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SUBWAY: What Do Franchisees Make on $5 Footlongs?

Discount promotions like Subway’s $5 Footlongs sub campaign provide are attractive to consumers and great for the franchisor… but what about the Subway franchise owner who foots the bill? According to Smart Money, Subway franchisees make a “Profit of roughly $1.20 a sandwich.”

Product discounting is one of the hottest topics in franchising. Here’s why: Franchisors make money off the gross sales of their franchisees, regardless of franchisee profitability.

Some franchisors make additional money marking up ingredients and food products to their franchisees.

Public franchisors benefit from higher sales – and stock prices – that are not tied to franchisee profitability.

SmartMoney.com surveyed franchisees from different franchise chains regarding the cost to them of some current and recent promotions. The Smart Money article points out that franchisees generally bear the brunt of a promotions’s cost, including the food, labor, rent and utilities, among other things.

Here’s the Smart Money finding for Subway’s $5 Footlongs sub campaign:

Subway

Promotion: $5 Footlongs – The chain offers any regular sub for $5. (Which subs getting this price tag will vary by store.)

What they normally charge: $5.89 (12-inch turkey sub)

Promotion Price: $5

Bottom line for restaurant: Profit of roughly $1.20 a sandwich

The $5 Footlong is a catchy marketing slogan but the discounting on the turkey sub isn’t as deep as some other big fast food promotions. For Subway operators you can still eke out a decent per item profit — and hope the diner is thirsty for a large, high-margin soda. To make the footlong turkey sub, the ingredients cost $1.65 at a New York location. Mack Bridenbaker, a Subway spokesman, declined to discuss the economics of hosting the company’s $5 footlong promotion.

LITTLE CAESARS: What Franchisees Make on a $5 Pizza

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BASKIN ROBBINS: Franchisees Lose $1.45 per Scoop on Promo

QUIZNOS: Franchisees Lost $2.25 per Sub on Giveaway

BURGER KING Franchisees Sue Over $1 Cheeseburgers

WHAT DO YOU THINK OF SUBWAY’S PROMOTIONS? SHARE A COMMENT BELOW.

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Brent says:

October 1, 2014 at 7:34 pm

My wife and I owned 3 Subways and I can guarantee you the profit on $5 footlongs is non-existent. You are using a model that suits your article to show a profit but we lose money on the high price point sandwiches. What sandwiches do you think get sold during $5 footlong promotions? Yep, the Chicken Bacon Ranch, Club and other premium sandwiches. The only person making money off of the $5 footlongs is Fred Deluca owner of Subway cooperate (DAI).
Chase says:

November 18, 2014 at 4:17 pm

I have an issue with your comment Brent. When the article "The chain offers any regular sub for $5" the key word is regular. If you owned subways than you should be at least knowledgeable about the difference between a "regular sub" and a "premium sub". The profit margins they are referring to are only based on regular subs, which would explain why you had such loss if you were doing a promotion on the wrong items that the franchise was advertising in the first place.

The key to success comes mostly from location, but secondly from the owner.
Tahseen Khan says:

April 23, 2015 at 5:08 pm

Interesting reading, I was investigating buying 6 stores for 2.3 million. I had a sneaky feeling about Subway, you stores every few blocks and no customers. I had suspected that the owner is interested in selling as many franchises as possible because he makes money on the sales not on income.

Thanks guys I changed my mind!!!
Josh M says:

September 27, 2020 at 10:43 pm

Subway might not be around much longer
https://www.mashed.com/237524/signs-subway-might-not-be-around-much-longer/