Connect with us

Latest News

Who needs economists? The real way to tell we’re in a recession is that Subway’s $5 footlong is back

Published

on

Forget the Big Mac Index, there’s a new fast-food economic gauge in town: The $5 Footlong Principle (5FP). 

The concept is simple: When the economy goes sour, footlong sandwiches from Subway are priced at $5. When growth returns to normal, the prices increase to market rate. Think of it as a recession special. 

The $5 footlong, one of the most successful campaigns in Subway history, was first introduced to the public in March of 2008. The deal was an immediate hit for the Connecticut-based chain. Sales increased by 25% within the first two weeks, according to Businesweek. The deal, originally intended to last just four weeks, was extended to seven.

Eventually the types of sandwiches available for $5 were narrowed in scope, but the concept was cemented. Subway became one of the 10 most popular fast-food franchises in the U.S., and other companies like KFC, Pizza hut, and Boston Market made their own copycat $5 meals.  

By the end of August of 2009, the $5 footlong had generated $3.8 billion in nationwide sales.

But then, at some point during the longest period of economic growth ever recorded in U.S. history, the nation lost its taste for these inexpensive sandwiches. Fast-casual competitors like Panera (with $11 sandwiches!) presented a new challenge and as demand lessened so too did the revenue on the $5 footlong. 

One franchisee in Northern California told the Washington Post at the time that it cost well over $4 to produce each footlong: $2 for ingredients on top of labor, utilities, royalties credit card fees, and rent.

In September of 2018, CEO Trevor Haynes announced that he would no longer require franchises to run the deal. “How do we help our franchises with more of a regional value message, so they’re able to (have) a value proposition that fits with their economic model?” Haynes asked USA Today. “If you look at California, there’s a very different cost of business than in Arkansas.”

But now, as we enter a recession that some economists predict will last for years, the footlong has returned. 

A coincidence?

When asked, representatives from Subway responded with a “no comment.” Hmm.

In a press release, Subway officials announced that all footlongs would once again cost $5 for at least the length of the summer, so long as customers order two at once. It’s possible that the change in pricing wasn’t predictive and was in fact a response to the official announcement we are in a recession, but a little sleuthing shows that this campaign has likely been in the works for some time. Exhibit A: On Tuesday, Subway published a video staring pop star Charlie Puth and revealed a new jingle for the promo. Exhibit B: The company referenced a number of tweets in their campaign announcement dating back to February, right around the time economists say our current recession began.

Subway also announced Thursday that it would hire an additional 50,000 workers across the country this summer due to anticipated demand.

Not all is well, however, in the land of Subway franchisees. Some have already filed complaints with the Federal Trade Commission, arguing that they are being “bullied into honoring a promotion that is unprofitable to them.” The company, hoping to get restaurants on board, has offered an extra $2,100 in cash to each store that offers the promotion.

Regardless, if you’re looking for clues as to where the economy is heading, keep your eye on your local Subway to see if the promotion lasts into the fall.

More must-read finance coverage from Fortune:

Continue Reading
Comments