What if a program is so costly, its own franchisees disavow it?

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By: Richard Pachter |

Posted on July 11, 2018

Subway, the national franchiser (with no company-owned shops, by the way), that’s also the country’s biggest fast-food chain. The sandwiches – an endless array of hot and cold iterations with a multiplicity of meats, cheeses, vegetables and condiments — is an undeniably safe and simple option for lunch or dinner on the run, hence the rising competition from other national sandwich chains (Quizno’s, Firehouse, Jersey Mike’s, Panera et al).

By Richard Pachter

The chain’s promotion of itself as a temple of “healthy” sustenance might help, but people likely settle for its offerings due to location, convenience and price. Does anyone dream of a BMT or other Subway combination in the middle of the night or during their workday? If you can put a smart program in place, when it comes to making a lunchtime decision, loyalty — earned or bartered — should make the difference. You would think…

But what if the program is so costly, the franchisees disavow it?

According to Bloomberg, “Franchisees, who own and operate all Subway restaurants, say the company didn’t provide them with enough financial data to support the rewards program that the chain introduced this spring in the U.S. and Canada. The company ‘has not provided franchisees with documentation of a profitable business case to justify the additional expense,’ franchisees said in a position paper obtained by Bloomberg News. For each restaurant in Subway’s network -— which at 26,000 locations is the largest in the U.S. by that measure — the fee amounts to about $2,600 a year.‘”

This comes during a particularly rough patch for owners, with business down and shops closing by the hundreds … plus the imprisonment of its erstwhile spokesperson, Jared Fogle. Even its recent attempt to introduce breakfast to the mix laid an egg.

Subway counterpunched, claiming: “Individual restaurant results will vary, but based on our industry research and historical data from the Subway rewards program, we are confident that loyalty members will visit more frequently and spend more than non-loyalty members.We know time and money are important to our guests,” said Subway Chief Digital Officer Carissa Ganelli. “It’s important to us that we deliver a seamless, convenient experience to help our customers get what they want when they want it — and what they want is our delicious, nutritious and affordable food.”

They’re also trying to freshen the stores’ design and provide every millennial’s catnip, free Wi-Fi. Recently, the company debuted its newest and biggest initiative — the Fresh Forward redesign in about 400 locations. “It’s not changing or rebranding; it’s modernizing those core elements,” said James Walker, vice president of Subway’s North American operations.

In addition to free Wi-Fi, they’ve also added charging stations built into seats, phone apps and menu kiosks, using technology to improve the customer experience, Walker said. The loyalty program is a key part of that effort. Previously, Subway offered free sandwiches with a punch-card system called Sub Club that was dumped in 2005, because of fraud, according to Wired.

The new token-based loyalty program has a strong mobile element with an amazing resemblance to rival Panera’s own affinity scheme, so it could prove to be a hit with those coveted younger demos. But first, they’ll need to create a plan to strengthen ties with their own franchisees, who have a long history of strong dissatisfaction with what the parent firm serves up.

Richard Pachter is an Editor at Large for The Wise Marketer.