- Subway will introduce a $5-or-less menu in April, Restaurant Business reports. That menu will include three Footlong options, 6-inch sandwiches and sliders.
- The new value menu is one of a number of changes put into place by CEO John Chidsey since taking the helm in November 2019 after the position stood empty for more than a year. Those changes have included layoffs at headquarters and C-suite shakeups.
- Restaurant consultant John Gordon told Restaurant Business that the new menu is a strategy for Subway to regain customers it has lost throughout the past few years, and that a unified value message should be more effective than the brand's varied discounts that confused diners in the past.
Subway is in need of a massive tailwind and this new, cohesive value menu could provide one. The chain's footprint has retrenched by 13% since peaking at 2015, and Technomic predicted in 2019 that the chain will fall out of the top five chains on its Top 500 ranking, likely reporting less than $10 billion in sales.
That's not to say the move will be easy to pull off, however. Subway is not alone in trying to boost traffic through value options. The tactic has been used across the QSR segment in the past two-plus years as traffic growth continues to elude most chains. McDonald's is the biggest example here, launching a value menu in early 2018 to kickstart such growth.
But as McDonald's approach has proved, value offerings don't necessarily translate to traffic. The chain has struggled with this metric, with transactions down about 2% last year, even after its value menu was put into place.
However, as McDonald's also proves, it has experienced strong same-store sales, mostly from increasing its menu prices. So, the challenge here, as it is for most chains and as it has been since the economic downturn more than a decade ago, is in finding a balance between pricing for sales growth versus traffic. By implementing one, it's hard to differentiate with the other.
Some chains have struck this balance. Jack in the Box seems to have found its traffic-driving sweet spot in the value conversation with bundled meals and by promoting add-ons, for example.
Subway may be a bit more vulnerable in deploying this new value strategy, however. It has done this before, first with its $5 Footlong deal in 2012, and faced significant pushback from its franchisees. With rising food costs, the chain eventually moved away from the promotion, but the company attempted to revisit the $5 Footlong in 2017 to make up for a nearly 25% drop. Franchisees voiced their concerns about rising labor costs and other pressures once again.
In 2017, more than 400 Subway franchisees signed a petition claiming the national promotional focus left many operators unprofitable and, in some cases, unable to pay off debts. They've continued to show restlessness about this latest menu initiative, hosting an open forum about the move at the end of 2019, in which one franchisee simply said, "stop the discounting and quit giving away the little profits we have."