Firehouse Subs is a franchise business that serves submarine sandwiches. Robin and Chris Sorensen opened the first location in 1994 in Jacksonville, Florida. Robin and Chris are two brothers that once worked as firefighters in the state of Florida. After sampling other entrepreneurial ventures, the two brothers decided to expound on Firehouse Subs, turning it into a franchise business after a few short years.
The Sorenson’s began to tackle the Southeast region of the United States in efforts to set up shops and serve sandwiches. In 2001, there were 30 Firehouse Subs restaurants operating across Florida. As of today, they have 450 locations in 29 states within the United States. Using the thematic of fire stations, the brothers pay homage to their firefighting roots and have decorated and carried on the tradition of having their restaurants emulate a firehouse and serve sandwiches specializing in “the best meats, cheeses, and toppings [they] can find.” It’s because of this recipe, and stellar customer service, that the Sorenson’s have been as successful thus far.
Financial Issues In 2008 Firehouse Subs sales shockingly declined throughout the submarine chain by 3.4 percent. The decline in sales shocked executives because of the restaurant being in the lower priced category, where usually is positioned well enough in the market during economic downturns to attract continuing dining out customers that look for less expensive selections. So in result of this decline, co- owner Robin Sorenson wanted to figure out what other factors could have created this drop in sales and immediately implement strategies to push sales back up.
Firehouse Subs charges an initial franchise fee of $20,000, a royalty of 6 percent sales and a 3 percent advertising fee (2 percent toward local advertising). He suggested eliminating 2 percent local advertising fees to allow franchisees to create their own marketing strategies. Most franchisees approved the idea but some executives felt giving money back to the franchisees was a bad idea. After six months of the new strategy, Firehouse Subs saw a system- wide sales decline of 6 percent. In result of this, reclaiming franchisees local advertising fee was recommended and also it being doubled from 2 to 4 percent which would increase payments from 9 to 11 percent of sales.
Issues In 2008, Firehouse subs had a sales decrease from year-to-year throughout the entire chain by 3.4 percent, which is a company first. Secondly, when trying to switch their current marketing methods, six months later, the sales worsened by six percent from the previous year. They believed the decline was due to the lack of brand awareness and their biggest competitor, Subway. Subway holds a campaign of five dollar foot long sandwiches. Lastly, the advertising agency suggests the executive team increase the advertising fee which would be difficult when the franchises are already struggling with lower sales and profits.
Recommendations The Franchisees should return to paying the advertising fee because there wasn’t a sales decline until 2008. In addition, the advertising team has more brand awareness and can effectively market the products better. Firehouse should incorporate loyalty cards which would keep customers returning to eat at their shop. They can construct a card that requires them to buy five sandwiches and then the sixth one would be free! The company should research deeper in how they want to market their products in a more creative way before they agree to pay a higher fee for advertising. Increasing sales is the main concern for this company; in this, they should focus on excellent customer service such as Chic-fil-a. Customer service can create buzz marketing, resulting in new customers inquiring about Firehouse subs.