If you live in New York, the BMT is the Brooklyn Manhattan Transit system. However, to another group of Subway users, it means, “Biggest, Meatiest, Tastiest.”
While Subway created the B.M.T. in 1975, you still can order an Italian B.M.T. today:
In 1977 the 6-incher SNAK arrived.
However, the name that stuck was the $5 footlong.
The Subway Footlong
In 2004, a Florida Subway franchisee figured out that that a $5 footlong would boost business. It was catchy, simple, and cheap. Initially local, by 2008, the footlong was offered to the nation and sent revenue soaring:
They just needed a catchy ad and the $5 price tag:
But it was not quite that simple.
Franchisees complained that the footlong cost increasingly more to make:
Responding that sometimes a frozen roll did not fully expand when heated, they even faced a lawsuit that claimed the footlong was missing an inch. It was eventually thrown out of court.
Today, in a crowded fast food market, a less expensive footlong remains available. Recently, I saw this offer at Subway’s website. (No, I did not buy one.):
Our Bottom Line: Fast Food Competition
Engaging in monopolistic competition, the Subway franchisee can enter the market more easily than others. However, in operation, a Subway outlet owes its parents a hefty royalty at 12.5 percent of sales:
Subway’s market is called monopolistic competition. The competition half refers to the long list of all too similar firms that it fights for market share. Meanwhile, the monopolistic half refers to whatever makes the restaurant unique. For Subway, it is the footlong.
Below, occupying the left quadrant of the market structure scale, Subways are smaller franchises that can enter and exit the market with relative ease. When profitability shrinks, perhaps because of a costly footlong, firms leave. When the environment is more financially attractive, they enter. Their pricing power and business volume come from any way they can differentiate themselves:
So, in a monopolistically competitive market, a footlong, even when it’s 11 inches, can make a difference.