Exclusive: Eat Fresh

Fare Digest speaks with Subway CDO Don Fertman

By  Abbie Westra, Editor-in-Chief, Convenience Store Products

MILFORD, Conn. -- It’s aiming for up to 2,500 new stores this year, permeating new markets from Kenya to New Jersey, the Ukraine to Northern California. That's not the only way Subway maintains a panoramic view of its business. It's continuously analyzing its position to ensure it's meeting consumer needs and expectations. By offering healthy options well before everyone else and forcing the whole industry to shift to its $5 price point, among other things, Subway has kept a finger on the consumer pulse without doing anything especially outrageous.

Subway’s chief development officer Don Fertman spoke with Fare Digest about finding “gold” on the menu, avoiding the $5 pigeonhole, and the “bloody” competition.

There are a few things Subway has done well for so long, one can’t help but wonder if they’ve dug themselves into a rut. But don't mistake steadiness for complacency. The chain has been touting its Fresh Fit Choices--subs that contain 6 grams of fat or less--since the 1990s. Its spokesman Jared Fogle, who lost 245 pounds eating Subway sandwiches, continues to be a household name, joined now by athlete spokespeople such as Apolo Ohno and Michael Phelps.

While other QSRs are just now figuring out how to integrate nutrition without alienating customers, it’s already engrained in Subway’s company culture and marketing fabric. And yet indulgence is equally celebrated, especially with favorites such as Italian BMT and steak and cheese.

And about that $5 footlong. While it set the bar for other meal deals (just look across the spectrum of restaurants and other foodservice operators with $5 promos), some industry consultants have warned that the company could pigeonhole itself, never able to get customers above that $5 price point.

But the folks at Subway have not been blind to the risk.

“We’ve discussed this, ad nauseam,” says Fertman. “It’s been a conversation between our advertising and marketing folks, our operations folks, [co-founder] Fred DeLuca, our franchisees and our developers, and we’re always looking at the data, the food and labor costs, the profitability of this promotion, and I don’t see it going away any time soon. That’s the general consensus.

“Every time we go to a vote it comes back that this thing’s working, you’ll just see it evolve,” Fertman continues. Last year saw the start of FebruANY, when all footlongs cost $5 for the entire month. Other variations include a rotating $5 footlong sub of the month.

“There are ways to freshen it up without always putting the entire menu on $5. That gives our customers the choice of value, but they can still look at their indulgence, their healthy sandwiches, and they can decide how much they want to spend and what they want to [spend it on],” says Fertman.

Subway has also learned a thing or two about breakfast since rolling it out in 2010. The stores had some growing pains in adjusting to an earlier start to the day and ensuring all food was prepped and ready to go for the morning rush.

It also realized that opening for breakfast not only helped breakfast, but it also boosted lunch as morning customers also picked up a footlong to save for the midday meal. The stores realized that they had to have lunch items ready, and they needed to promote the opportunity as well.

“The trick is to look at our menu and realize exactly what we have, because we have gold on that menu. How much gold can we get out of it with the incredible number of offerings we have, and at what day-parts can we promote that?” says Fertman.

Selling more lunch items during breakfast also helped Subway’s throughput in the afternoon—a strength Fertman acknowledges a competitor across the pond has over Subway.

Fertman, DeLuca and other Subway management members were recently in London and spent some time looking at Pret A Manger, the British grab-and-go sandwich shop that’s growing store counts in Chicago, New York and Washington, D.C.

“Here’s a thumbnail analysis,” he says. “First of all there’s a point of difference in the preparation of the sandwiches, and there’s a major difference in the sandwiches themselves. At Pret you’re getting a relatively small, four-corner sandwich that’s prepackaged and yet sold at a relatively premium price.”

He had a chicken salad sandwich on four-corner bread for 3.70 pounds. It tasted good, he says, and the quality was there, “but I could have gone to Subway two blocks away and gotten a 6-inch sandwich made to my exact specifications, and a beverage for 3 pounds.

“On the other hand what Pret can do that we have not yet mastered completely … is throughput, getting customers in and out relatively quickly. But Pret doesn’t have to take the time to make the sandwiches. So that allows them to have quicker turnover to perhaps do a larger volume, and it also allows time to market other things like nuts and desserts. So we’re continuing to watch what they do and keep any eye on their progress.”

Meanwhile, Subway continues to capture new customers by focusing on nontraditional locations, especially colleges and universities, hospitals, airports and other transportation hubs.

“We’ve discovered that we go really well not just with airports but also bus terminals and railroad terminals, especially internationally where folks travel a lot on that type of public transportation.”

These locations--including 3,000 c-store locations and 1,600 shops within Walmart stores--raise visibility for the brand. And because of the adaptability of Subway stores, it’s able to open units quite quickly.

“We opened a store in an airport in upstate New York, and they literally built it overnight.”

By Abbie Westra, Editor-in-Chief, Convenience Store Products
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