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Subway, the fast food restaurant franchise, recently announced it is bringing back the $5 Footlong promotion. Hundreds of Subway Franchise owners are protesting the promotion,
Subway, the fast food restaurant franchise, recently announced it is bringing back the $5 Footlong promotion. Hundreds of Subway Franchise owners are protesting the promotion, saying that they cannot afford to sell the footlong sub sandwhiches for $5.
Assume that the costs related to a Subway footlong and a Subway franchise include the following:
1. Identify each of the listed costs of one footlong sub sandwhich as either variable, fixed, or mixed.
2. What costs and factors do you think should be relevant to the footlong sub sandwhich pricing decision? Explain.
3. What is the contribution margin of each $5 footlong sub sandwhich.
4. Do you agree that a Subway franchise would lose money for each footlong sold for $5? Why or why not?
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