Let the sandwich wars begin

An emergency meeting was recently called by the owners of Subway sandwich shops around the country. A large number of their franchisees were complaining about all of the "crazy coupons" that the company was issuing, drastically slashing the prices of various products in an effort to drive more traffic and increase the company's market share. 

Some of the discounts being offered by the home office were so steep that the individual stores were losing money on their sales and eliminating their profit margin. 

Apparently, those complaints fell on deaf ears because the company turned around and put out another similar offer almost immediately, offering footlong sandwich deals for $6.99 when the subs normally sell for between $11 and $17. This was apparently a bridge too far and now the chain's largest franchise group is staging a revolt, encouraging other local outlets to ignore the offer and refuse to honor the coupons. The sandwich wars are upon us. 

From the NY Post:

Subway’s $6.99 footlong sandwich deal has sparked a revolt from the chain’s biggest franchise group — which has raised concerns the discount will spark losses for cash-strapped restaurateurs, The Post has learned.

Subway announced the promotion on Friday, joining the fast-food value menu wars to lure back inflation-battered consumers.

Under the deal, which is only accessible through the Subway app, a footlong sub goes for $6.99 — sharply below regular prices between $11 and $17.

The company has a potentially serious problem on its hands. Leading the revolt is the chairman of the North American Association of Subway Franchisees, or NAASF. They represent more than 2,500 Subway franchises around the country. Bill Mathis is advising all of the franchisees to not honor the $6.99 meal deal. He is advising the local outlets to "opt out." As it turns out, the majority of franchisees have contracts with Subway dating back prior to 2021 and those contracts include a clause allowing them to opt out of deals such as this.

Mathis has also been breaking out some basic mathematics to make his argument. Subway's ownership claims that the purpose of these deals is to drive up traffic in the stores. But Mathis points out that this approach is not coming close to working. He calculated that the current $6.99 offer would require a thirty percent increase in traffic to each store in order for them to break even. But none of the deals being offered this summer have driven up traffic by even ten percent in most stores. The franchisees are losing money. Corporate headquarters has also issued instructions for the local stores to perform expensive renovations and upgrades at the same time.

The legal ramifications of this logjam are not entirely clear. Customers can receive the coupon for this deal by using the Subway app on their phones. The offer comes from the corporate level. If they show up at their local franchise and present their coupon and the store refuses to honor it, who would be held responsible? I'm not sure how many people would go to the trouble and expense of retaining a lawyer just to save five or ten bucks on a sandwich, but the plaintiff would first need to identify the responsible party. Would they take the corporation to court or just the local franchise? The franchise didn't make the offer, but the corporation doesn't actually make any sandwiches. Even if the case never sees the light of day in court, once word gets around that the company isn't honoring its promotional deals, disgruntled customers will likely start staying away, further driving down traffic and slashing profits. The entire situation is a mess and if Subway can't figure out a way to resolve this, the operation may wind up going the way of the dinosaurs.