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Subway, one of the world’s largest fast-food chains, is facing significant pushback from its franchisees over a controversial $6.99 deal promotion. The ongoing tension between corporate strategy and the financial reality faced by individual store owners is coming to a head.
Bill Mathis — chair of the North American Association of Subway Franchisees (the major Subway franchise group, NAASF, has about 2,500 franchisees that operate around 10,000 locations) had a message for its members about steering clear of the new deal. He addressed franchisees in a blog post this past Sunday, saying:
“If your franchise agreement allows, DO NOT PARTICIPATE in the $6.99 promotion. NAASF is advising to opt out. NAASF has a variety of talented members including those who are quite proficient with analysis of break evens. In some people’s opinions, the traffic lift needed to break even on this promotion is as high as 30%.”
The Contentious $6.99 Deal
Subway recently introduced a nationwide promotion offering select footlong subs for $6.99. While designed to drive customer traffic and compete with other value offerings in the fast-food market, the deal has become a point of contention for many franchisees who argue that it’s hurting their bottom line.
Mathis continued: “If this is accurate or even half accurate, have you seen any promotion that has brought to franchisees that kind of traffic lift from the current Subway leadership group?”
Many Subway franchise owners are opting out of the promotion, citing several key issues:
- Slim Profit Margins: With rising food and labor costs, franchisees argue that the $6.99 price point leaves little to no profit margin.
- Operational Challenges: The influx of customers seeking the deal can overwhelm staff and lead to longer wait times, potentially affecting customer satisfaction.
- Cannibalization of Higher-Priced Sales: Some franchisees report that the deal is simply shifting sales from more profitable menu items to the discounted options.
- Inconsistency with Local Market Conditions: Franchise owners in areas with higher operating costs feel the promotion doesn’t account for regional economic differences.
In response to these concerns, a growing number of Subway franchisees are choosing not to participate in the $6.99 deal. This opt-out movement has gained traction across various regions, leading to inconsistent pricing and offerings among Subway locations.
Last week, an emergency Subway meeting was called to include every franchisee to b discuss the future of the company and bring up the $6.99 promotion as a way to bring in more customers.
Corporate Response
Subway’s corporate office has defended the promotion, stating that it’s designed to increase overall sales volume and attract new customers. They have acknowledged the franchisees’ concerns and indicated they are open to dialogue.
A spokesperson for Subway stated, “We value our franchise owners and understand the challenges they face. We’re committed to working with them to find solutions that benefit both our franchisees and our customers.”
This revolt against the $6.99 deal at Subway is indicative of broader tensions in the franchise restaurant industry. As chains increasingly rely on value promotions to drive traffic, franchise owners are pushing back against what they see as unsustainable pricing strategies.
The situation raises questions about the long-term viability of deep discounting in the fast-food sector and the need for better alignment between corporate strategies and franchisee profitability.
Looking Ahead
As the opt-out movement grows, Subway may be forced to reconsider its promotional strategy. The company will need to balance its desire for competitive pricing with the need to maintain a profitable and harmonious franchise network.
