When a fast food chain like Subway announces a corporate promotion, like the current $4.99 special on certain foot-long sandwiches, it can be a bargain for customers and an effective way for a company with declining revenues to boost sales.
But such promotions can also be problematic for franchisees, who have no choice but to go along with deals that can end up taking a huge bite out of their bottom line.
So concerned, in fact, are some Subway franchisees about the new $4.99 promo, which went into effect Jan. 1, nearly 900 of the company’s 10,000 franchisees signed a petition urging the company to withdraw the deal.
Baton Rouge franchisee Andy Kimbrell, who owns two Subway restaurants in the area, was not among them and he supports the parent company’s marketing efforts. But he concedes it’s tough to make the numbers work when he’s forced to sell certain sandwiches at such drastically reduced prices.
“Pricing wise, this amounts to a buy one, get one free,” Kimbrell says. “But while you’re offering the discount the cost of your meat and vegetables hasn’t gone down.”
The idea, of course, is that the cost of the promo will be offset by an increase in sales. But there’s not a one-to-one ratio and sometimes it can be months before franchisees see a payoff, if at all
“You hope it will drive traffic, increase your customer count, increase your frequency, your number of visits,” he says. “Where you were getting them to come in once a week, maybe they come in twice a week now, and then the upside is it establishes a pattern, a behavior change, that becomes their normal.”
In a statement, Subway says that the petition does not represent the views of the majority its franchisees and that the promotion is optional. But as Kimbrell points out, franchise owners who opt out may face disgruntled customers and negative publicity.
“What happens is they end up going to another restaurant down the road,” he says.
The Subway situation isn’t unique. As fast-food chains across the country have slashed menu prices to revive flagging sales, a growing rift has emerged between some name-brand corporations and the local operators who run their outlets, according to The Washington Post.
Kimbrell concedes there’s more competition in the market than even just a few years ago, which is why he supports the parent company’s promotion. He says it’s important for franchisees to give it a try, even though it won’t necessarily be easy.
“It really just depends on the franchisee,” he says. “If they have a good attitude about it they should do it and just believe in the system and believe someone at headquarters really has thought this through.”
—Stephanie Riegel
