The sandwich franchise market is one of the most competitive in the food franchising sector. Overheads are low and margins are tight, which creates a saturated market that franchisees have to compete tooth-and-nail in in order to make a splash.
There’s a very interesting dispatch on sandwich franchising in the latest issue of Franchise Times magazine. The story centers around the introduction of the $5 dollar foot-long sub by Subway last year. The idea, which was quickly copied by other sandwich franchisees, was met with some consternation by franchisees like Jim Underwood of Alabama, who thought the discount would further eat into their profits (no pun intended).
The end result has been quite different.
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.
At the same time that ice cream franchises are enjoying a resurgence, sandwich franchises are providing great sustenance to franchisees during the recession. It’s easy to understand why: their food is a cheap, healthier alternative, and for prospective franchisees, easier to purchase than a massive unit during a time when banks have little capital. The Franchising Times article is well worth the read, as it speaks with a variety of people in sandwich franchising about the future of the industry. It also testifies to the advantages of offering discounts to attract new customers.
As a side note, the foot-long discount was introduced by a franchisee in Florida before eventually being taken up by the franchisor and put into effect on a national level. This kind of initiative shows how effective franchisees can be at bringing about change.