||What Firehouse Subs Learned
Radio Ad Campaign Pays Immediate -- and Ongoing --Dividends
A recent case study published by The New York Times chronicled the advertising woes of Firehouse Subs, a fast-food chain that experienced sinking sales in the depths of the recession.
The article recounted how the chain stopped collecting its 2-percent-of-sales fee for local advertising and gave the money back to franchisees in the hope that they would do their own marketing. But the local effort fizzled and sales continued to drop, prompting Firehouse to change course and hire a new ad agency to develop a series of Radio spots.
The resulting $8 million campaign required franchisees to dig deeper. Not only did Firehouse decide to resume collecting the 2 percent fee, but it asked its franchisees to double it and pay 4 percent for local advertising. Two-thirds of the chain's franchisees agreed and the Radio spots started in their markets in September 2009.
"It turned us around on a dime," said Don Fox, Firehouse's chief executive. "We immediately went to positive sales for the entire system."
In the weeks after the campaign, the comparable sales of Firehouse Subs went from negative 5.8 percent the previous year to positive 2.4 percent. In markets where the chain broadcast the Radio ads, sales jumped by more than 10 percent.
Better yet, Firehouse held on to the gains after the Radio campaign ended. According to Mr. Fox, year-to-date comp sales are up 5 percent for the system. In markets that employed the Radio advertising, comp sales have jumped from negative 6 percent a year ago to positive 11 percent -- a 17-point swing.
For Mr. Fox, the case study is a lesson in being true to the company's identity. "You cannot abandon your core strength as a brand," Mr. Fox said. "Stay the course with your strengths and don't compromise."
In a brief interview, Mr. Fox addressed some of the concerns raised by Times readers who commented on the case study:
Q. Are you happy with how things turned out?
Mr. Fox: It actually exceeded our expectations. Of course, nothing is ever certain when you embark on a decision like this. We knew a lot was riding on this in the sales results we hoped to achieve but also in our relationship with franchisees.
Q. Are you getting a return on investment that makes the advertising campaign worthwhile for the corporation and franchisees?
Mr. Fox: Yes, absolutely. The basic math with the return on investment is with the additional 2 percent investment, they need to raise sales at least 6 percentage points. Our return, in the Radio markets in particular, has been well above that. In Atlanta for example, they're running 18 percent positive over last year. When you combine that with their negative trend a year ago, the net increase is well above 20 percent. Those numbers speak for themselves.
Q. Some commenters suggested you waited too long to make this move. Do you wish you had acted sooner?
Mr. Fox: Hindsight is always 20-20. It was a difficult decision at the time because you're looking at the external factors of the economy and some of those need some time to manifest themselves. We had a very good relationship with our prior agency so we wanted to give them an opportunity to work through some solutions for us. It would be difficult to look back on it and imagine acting on it sooner with less information. And I think it would have been more difficult to get the change implemented with our franchisees because we wouldn't have had enough of a track record at that point. We needed to give them enough time to take a shot at it and reach the conclusion on their own that they couldn't effectively move the needle.
Q. Some people have suggested that putting local advertising in the hands of franchisees was doomed to failure because they don't have the experience or resources to do local marketing on their own.
Mr. Fox: I wouldn't agree it's doomed to failure. We're a brand that started with no advertising. We had a history of building our sales through a combination of operations excellence and local store marketing. That's all we had available to us, and we increased sales year after year. So we know we can do it.
If we moved the needle sufficiently with local store marketing, I would have been prepared to say to the franchise community we'll keep doing this indefinitely.
An important part of this process was the fact that the executive team of the company spent so much time talking to and listening to the franchisees. We spent almost that entire year side by side with them doing the local store marketing, not only to help them do it more effectively but also so we could see firsthand just how it was being executed and the results. When we made the decision to pull it back, it wasn't a decision made solely sitting here in Jacksonville, but it was borne from our experience of being out in the field with the operators.
There was some commentary from folks wondering about the support we provided during that period and whether it was too loose. We managed that very closely, making sure all the materials used by franchises were approved by us. We were very conscious of the brand image. They had a slate of tactics to pull from. It was a little more controlled than some readers would have assumed.
Q. Is there still a place for local store marketing?
Mr. Fox: Absolutely. Our franchisees know that local store marketing is still an embedded part of our business strategy. Our promotion of catering relies almost entirely on the franchisees individual efforts to go out and market business to business. Also, local store marketing is very important in terms of site awareness; for example, using sign wavers on the street. It's not unusual for a sign waver alone to generate sales increases of 10 to 15 percent. We're in a battle for share of stomach and the average person doesn't have a clue where they're going to eat lunch on any given day until they're within minutes of making a decision. When you're competing against different restaurant concepts with tens and hundreds of millions of dollars to spend on advertising, it takes a guerrilla tactic like that just to break through the clutter and make traffic turn in to see you.
Q. How will this experience shape future strategy?
Mr. Fox: Our main thought right now is we need to continue hammering away on the same messages we've been putting out in the marketplace for the last year. Our mission at marketing the brand really boils down to two things: Making people aware of us and enticing trial. We know when we get somebody into the restaurant and they have a chance to experience it, we're going to keep them as customers. Fortunately, with this advertisement campaign we've been able to get that trial without coupons or discounting. So much credit goes to the Zimmerman Agency for this. We're continuing Radio and continuing to refresh the spots.
(Source: The New York Times, 09/29/10)
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