Monday, June 8, 2009

Subway's $5 Foot-long Becomes Yardstick for Fast-Food Meal Deals

Chains Fight to Keep Up With Competitor, but Will Consumers Buy It?

By Emily Bryson York Published: June 08, 2009

CHICAGO ( -- If fast food has one truism, it's that success breeds imitators.

Subway handily beat its competition last year with the incredibly
popular $5 foot-long promotion. Doing so, it also crystallized the $5
price point as the one to meet or even beat. The sandwich chain closed
the year with double-digit same-store sales increases, and competitors
went back to the drawing board. Subway, which is the nation's largest
restaurant chain, has since made the $5 promotion permanent for a
handful of subs, and occasionally offers all of its sandwiches at $5
for a limited time.

"It's become the institutionalized yardstick against
which all of the meal specials are going to judged," said Brand Keys
President Robert Passikoff. "They're looking to expand their lines and
their income streams. Doing that allows them to try and migrate the
brands in different directions, and say, 'We have more than just
fill-in-the-blank.'" The degree to which consumers will accept it, he
added, is a moving target that also hinges on the marketer's ability to

Subway continues to push $5 sandwiches, but with a lot more company. Domino's launched a $5 toasted sub this winter, Quiznos has a $4 sandwich,
and Kraft has introduced frozen sandwiches under $4 from its DiGiorno
and California Pizza Kitchen brands. Pizza Hut launched a $5 calzone
over Memorial Day weekend. Even McDonald's billboards in New York show
a Big Mac, fries and a drink pointing to a full meal at the critical $5
In some cases, the competition has gotten nasty. Subway sent Domino's a
cease-and-desist letter in response to an ad from Crispin Porter &
Bogusky that says Domino's beat Subway in a national taste test by a 2-to-1 margin. Domino's president David Brandon then burned the letter in a TV spot.

While Subway claims that the ongoing promotion is sustainable for its
system because of its size and subsequent leverage over vendors, how
long smaller competitors can bear up remains to be seen. Some Quiznos
franchisees have roundly criticized low-price promotions that affect
their margins, but the corporation has said the $4 Torpedo was designed
to boost franchisee profit. In most cases, it's too early to say what
products are getting the most traction.

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