By Jim Edwards

Sales at fast-food chains have slowed precipitously in the last few months. Why? As more people lose their jobs, fewer workers means fewer consumers needing to eat lunch outside of their own kitchens. Traffic in restaurants declined 1.5 percent in Q1 2009, the second sequential decline in traffic reported by NPD. Even as they advertise dollar meals and other recession specials, quick-serve restaurants were off 1 percent.

Unsurprisingly, the more brutal damage was done further up the food chain among the full-service and casual dining segments.

Still, drive-thru operations, particularly at breakfast, have been hit hard. “If you’re not on your way to work, you’re not likely to pick up breakfast,” says Technomic president Ron Paul.

In 2008, growth across the business slowed to $230 billion in sales, up 3.4 percent; it was up 5 percent last year and 6 percent the year before, according to Technomic.

The industry isn’t standing idly by, of course. Burger King has upped its ad spend already this year as it pours money into tie-ins with SpongeBob and a three movie tie-in deal with Paramount (Star Trek, Transformers: Revenge of the Fallen and G.I. Joe: The Rise of Cobra.)

McDonald’s is preparing a $100 million campaign of its own for its McCafé coffee brand.

The campaign will bring extra heat to the coffee-bakery category, where Starbucks is scrambling to retain its ubiquity after it was forced to close a layer of locations where real-estate costs had become too high and where sales were cannibalizing sister stores.
In the third corner is Dunkin’ Donuts, which has a head start in the war for Starbucks’ customers, having positioned its coffee as cheaper and involving a shorter wait at the counter.

Subway, which has focused on $5 footlongs versus caffeine, saw sales grow 17. 1 percent last year, bringing revenues to $9.6 billion, per Technomic.

It has overtaken Burger King to become the second-largest chain in the count. Sure, Subway has experimented with soup, pizza and toast, but its core strength comes from the size of the meal, the healthy positioning and the recessionary appeal of the $5 price point.

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