Here, you get a 6" sub for $1 every $25 you put on the card. But there are a lot of app deals and random sales that just pop up.
My suspicion is that Subway is almost fine with breaking even, or even LOSING money as long as their gross sales increase.
Sales increase = illusion of success = more owners = $15,000 franchise fee for Subway + something like 12% off the top from all sales, even if the owner is losing cash.
I also think Subway was sold, but the deal isn't finalized yet. So from what I can tell, the company just wants as many sales as possible.
There is NO WAY [IMO] that giving me basically $350 for pre-paying $200 could be profitable. But if everyone did that, they'd have more sales on paper, and that seems to be what the company wants right now.
Large companies with plenty of cash on hand (like Subway) will lower prices to drive sales, which is common for restaurants and other food services, because they make money in bulk over time. Also, you would be shocked to know what their profit margins are on a single sandwich. They can afford to lose margin for determined periods of time.
So, taking a loss for an amount of time to drive up sales and traffic, increases total sales for the year, AND produces repeat buyers at a certain percentage, often for years.
So they lose X% margin for 6 months, but over the next 6-18 months they have an increase in sales from repeat buyers, which increases their margin and sales production, which equals growth, which equals more sales, more stores, etc. This is how they grow.
They do this in the housing market too, that's where i learned it. And large production/refinery industries do it in electronics sales.
It's about driving traffic to increase sales over time. And for a company this size, the amount of people taking advantage of the Subway card and rewards is negligible. And they know this.
Smart. They have brilliant people running the numbers and they always make money.
I know the owners of a large brewery in Texas, they make over 60% profit on a 6 pack of beer. And they have crazy sales and give-a-ways to drive more traffic/sales. They make millions off of these tactics. Free beer, free t-shirts, etc. Then the next 6-18 months they see record sales and profits.
Welcome to capitalism.
