Subway Is Forcing Franchisees To Accept Mobile App Discounts

After more than 50 years of independent ownership, one of the country's biggest franchises, Subway has recently put itself up for sale and reeled in a buyer. With a potential acquisition by Roark Capital ahead of it, Subway has laid down a policy for all of its locations: According to Subway franchisees, all Subway locations will be required to accept all mobile app discounts as of December 28, 2023.

In correspondence with Restaurant Business, franchise operators stated that Subway corporate announced the hard deadline to franchisees on September 26. This unilateral order comes as an unprecedented move for the value-oriented sandwich chain: Up until now, every location has reserved the right not to participate in corporate promotions and discounts at their discretion, as each franchisee is individually responsible for their own costs and profits. Unfortunately, food costs and ongoing inflation have had more than a few franchisees opt out of accepting coupons that they couldn't afford to honor.

As an Iowa-based Subway manager explained to WHO 13 last year, "We used to take coupons until about February of this year. Prices of turkey went up, bacon has gone up about 20% since 2020, so every year it keeps climbing." Despite there being no sign of inflation slowing down as of yet, it seems all Subway locations will be forced to take any and all digital promotions by the end of the year regardless of how it might impact their operating costs and profits.

Subway also released a statement to Restaurant Business explaining the rationale behind the decision. Apparently, the company has found that consistent coupon acceptance drives better sales and traffic and creates momentum for repeat customers. Subway claimed that, by "maintaining a strong value proposition" for consumers through reliable promotions and discounts, it aims to boost profitability for franchisees.

With Roark Capital allegedly setting financial milestones that must be met in order for a full acquisition payout, the mandatory coupon acceptance may be part of Subway's efforts to meet said milestones before the deal is finalized. However, it's very possible that this heavy-handed attempt to encourage sales may completely backfire as the company continues to roll out steep discounts through the mobile app. As it stands now, franchise operators are able to opt out of financially unviable promotions — if it forces franchisees to accept major profit losses en masse, could Subway end up seeing its fourth consecutive year of mass location closures?