Subway Trying Breakfast

March 25/Chicago/Associated Press Financial Wire -- Subway is joining the breakfast scramble in a move that the sandwich chain hopes will help add customers and sales.

After years of testing, almost all of Subway's 23,000 U.S. restaurants will begin selling the meal April 5. When they do, the nation's largest restaurant chain by number of outlets will fully enter the increasingly competitive and profitable breakfast business.

"We want it to be an important day part for us, and we also want it to be a profitable day part," Tony Pace, the chief marketing officer at the Subway Franchisee Advertising Fund Trust, the restaurant chain's consumer marketing division, said in an interview.

The new menu, which is already being served in some cities around the country and throughout Canada, sticks with Subway's sandwich specialty. Featuring customizable "omelet sandwiches," the options include a combination of eggs or egg whites, cheese, ham, bacon, steak, sausage, peppers and onions -- in addition Subway's other sandwich toppings.

The items will be served on an English muffins, flatbread or the restaurant company's traditional sub rolls.

While franchise owners who operate all of the company's 25,000 North American locations determine the prices of the breakfast items, suggested prices will range from $1.75 to $6. A combo meal featuring an English muffin sandwich and small coffee would be $2.50.

Advertising for the new menu will begin shortly.

Breakfast has become a popular addition to fast-food chains in recent years, as companies clamor for diners. Since coffee, eggs and other breakfast ingredients often come cheap, the meals typically can rake in big profits for restaurants, but it is not a sure thing. As the economy soured, so did breakfast sales, as customers cut back on spending and unemployed workers stopped visiting restaurants on their way to work.

According to research firm NPD Group, the number of customers buying breakfast at fast-food restaurants slipped 2% in 2009. Even so, that is still better than the 5% decline recorded at dinner.

However, that is not keeping restaurant chains from trying. Restaurants added more than 460 new breakfast items to menus in 2009, according to Mintel. That is more than in 2008 and 2007.

"It is a very competitive landscape," said Morningstar analyst R.J. Hottovy. "They're going in at a time when everyone's done a renovation on their breakfast menu in the past year or so, but I think if they do it right, they're probably positioned to profit from it."

Meanwhile, it is also difficult to convince brand-loyal diners to swap breakfast routines. These are challenges Subway acknowledges. "There are a number of other competitors of ours that are trying to suss out the breakfast opportunity, and I'd rather be in the market before they get there," Pace said. "Is there going to be competition now? Of course, and it's going to be fierce."

Some franchisee-owned restaurants began serving the meal years ago, and by last year, nearly 40% of the company's locations had some sort of breakfast item on the menu. As the popularity of the meal grew, the company inked a deal with Starbucks Corp. in November to sell its Seattle's Best Coffee in stores and began completing its nationwide breakfast push.

The chain recommends locations begin serving the meal at 7 a.m., although some will offer the menu earlier. Pace said breakfast items will remain available to order after the traditional morning meal period.  

From the March 29, 2010, Prepared Foods E-dition