U.S. Markets closed

Subway: Eat fresh ... and add the Fritos

The Exchange
Subway: Eat fresh ... and add the Fritos

One of the bigger surprises of Sunday's Super Bowl wasn't that the Seahawks obliterated the Broncos it was the revelation that Subway isn't always about pleasing dieticians.

Indeed, Subway made clear it's not only about attracting those looking to whittle down their waistlines, Jared Fogle-style. That's right the sandwich chain is joining the race to redefine convenience on a bun, this time via the new Fritos Chicken Enchilada Melt.

Subway has vegetables. It's got salads. It's got apples and "heart-healthy" meals. But Subway also has the Chicken & Bacon Ranch Melt, the Big Philly Cheesesteak, the Meatball Marinara, and, now, a chicken sandwich on flatbread with enchilada sauce, garnished with Fritos. Subway's website indicates it's a limited-time offer, although if sales go through the roof, the company won't likely be rushing to end it.

Though many people were introduced to it during the Super Bowl for the first time, talk of the sandwich has been around for a few months. (Advertising Age said the commercial was a late entry to the ad lineup and that it initially aired last Thursday.) Known for its "eat fresh" pronouncements and pound-dropping spokesman, Subway has benefited in recent years from the fact that it lets patrons choose their sandwich toppings. That it does so isn't news. But we're living in food-ingredient-obsessed times, with just about anything that's not McDonald's (MCD) or its ilk held up in the press as some kind of world-changer.

Among the nutritional particulars for the enchilada-Frito joint venture are 580 calories, 26 grams of fat and 1,170 milligrams of sodium for the 6-inch version. While it's being supported by a spot featuring past Olympians Nastia Liukin, Michael Phelps and Apolo Ohno, we can be fairly confident they're not eating every one of their meals at Subway, any more than Big Macs are strongly encouraged by managers for the U.S. team headed to Sochi. The advertising part of this and the actuality of it have always been, and remain, different things.

More than anything, the new sandwich should remind us that business is business. When that business is food, the ultimate differentiator for many, if not most, is taste. We can think about where the food's from, what's in it and how it was processed, but are most of us doing that, meal by meal? Let's take a step back. Yes, Subway has plant toppings, but it shouldn't be mistaken for your local farmer's market.

Growing sub space

Still, for Subway, it hasn't remotely hurt the chain that media coverage about the joys of healthier, or less-bad-for-you, restaurant foods has reached a fever pitch. Last year, a report in Ad Age said McDonald's was increasingly concerned about Subway's appeal to younger diners, leading the House of Ronald to bet heavily on the success of its chicken McWrap line. Meanwhile, for Fritos owner PepsiCo (PEP), the news recalls the Doritos Locos Tacos deal with former subsidiary Taco Bell. It also sets a reminder that we should keep an eye on possible food plays with new restaurant partner Buffalo Wild Wings (BWLD).

Subway has seen extraordinary growth over the years. With more than 41,000 locations globally, it's the single-biggest chain there is, measured by number of units. It's larger even than McDonald's, which has around 35,000 stores. In the U.S., its 26,000-plus shops nearly doubles the number of Golden Arches.

Doctor's Associates, the privately held entity that controls Subway, has encouraged the proliferation by keeping franchise expenses on the low side. And the stores, once open, don't require much physical space or a large workforce. An individual Subway isn't exactly a mint, however 2012 average unit sales were about $481,000, according to Technomic data furnished to QSR magazine though it is a lower-cost way to own a business that even today doesn't seem to have oversaturated the landscape.

That's nothing short of astonishing. Subway hit 20,000 restaurants in 2003, and it expanded 100% in the next 10 years. It did so as other growing chains such as Chipotle (CMG) and Panera Bread (PNRA) spread, and it's stood fast as smaller sub shops such as Jimmy John's, Potbelly (PBPB), Firehouse Subs and Jersey Mike's dot bigger portions of the landscape. (Competitor Quiznos hasn't been nearly as fortunate.)

So Subway's doing something right. Just don't call it health food at least not entirely.