Don’t sacrifice quality for price

As high prices continue to hurt consumer spending, more and more fast-food restaurants are offering value-priced menu items to lure customers back into their restaurants. Doug Fry, President of Subway North America, talks to Wealth! about how the sandwich chain is dealing with the decline in consumer spending.

While more restaurants are offering inexpensive meals, Fry warns that “sometimes greater value comes with a trade-off. And that trade-off is often a trade-off in quality to meet the price.” He explains that Subway offers a variety of menu items to suit every budget without sacrificing quality. As consumers look for on-the-go snacks, Subway has released 12-inch-long “Sidekicks” in the form of pretzels, churros and cookies. The company is now launching 12-inch-long “Dippers” for $3.

He points out that Subway emphasizes a balance between quality, quantity and price when developing new menu items. Fry also stresses the importance of loyalty in the industry, pointing to Subway’s MVP rewards, which offer special offers and perks.

Click here to watch the full episode of Wealth and learn more about expert insights and the latest market activity!

This article was written by Melanie Riehl

Video transcript

Because high prices continue to impact consumer spending.

Fast food restaurants are also badly affected, as low-income consumers in particular are eating out less often.

To ensure we can win back customers, chains like McDonald’s, Wendy’s, Starbucks and Subway are adding discounted deals to their menus. Here we discuss Subway’s latest measures.

We have Doug Fry, President of Subway, North America. Doug, great to have you in the studio with us today.

Thanks, Fred.

I’m really happy to be here.

I mean, what are you sensing in the consumer environment right now where they are resisting certain menu items and where they are relying on some fast food restaurants to express their wishes even with regard to the current menu.

Yeah, I think if you look at the restaurant industry today, we’re seeing as consumers everywhere that suddenly these, these, uh, dishes are popping up on menus that, you know, offer greater value.

The challenge for me is that sometimes greater value comes with sacrifices, and those sacrifices are often sacrificing quality to achieve price.

And at Subway, we don’t believe our guests should sacrifice quality for price.

And that’s why we offer a wide variety of menu items to suit every budget and appetite.

And as you know, when I look at it – and I’m not just looking at price, I’m looking at value – I really look at price, quality and quantity and that comes down to wanting to feel good about the food.

The story goes on

And as you know, consumers are looking for snacks on the go.

Consumers are looking for something that is good value for money and still has the necessary taste.

And you know, earlier this year we launched our 12-inch Dipper or 12-inch Sidekick, our 12-inch Pretzel, our 12-inch Cookie.

Uh, and this week we’re launching our 3-foot Dippers, which are $3, you know, with 11 different sauces to choose from.

And again it offers added value, great taste, a great product, without compromising on quality.

What reactions do you hear from franchisees?

I mean, those who invest their money to ensure that they can grow their wealth through an investment and because of a nationally recognized brand like Subway.

So what are franchisees?

Yes.

What reactions are you hearing from them regarding some of the new promotions that may also be launched?

Yes.

Well, these $3 Dippers are a great example of how we’re working with our franchisees to better listen to our guests and understand what our guests are looking for. And our guests tell us they’re looking for a snack on the go.

So instead of reorganizing a menu, we’re coming out with a new menu innovation to really appeal to those guests and attract new guests into the restaurant who, you know, are really attracted to a 10-foot bowl that they can just pick up and walk out with, and that’s the kind of work that we do with our franchisees to really find the right balance so that we’re meeting the needs of our guests and exceeding their expectations, but also meeting the needs of our franchisees from a profitability perspective when we think about it, and that’s something that you mentioned earlier.

And I think it was absolutely right that when you see some of the low-cost offerings coming into the market, there are some compromises in quality, and some of those compromises in quality affect the food system, particularly in the United States, even compared to other regions of the world.

Are we making a significant or lasting change in the sense that the loss of quality is reduced even when new menu items are introduced to the market?

Well, I can certainly speak for Subway.

When I think of quality, I think of freshly cut meat, fresh vegetables and freshly baked bread, all packaged into something you can eat with a clear conscience and spend your money on with a clear conscience.

And that is what quality means to me.

And it also comes back to the earlier point about what value means.

It’s about quality, quantity and price.

Um, and as we look at new menu items, it’s about trying to maintain that, so continuing to offer something for everyone, even when you think about today’s consumer.

I mean, there’s the wave of GLP drugs, weight loss drugs that affect appetite, to what extent do you see that impacting the menu items that are purchased?

Um, and at a certain cadence, if people are engaging with Subway even now, which I appreciate, they’re engaging with Subway, they’re engaging, you know, I look at some of our superfans who are, you know, part of our loyalty program, our MVP rewards.

Uh, and these are also the people who post us on TikTok or Instagram talking about snacks.

They talk about great products that taste great, have great aromas and are easy to take with you.

They also talk about our six-inch submarines.

They also talk about the Footlongs and of course the Sidekicks because they were a huge hit when we launched them in January.

Um, and I would say that’s what people talk about, they talk about our food, they talk about the quality of their food.

Uh, and they talk about value for money.

What impact will this have on prices in the long term?

I mean, if consumers are really tied to some of these value propositions, what does that mean for the normalization of prices on a going forward basis?

Yes, I look at what we offer and we have daily prices, we have special offers, we offer loyalty programs.

Um, and I think if you look at the restaurant industry, we should talk about loyalty for a minute here.

I think loyalty is a really important aspect of this industry.

And for Subway, ours is called MVP Rewards.

We relaunched it about nine months ago and it’s really about our superfans would tell you this is the place to get the best deals and the best perks. They get, you know, free chip Fridays, they get birthday gifts and they get cashback.

More specifically, in the nine months since we started.

It’s about, I think, uh, my goodness, $60 million or more in cash for these superfans, these loyal users through their loyalty.

And I think that’s where consumers really start asking themselves, “How do I get the most for my money and how do I get the real value out of it?”

And that is exactly what you will certainly see with loyalty programs.

I think people, um, you know, get more value from it as consumers.

I know.

I certainly do.

Yes, I feel the same way.

Doug Fry Subway, President North America.

Thank you for taking the time.

Thank you very much.

Am grateful.

Absolutely.