Subway Backs Off $5 Footlong after Franchisee Revolt
The $5 footlong was a hit with penny-pinching customers, but many Subway franchisees were finding that they couldn't make money on the deal. The franchisor, on the other hand, collecting its royalties on the gross sales of its franchisees rather than their net profit, made money whether or not they did. After franchisees forcefully aired their complaints, the franchisor has backed off.
Subway franchisees will no longer be required to sell the $5 footlong after a franchisee revolt broke out earlier in the year.
When the sandwich chain announced in December that it would be bringing back a new take on the deal, charging $4.99 rather than $5 for a footlong sandwich, it was met with mixed reactions. At the time, 400 angry franchisees signed a petition in protest, saying that the company's strategy for discounting was eating into already-slim profit margins.
"The national promotional focus over the past five years … has decimated [us] and left many franchisees unprofitable and even insolvent," petitioners, led by Virginia franchisee Mitesh Raval, wrote in a letter to Subway in December, The New York Post reported. —Mary Hanbury, Business Insider