"I refuse to lock us into some low price point and then make food I won't eat," Puzder said. And based on his experience sampling the value fare at several competitors, he considers much of the low-priced food in the marketplace "inedible."
Puzder contends that it's almost impossible to sell quality food at $1 or less.
"Go to the store," he said. "Buy ingredients and make something yourself that you spent only 99 cents on. It is really hard, and then we are not even including the cost of rent, utilities and labor in that 99 cents. It is just ingredients.
"You can do value and quality -- you just can't do 99 cents and quality."
Quiznos knew it needed a value entree but didn't attempt the $1-or-less level, said Rick Schaden, CEO of the Denver sandwich chain.
The company's marketing research found that "there is kind of a big cliff above $4 right now" and set that as its target. It gave a team of chefs, accountants and marketers the task of coming up with a product, and in March, Quiznos launched the $4 Torpedo sub sandwich. A month later, the sandwich accounts for about 25% of the chain's sales, Schaden said.
The five sandwich selections include the Italian, with pepperoni, spicy capicola and ham, and the Turkey Club, with sliced oven-roasted turkey and bacon.
Schaden said comparable-store sales, or sales at stores open at least a year, are up by double digits during the first weeks of the Torpedo's introduction. The sandwich also is bringing more people into the restaurants, allowing Quiznos to make up for the lower price by selling more food to customers such as Karen Algorri of La Mirada.
"We saw the $4 sign when we were walking by and decided to go for the deal," said Algorri, as she ate lunch at a downtown Quiznos recently.
The Torpedo also has a higher profit margin than other sandwiches. Ingredients make up 29% of its retail price. That's lower than the 30% average cost for the company's entire menu, Schaden said.
There are other fast-food examples of less is more.
Qdoba, the Mexican chain owned by Jack in the Box of San Diego, offered a combo meal promotion in February that was a profit booster. It sold any full-size chicken entree with chips and salsa and a regular fountain beverage for $6.99. The combo has a relatively low food cost, so if a customer traded down from a comparable steak entree, Qdoba's profit margin increased.
