How Larry Feldman keeps Subway ahead of competitors

Keep it simple

Subway’s simple operation — with no fryers, no grease traps, and a simple menu — makes it easy to run, and gives the company the control to easily manage food and labor costs. But how do you promote new ideas when you’re worried about overcomplicating your brand? At Subway, it’s by practicing “controlled innovation.” At the national level, the company sets aside an innovation fund specifically for testing ideas for the restaurants that are submitted to the company from customers or franchises. Every new idea goes through a thorough and carefully controlled approval and testing process.

“We can’t have everybody out there saying my grandma has a great recipe,” Feldman says. We need to go out there and try it.”

Recommendations are made through the franchisee development office. Approved ideas will go through a strict testing procedure starting with 100 stores, then 1,000, then 2,000 stores — which are checked for compliance — until the idea is reviewed for the entire system. Stores also must report daily and weekly through the computer on how many of the product are sold, what hours and so on. This info is sent to the home office in Connecticut where analysts examine the idea before sending their suggestions to corporate. The controlled process ensures ideas are only rolled out to the entire company that can be consistently executed and that complement its bigger health and price-value messages.

“So it’s not just an off-end product that’s left out there,” Feldman says. “It’s not just somebody that wants to test something on their own. There’s a very specific testing program.”

That’s not to say the company hasn’t adapted. A key reason that Subway has been able to stay relevant in the crowded fast food space is by proactively expanding its product mix to appeal to a wider range of consumers. As home of the $5 foot long, the brand has been able to capture a larger market share of people who see it as an affordable option. It was also one of the first to respond to the growing trend of health and wellness.

In the past five years Subway’s variety of products has increased dramatically, all tied to the health offerings. But the company has also carried out these changes in a very conscious way, Feldman says. The company has been successful at adding the healthier options because they are just that — options.

While it now provides things like calorie counts, reduced sodium options, and diabetic menus and healthier menu items such as salads, flatbreads and lean meats, Subway has also kept its indulgent subs like its BMT, meatball and steak and cheese. Diners can still add mayo or a bag of chips.

“Choices should be there,” Feldman says.

“That has been a tremendous part of our growth; but the fact that I can also come in and get that indulgent sub as well and I’m not a health food franchise — I’m here for everyone.”

The importance of keeping it simple has only been verified by the company’s testing of newer concepts like Subway cafés, designed by Feldman’s office for national in response to landlord’s looking for a more upscale Subway. In addition to the regular menu items, Subway cafes include offerings such as paninis and gelato.

“What we found was that the landlords thought that these big fancy law firms and investment firms that the people would demand all these fancy things,” Feldman says. “But when we opened these restaurants, more than 80 percent of the purchases are still our traditional Subway fare. So people are still coming down and getting their tuna sub or cold cut combo.”