects, this has to be a marketer’s dream: Create an idea that works so well it helps your en- tire brand thrive during one of the worst economic downturns in histo- ry and spawns a memory that lasts for well over a decade. But to Subway franchisees—and, increasingly, the brand as a whole— that promotion has been a night- mare for more than a decade. The $5 Footlong dates back to 2003. Think about that for a minute. Stuart Frankel, the Subway fran- chisee who created the promotion, used the $5 price point 21 years ago to lure customers to his location on weekends. It spread to more stores and was ultimately adopted chainwide. Sub- way used its marketing might to push the offer heavily, and the $5 Footlong jingle became ubiquitous. The offer itself became a $30 billion brand. But the company ran with it en- tirely too long. It had to shift away from it in 2012 following a run-up in food costs that made the price point untenable. Fast-food brands do need some value to get customers in the door. Subway in particular needs a lot of customer traffic, because it oper- ates 20,000 locations. That many restaurants requires a lot of custom- ers. But it struggled to find the right type of value since then. And every so often the chain would come back to some form of $5 Footlong offer. In 2018, for instance, franchisees re- volted when the chain tried a $4.99 Footlong offer. (It’s also worth noting that, as that offer was proposed, its creator Frankel said the deal had long run its course.) The company tried something similar in 2020, “$5 Footlongs when you buy 2,” a 2-for-$10 offer that franchisees vehemently opposed. Price-based promotions are risky because eventually costs make those prices obsolete. Consider the $1 menus many chains had during the heyday of the $5 Footlong. No- body has $1 menus any longer, opt-
ing to promote menus that are under $3 or something along those lines. Mc- Donald’s, for instance, has a 123 Dollar Menu, but few if anything is actually priced at $1 right now. The cost of operating a restaurant is a lot more expensive than it was 21 years ago when Frankel created the offer. In today’s dollars, in fact, that $5 Footlong should be priced at $8.67. If we just went back to 2012, the last time Subway had the deal, it should be priced at $6.94. That makes the $6.99 footlong offer the company plans more tenable. Subway is a franchise. If it were a company-run operation, the brand could theoretically run a $5 Footlong promotion of some form and tolerate lower overall margin, including losses at many locations, in exchange for traffic. (Even then it’s only advisable in extremely limited amounts.) But Subway is 100% franchised. Those franchisees generate low average unit volumes, $490,000 in 2023, according to Technomic. Most of these op- erators have one or two locations and rely on their profits for their income. What’s more, many of these franchisees have watched their system close 7,000 locations over the past eight years, the result of a brand that has strug- gled to generate sales. Part of the reason that brand is struggling to generate sales is the success of the $5 Footlong promotion. It has established Subway as the low-priced competitor. And customers haven’t forgotten that. Like every fast-food brand, Subway needs some permanent value to get customers in the door. But it would help the brand if people weren’t still stuck on a promotion that has been out of date for 12 years.
Price-based promotions are risky because eventurally costs make those prices obsolete.
PHOTO: ENVATO
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