Article
Sandwich segment holds its own
Portability, customization and healthful options create market opportunities.
February 23, 2009 by Valerie Killifer — senior editor, NetWorld Alliance
When firefighters and brothers Robin and Chris Sorensen launched Firehouse Subs in 1995, the limited-service sandwich segment was just beginning to explode.
And explode it did.
In 2007, the sandwich industry generated $21.2 billion in sales, a 5.7 percent increase over 2006 figures, according to the 2008 Technomic Top 100 Limited-Service Sandwich Chains report.Of the industry's Top 100 chains, 30 fall into the fast casual category.
Firehouse Subs experienced a 19 percent increase in sales and unit counts in 2007, while other chains, such as Which Wich and Spicy Pickle — Nos. 52 and 53, respectively, on Technomic's list — more than doubled their sales and units for the same year.
Although current economic conditions are impacting restaurants overall, the sandwich segment — which offers consumers portability and flexibility — appears to be standing firm.
"I think we're still in a growth pattern," said Don Fox, chief operating officer of Firehouse Subs. "Even in the current economy, I think the growth will be strongest with operators that have the strongest operations and the highest levels of customer satisfaction. Every time a competitor closes, it creates a market opportunity."
Firehouse Subs earned $168 million in 2007 with its average unit volume at $605,000.
Fox said the concept won't go the route of quick-service chain Subways' $5 footlongs to draw consumer dollars, but it will continue to focus on its value proposition of variety and freshness.
"We have not pursued anything aggressively on our price point. Our strategy has been to stay true to what our customers expect from us, but at a price point that's commensurate with quality," he said.
A daytime icon
While the sandwich may be to lunch what mashed potatoes is to comfort food, there are some challenges ahead for the segment.
"We're a daytime population venue," said Marc Geman, CEO of Denver-based Spicy Pickle. Spicy Pickle's sales were estimated at $22 million in 2007, according to Technomic's sandwich report, a 103 percent increase over 2006 estimations. And average unit volumes were approximated at $725,000. However, the current economic situation had a definite impact on the chain's U.S. development in 2008.
In order to boost sales and foot traffic, Geman said the company is looking to draw crowds through the dinner and breakfast dayparts, which will take some work.
Through its Vancouver-based Bread Garden Urban Café, Spicy Pickle is looking to add breakfast items. The company also is opening a grab-n-go location near a Denver light rail stop.
"We need to have a very strong value proposition for our customers right now," he said. "Service is going to be big. You want to give people a reason to enjoy their experience and come back."
Sandwich chains that will continue to thrive are those that offer strong points of differentiation. Quality and versatile ingredients will continue to lead the way, as will consumers' continued quest for healthful menu items.
"Surely, there is a health and nutrition halo that follows the category," Fox said. "Subway created a lot of that halo around the category, but I think all chains benefit from it."
And despite the economic downturn, one thing that won't go away is the number of Americans who are looking for portability and customization when it comes to dining out.
"You can eat a sandwich much easier and much more on the run than anything else other than a beverage," Darren Tristano, executive vice president of Technomic. "I don't think (sandwich chains) have to do anything but keep doing what they're doing and execute it well."
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