Wednesday, November 11, 2009

The saga of the $5 footlong: lessons for IP people?

In a BusinessWeek article titled The Accidental Hero , carrying the sub-headline --Subway's $5 footlong, the brainchild of an obscure Miami franchisee, is the fast-food success story of the recession --, Matthew Boyle writes

Nobody, least of all [obscure Miami franchisee Stuart] Frankel, knew it at the time, but he had stumbled on a concept that has unexpectedly morphed from a short-term gimmick into a national phenomenon that has turbocharged Subway's performance.


It helped privately held Subway, of Milford, Conn., lift U.S. sales 17% last year at a time when most restaurant chains, save for industry leader McDonald's, struggled.


Frankel's $5 footlong idea illustrates how a huge company can wake up and eventually seize on a good idea that's not generated at headquarters. Frankel, along with two other local managers in economically ravaged South Florida, ceaselessly championed the idea to Subway's corporate leadership amid widespread skepticism.

One can see some general IP themes here, including overcoming skepticism from the purveyors of the status quo, dealing with the "not invented here" problem, as well as invocation of the B-school (plagiarism) mantra of "take it and make it your own."

** As to inventors selling inventions to their own management, or IP attorneys pushing the value of IP to management, one sees that senior management does not always listen to what are, in reality, good (here, economically valuable) ideas. [One can also think about Chester Carlson's fruitlessly banging at the doors of IBM and Eastman Kodak with one of the greatest innovations of the 20th century.] Not surprisingly, a leadership blog picked up on the footlong story, and produced five lessons:

Run some small experiments off the radar screen
Collect compelling data
Recruit some early champions
Show them, don't just tell them
Stick(y) with it

A lot of employee inventors come up with great ideas in their invention disclosures, but don't generate any data. Sometimes they can get the ear of a senior manager, but as to the patent attorney and the USPTO, on ideas without data:
that don't impress me much.

Moving up a notch, a lot of in-house patent attorneys have the idea that they can just show up and do some scrivening and all is well with the world. IP people also need to be collecting data showing they are a profit center for the company, not just an expense to be tolerated.

**Sometimes it's the persistence, not the novelty. In the patent world, patents are for inventions that are useful, novel, and nonobvious. Although the Boyle article might give the impression that the $5 footlong was a new idea, pushed by an "in the trenches" franchisee, IPBiz suspects it was not new. In the Trenton area, footlongs for less than $5 were being pushed by QuickChek long before Subway (and IPBiz seems to recollect they were pushed by Subway (in the Trenton area) before the date in the article. The real message from the footlong story is going with something that works, evoking the "take it and make it your own" theme and the memorable Harvard Business Review line "plagiarize with pride." Further, the Boyle article did allude to competitors trying to copy the Subway idea (which may not have been entirely novel anyway):

Soon, copycat offers emerged. Boston Market offered 11 meals for $5 each, while Domino's sold sandwiches for $4.99 and KFC launched $5 combo meals. T.G.I. Friday's began selling $5 sandwiches. "Five dollars is the magic number now," says restaurant consultant Malcolm Knapp. "It's become a price point that consumers respond to," says Judy Cantrell, Boston Market's chief brand officer.

**In passing, there seems to be a date inconsistency in the article

Right before Christmas 2008, the board voted again, and the motion passed.

The campaign was launched on Mar. 23, 2008

**The amount of money in question was roughly $1 off on a six dollar purchase, to go to $5: He would offer every footlong sandwich (the chain also sells 6-inch versions) on Saturday and Sunday for $5, about a buck less than the usual price.

Recall the saga of McDonald's McDouble. From Associated Content:

It is quite obvious the reason McDonalds introduced the McDouble was to give them the ability to raise the price of the Double Cheeseburger without eliminating their dollar menu burger.

The Double Cheeseburger is now priced at $1.19. This is 19 cents more than its long standing previous price of $1.00. To add a slice of cheese to a sandwich at McDonalds is normally 30 cents so McDonald's is giving consumers a bit of a break.

The McDouble is priced at $1.00. One dollar seems to be the magic number for fast food chains. Personally, I love to stick to the dollar menu so saving myself 19 cents could make me order the McDouble.

IPBiz notes 1.19/1.00 (McDonald's) vs. 6/5 (Subway).

**See previous IPBiz posts

Foreseeability and obviousness
[ Hmmm, if the president of McDonald's US business could not foresee that lower-priced beverages might be substituted for higher-priced beverages, especially in a bad economy, what does that say about the use of foreseeability in obviousness-determinations in patent law? ]

**In passing, the 11 Nov 09 episode of CBS "Criminal Minds" had a reference to Kubrick's "A Clockwork Orange."

**A footnote on costs involved in food discounting programs--
Food fight: Burger King franchisees sue chain:

The National Franchise Association, a group that represents more than 80 percent of Burger King's U.S. franchise owners, said the $1 promotion forces restaurant owners to sell the quarter-pound burger with at least a 10-cent loss.

While costs vary by location, the $1 double cheeseburger typically costs franchisees at least $1.10, said Dan Fitzpatrick, a Burger King franchisee from South Bend, Ind. who is a spokesman for the association. That includes about 55 cents for the cost of the meat, bun, cheese and toppings as well as 45 cents that typically covers expenses such as rent, royalties and worker wages.

"New math, or old math, the math just doesn't work," Fitzpatrick said.

After testing the $1 deal in markets across the country, the discounted burger went on sale nationwide last month even though franchise owners, who operate 90 percent of the company's 12,000 locations, twice rejected the product because of its expense.

"The current management team has disregarded rights that Burger King franchisees have always had," Pennsylvania franchise owner Steve Lewis said in a statement.


The lawsuit was filed Tuesday [10 Nov 09] in U.S. District Court in Southern Florida.

Note what BurgerKing says:

the litigation is "without merit," particularly after an earlier appeals court ruling this year showing the company had a right to require franchise owners to participate in its value menu promotions.


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