I was reading Retire By 40 a couple of days ago and Joe had a good article about not forgetting about inflation in retirement. After all, if you are going to “Retire by 40”, you’ve got to consider dealing with potentially 45 years (or more) of inflation. If you retire at age 65, you are looking at “only” 20 (or more years). (Yes, that’s me getting ‘mathy’ by subtracting 25.)
Inflation over 45 years is a significantly bigger deal than over 20 years.
In the article, Joe mentioned the rising prices of the lunch special at a local Chinese restaurant. In a few years, the $5.50 special became a $7 one.
That triggered a thought about my own mental inflation index, the price of Subway footlongs subs. You might remember that back in 2008, Subway launched a $5 footlong promotion. From everything I’ve read, it was fabulous successful, so successful that it became part of the regular menu.
Over time the number of subs that were available for $5 dwindled. Then they disappeared except for a monthly special. That disappeared and, in my area, has been replaced with $3 six-inch sub. The $5 footlong became $5.50. Now the cheapest footlong is $6.25.
The Subway Footlong Index (SFI) is a good way to thin slice overall inflation because Subway can’t reduce the product and still call it a footlong. (Though I supposed they could “thin slice” in a different way by making the meats thinner or smaller). It’s different than the price of a computer which always seems to be the same or a “half gallon” of ice cream that shrinks to 1.75 quarts.
Another useful thing about SFI is that most of you know what I’m referring to. Sure in San Francisco, Hawaii, or New York, the same subs might be $7, but people have probably traveled to an area with a Subway that has typical pricing.
Let’s look Subway prices and see if the SFI makes any sense with regard to traditional inflation indexes. I’m going to presume that you might have a $6 footlongs (I think I’ve still seen these). That means that prices have gone up around $1 (or $1.25 for me) in 8 years… from 2008-2016. We’ll call it between 20-25% over 8 years.
That’s around 2.7% per year compounded annually… which seems in line with other measures of inflation.
Maybe there really is something to this Subway Footlong Index? What do you think? Let me know in the comments.
Funny, I look at Subway as a bell weather of how the food industry (not just fast food, but also grocery food) is doing as well. When they raise their prices, generally you will pay more at the grocery store was well. The other thing I look at is drinks and sides. I remember going to a restaurant and paying under $1 for a soda. Now restaurants are charging $2.99 for something that has not gone up in price for 2 decades. You can still buy syrup from coke for $15 which makes about 100 gallons of soda.
Sadly I think I am remembering back farther than you are with your article and subway. I remember when all subs were between $3 and $4. You used to be able to get a foot long club meal for $5.25 including tax around me (5% tax). The thing I have noticed is what they have done through all the stages of inflation. They started at first by taking away a piece of meat. Used to be on a cold cut combo you got 6 pieces of ham, 6 pieces of salami and 6 pieces of bologna. They took away a piece of bologna. Then 2 pieces of ham. Then 2 pieces of bologna. Finally 2 pieces of salami. Each time they have taken away from the sandwich, there was a “menu” reshuffling and they have done stuff with the prices as well. So they are taking away product, as well as raising prices.
My favorite sandwich at subway is the club. Turkey, Ham, Roast beef. It is also one of their most expensive because of the meats on it. It used to be (just like the cold cut trio) 6 pieces of each meat. Now it is 2 pieces of ham, 4 pieces of turkey, and 4 pieces of roast beef. Almost 50% less meat than was on that sandwich in the 90’s.
I honestly have quit going to subway as often as I used to. Those choices they have made over the years makes the food not worth the money in my opinion. I only go when I am out of options and have to eat (like when I travel). But man have I spent a lot of money there over the decades. You used to get full going there when I was in college and I cannot tell you what it meant being full, on about 1 hour’s worth of wage.
In the 90’s there weren’t any Subways that were convenient for me to get to. I sometimes went out of my way on Sundays before football to get their meatball subs. I seem to remember them being around $8 after sales tax. I remember thinking, “Wow, this is just something to do on rare occasions.”
When they came out with a $5 footlong, I started going back. It helped that it was much more convenient by that time. (I had moved.)
I figured that they’d mess with the amounts of meat in the subs as you suggest. I’m surprised they just didn’t slice them thinner so that it looked like the same. Maybe they already implemented that shortcut and they are as thing as reasonable possible?
We had a subway a few miles away from us in the 80’s and 90’s. Lots of “if the colts lose, cold cut trio subs are 10 times the loss amount” Those were dark days as a colts fan (lots of losing seasons), but cannot tell you how many $0.30 subs we go because the colts lost to the bills 16-13 :) I used to get 10 of them for the family for dinner …
They could make the foot long less than 12 inches, but they’d get sued for false advertising. Again.