Subway lets local tastes guide new products

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While Burger King and Domino's are letting contestants on "The Apprentice" come up with new offerings, Subway is turning to a group who knows a bit more about what its customers want: their franchisees.

"These guys have lots of ideas and we've taken the attitude of allowing and encouraging it," said Chris Carroll, senior VP-marketing for Subway's Franchisee Advertising Fund Trust, noting that the corporate office can reasonably test just six or seven products a year.

It's a move that flies in the face of its biggest rivals. Despite their hitmaking histories with products like the Happy Meal and the Egg McMuffin that were cultivated in the chain's early years, McDonald's Corp., Burger King Corp. and Wendy's International have centralized product development operations. This month, McDonald's named Wade Thoma VP-menu management to lead the new-product team. Last April, Burger King named Denny Post chief concept officer, in charge of new-product development. Two years ago, Wendy's opened a $5 million research-and-development center with a test kitchen, two culinary labs and testing booths to beef up the No. 3 chain's menu process.

Not so at Subway. At least half the national product launches were conceived in the local markets, including the chain's Atkins-friendly program, which originated in Phoenix. At Subway's most recent franchisee marketing committee meeting, the group mulled eight to 12 sandwich ideas in regional markets.

"By tapping the regional tastes and franchisees' entrepreneurial spirits, product ideas can be tripled in just one year, giving the chain more opportunities to find products with traction. Even if the product isn't broad enough for national launch, it could be a strong local option, which accounts for 25% of the marketing calendar," Mr. Carroll said. Between 15 and 20 products are in some form of testing locally right now. "If we got three or four of them to work, that wouldn't be a bad hit rate," he said. Currently in test are Ultimate Subs, which have double the meat and fancier ingredients, such as grilled vegetables, as well as four breakfast sandwiches.


With the number of regional chains outnumbering national chains, it's no wonder the big guys are getting bombarded by all sides, according to Ron Paul, president of consultant Technomic. "Who better to watch the competition than franchisees?" he mused. "Where the war is won or lost is in local markets. You'll find that most decisions are still made within three miles of the store. Local is where it's at."

Rick Sender, a franchisee with one unit in Woodland Hills, Calif., and a member of the chain's board of trustees for 15 years, conceded that the recently launched line of toasted subs was a defensive move-but one that added a new dinner platform.

"As a company with 20,000 locations, it doesn't move very nimbly and there's a lot of regionality," he said. "When corporate is not producing the kinds of things coming into pipeline quick enough or effective enough, by nature of the beast, franchisees will go out and do that. Franchises in a lot of cases look at that as saying `Our menu is stale what can we do to improve it?"'

Field agency Canadian American Corp., Flint, Mich., handles 31 Subway co-ops in 20 states. John Kupiec, agency president, said, "It helps make Subway the hometown sandwich shop." In South Carolina, regional research conducted five years ago showed that locals love steak more than any other food, so the region created Steak Burgers. Now called Angus Steak Subs, its name harks to rival Quizno's Black Angus Steak Sub. Subway's Michigan region created a Mesquite Chicken product to compete with a similar Quizno's offering, considered the chain's No. 1 sandwich. "Turf battles are more significant than anyone recognizes," Mr. Kupiec said.

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