This year, quick-service restaurants have competed with their limited-time offers to gain a larger share of thinning dining-out budgets while providing relief to consumers shocked by fast food inflation. However, Subway admitted defeat on its latest 6-inch Meal Deal for $6.99 after the offer failed to meet expectations, giving way to a modified strategy, reported Restaurant Business News.
The promotion originally debuted Nov. 3 and will now run until Dec. 4. The deal, however, will still be available through Subway’s digital ordering channels, according to the news source.
“The Meal Deal was designed to help drive a lift in traffic, sales and, ultimately, restaurant-level profitability, and delivered on these objectives during the market test,” Subway claimed. “While the national Meal Deal promotion is delivering the expected number of daily redemptions, overall the promotion is not driving the anticipated results.”
The new strategy entails a blanket digital promotion offering 20% off any sub between Dec. 4 and Jan. 5.
What’s the Deal with LTOs?
Competition among QSRs is fierce, and this year it has businesses working to deliver even lower prices by eating into their profits. On Nov. 22, McDonald’s offered a McValue platform to give customers the option to purchase core offerings at reduced prices when bundled appropriately, competing in the range of low-cost meals.
The movement is likely a response to food away-from-home inflation increases. In October, Bureau of Labor Statistics data revealed that the unadjusted YoY price increase is more than triple that of food-at-home inflation, causing consumers to shift to home cooking for affordable mealtime solutions. As a result, QSRs have been disproportionately affected, as their implicit value proposition hinges on competitive pricing.
Earlier this year, Datassential VP of sales Megan Lynberg spoke with FI about the efficacy of promotions while on a podcast examining this year’s ‘LTO craze.’
“LTOs are absolutely a central part of an operator’s business. They drive both revenue and traffic. Specifically, they drive repeat visits among consumers,” she explained.
However, Lynberg added that a restaurant’s core menu is equally important. Consumers going to a brick-and-mortar for an LTO often don’t even purchase the item, instead opting for a core offering.
Subway’s core offerings; however, have been under scrutiny recently. An ongoing lawsuit with the chain alleges the QSR engaged in “unfair and deceptive trade practices” by selling certain products with at least 200% less meat than advertised, ABC News noted, citing the lawsuit.
A recent Datassential report also revealed how LTOs can impact a foodservice operator’s overall strategy. Findings revealed that 65% of consumers were motivated to visit an operator specifically to order an LTO, and operators report an increase of up to 25% in both revenue and traffic during months with successful LTOs.
These gains would have been welcome news for the deli sandwich chain, which has had a complex year that may be the underlying motivator for its latest strategy swap.
Subway’s Tenuous Strategy
The sandwich chain has long since struggled with low unit volumes and weak sales. Since 2015, roughly 7,000 U.S. locations have closed. Nevertheless, the chain is optimistic about the year ahead.
In a statement about the impending transition of its CEO from John Chidsey to interim CEO Carrie Walsh, effective Jan 1, 2025, the company revealed plans to double the number of new restaurant openings by EOY compared to 2019. Additionally, it reiterated its over 10,000 future restaurant commitments, news first announced in October.
Chidsey helped revivify the brand after assuming the CEO role in 2019 through a digital-first strategy and refreshed menu, the QSR said. Walsh will chart the chain’s expansion strategy, leveraging her two decades of industry experience across Subway, Yum! Brands, Pizza Hut, and PepsiCo.
Recently, the chain has struggled against its competition: in October, its MoM change in foot traffic surged 3.1%, however, its YoY metrics remained in the negative, down 2.3%, reported data insights firm Placer.ai. Additionally, between July 2024 and Oct. 2023, the fast food and QSR category’s overall foot traffic outpaced Subway’s performance by roughly 3x.
Months after Roark Capital finalized its acquisition of Subway, The New York Post broke a story about an alleged “emergency” meeting regarding same-store drops in August and July. Subway promptly claimed that the virtual conference was not an emergency, instead endeavoring to “proactively communicate with our franchisees to share business updates and plans,” said a spokesperson.
Franchisees in attendance cited their inability to turn profits with the latest promotions.
“Charging $6.99 for any sub while they are $11 on the menu…they are doing crazy coupons,” one franchisee told The Post.
This signals a real cost of the latest promotions – chains struggle to keep up. Restaurant Business added that, as a result, some franchisees refuse to cooperate with value deals, hampering their efficacy.
Subway does not own any of its locations; instead, it takes a percentage of franchisee sales.
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