Your post with regard to this discussion should answer the four questions at the end of this scenario at Subway. This should be posted by the end of the day on Saturday. Your follow up post should comment on the discussion post by another student and point out how your answer differs from theirs and what you might change. This follow up should be posted by Monday night when the discussion will lock.

Subway, the fast food restaurant franchise, recently announced it is bringing back the $"$$$5$ Footlong" promotion. Hundreds of Subway franchise owners are protesting the promotion, saying that they cannot afford to sell the footlong sub sandwiches for $$5.$

Assume that the costs related to a Subway footlong and a Subway franchisee include the following:

Cost item Details Cost per sandwich

Food ingredients Per footlong $ $2\mathrm{.}00$

Labor cost per footlong Labor $$14\mathrm{.}00/$hour wage rate, each worker can make $7$ sandwiches per hour $2\mathrm{.}00$

Credit card transaction fee $1\mathrm{.}0\%+$ $$0\mathrm{.}10$ per transaction $0\mathrm{.}15$

Electricity $$360$ per month divided by $4,000$ orders per month $0\mathrm{.}09$

Rent Rent $$1,200$ per month divided by $4,000$ orders per month $0\mathrm{.}30$

Franchise fee amortization Franchise and startup fees $$36,000$ divided by $180$ months $(15$ years$)$ divided by $4,000$ orders per month $0\mathrm{.}05$

Royalty fee $8\mathrm{.}0\%$ of sales $0\mathrm{.}40$

Advertising fee $4\mathrm{.}5\%$ of sales $0\mathrm{.}23$

Equipment leasing cost $$600$ per month divided by $4,000$ orders $0\mathrm{.}15$

Assume that all sales are paid for using a credit card.

Questions

Identify each of the listed costs of one footlong sub sandwich as either variable, fixed, or mixed.

What costs and factors do you think should be relevant to the footlong sub sandwich pricing decision? Explain.

What is the contribution margin of each $$5$ footlong sub sandwich?

Do you agree that a Subway franchisee would lose money for each footlong sold for $$5?$ Why or why not?