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$5.00 Foot Long

January 23, 2018

I’m fairly certain that anyone who has exposure to any type of media is familiar with the $5 Foot Long. This is Subway’s war cry and provides the company with a great amount of revenue. Promotions are done by the corporation, but recently franchisees have revolted. Their objection arises from the claim that they do not make much money off of a $5 foot long. The story offers some insight into our economy.

Franchisees claim that their expenses break down as follows: sandwich ingredients, labor, electricity, gas, royalties, credit card transaction fees, and rent push their cost to well above $4.00.

How many times have you walked into a retail store and wondered how they can get away with selling a widget that probably cost them a penny for over a dollar? These numbers are particularly relevant in the drywall industry. Company A and B sell the same sheet of drywall for $1 and $1.25, respectively. Logic tells us that company A should get our business.

But let’s dig a little deeper. Company A’s trucks are 15 years old and constantly in need of service. Company A’s employees have no experience and have had no safety training. Company A has no drug screening requirement and their turnover is the highest in town.

Company B insists on having the newest and most efficient equipment. Company B has constant training, holds regular drug screenings, has employees that have been with the company for over 35 years, and has a passion for giving back to the community.

On a 1,000 board job that 25-cent price difference is $250. To some, that’s enough of a reason to do business with Company A. However, if Company A’s broken-down truck causes 10 drywall company employees to stand around for 4 hours ($15/hour x 10 workers x 4 hours =$600), that lower price does not represent a savings – and may in fact end up being the more expensive option.

In addition to being a drywall distributor, Gator Gypsum is a service provider. These services are the best in the industry because of the additional expenses that we incur. Providing good service costs a little more, but as shown in the example above, good service has value that’s not always reflected on the price tag.

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