Executive Summary
Wendy's offers a variety of fast food. The food selection ranges from hamburgers, French fries, salads, chicken, potatoes, and chili. Wendy's income is based on the sale of fast food. The demand of Wendy's service is highly elastic. A change in price will affect demand for products. Wendy's market structure is an oligopoly and has two main competitors; McDonalds and Burger King. In an oligopoly, the market is dominated by a few large producers of a homogeneous or differentiated product. Because of their "fewness," oligopolies have considerable control over their prices, but each must consider the possible reaction of rivals to its own pricing, output, and advertising decisions (McConnell & Brue, 2005). Since there
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In the immediate future, there may be a chance for a healthy fast food restaurant to enter the market. In general, the oligopolies in the food industry have large marketing budgets that hinder others from entering into the market. In addition, the members of the oligopoly can begin a price war to deter other entrants into the industry. However, it is conceivable that a healthy fast food restaurant may emerge in the near future. The fast food industry may have difficulties advertising against a healthy fast food restaurant, since the current culture is health conscience.
Price Elasticity of Demand
The price elasticity of demand is relatively elastic. If McDonalds and Burger King have promotional sales and Wendy's does not follow suit, the demand curve for Wendy's food will shift to the left, reflecting a decrease in demand. Due to the decrease in demand, Wendy's will have more supply than usual. The supply curve will shift to the right. On the other hand, if Wendy's raised the price on their food and other competitor prices remain the same, demand for Wendy's food will decrease. Another factor of demand for Wendy's food comes from a healthier culture. The shift in society has been to a more health conscience population. Demand for fast food had decreased as a result of high fat content in many of the foods.
Wendy's can adjust to a decrease in demand by increasing promotions and advertising. Having a promotional low-fat sandwich and extensive
Burger King and Wendy’s are among the top fast food chains in America, but this fact doesn’t elude either chain from having their negative and positive features. Burger King is cheaper, and has a wider assortment of food than Wendy’s, which makes Burger King more desirable to many Americans. What Wendy’s lacks in diversity, and lower priced food when compared to Burger King becomes irrelevant due to the higher speed and superior quality food they offer. Both qualities of Wendy’s help to maintain equal competition between the two in the fast food market of America.
Since the prices are higher in dinner menu, the elasticity of demand for dinner will be comparatively less elastic than the elasticity of demand for lunch menu. Since when there is a difference in the elasticity of demand in two markets say lunch and dinner market, a firm can charge higher prices in the market where the elasticity is relatively less elastic. Same has happened in the prices of Berghoff restaurant.
The food industry in the UK is a multi-billion pound industry that is mainly dominated by a few competitors such as McDonalds, Burger King, KFC and Subway. Most of the food sold in these fast food restaurants is unhealthy, which is becoming a huge concern as there are many people dying of obesity and other health related problems. This is one of the key social factors facing the fast food market at the moment.
This book discusses the fast-food industry and seeks to describe the impact of the industry on the U.S. economy and society. Also, it talks about the guys who has been investigating the fast food industry for many years. From his broad research, he has uncovered an abundance of little-known, frequently unsettling truths about the fast food industry.
The story of the fast food industry and its effect on the world is well told in the book Fast Food Nation by Eric Schlosser. Schlosser makes the claim that, what started out as a special treat for the kids eventually ended up defining a way of life. During a brief period of time, the fast food industry has helped transform not only the American diet, but also our countryside, economy, workforce, and popular culture. The book thoroughly describes how important the two factors of money and power are in today's society. The book clearly establishes the broader thesis that as consumers, we should know what we eat even if it makes us uncomfortable by the knowledge.
Fast-food is everywhere, for instance down the street there is fast food, not only one but seven options to choose from. Those seven options have promotions and deals
McDonald's franchise operates in oligopoly market since the fast food industry is one of the major industries with this type of markets. Some of the common features of oligopolistic markets are price rigidity and price war that have significant impacts on the firm's pricing strategies. The reason for the operation of this franchise in oligopolistic markets is that fast food industry is characterized by a small number of large producers or sellers. As a result, every large seller in the industry has a perceptible impact on other sellers as they influence the market.
The fast food industry has been growing dramatically during the last few years. For this reason, we should try to find out what are the several factors why fast food consumption keeps growing among young people and adults. Therefore, as we have seen, the popularity of fast food is spreading rapidly among many people due to the following three main reasons: good taste, convenient time, and price. Personally, working for a fast food restaurant for a brief moment in my life, I can attest to this. Marketing also plays a big part to more people eating fast food. It’s in our culture in America to expect fast food companies to market and strategize their ways to make us, the consumers, to buy more food and consume more food so they can make more profit. Especially now with commercials and social media. The fast food industry has thrived in the modern era. It’s thriving so much, the industry is growing faster than the U.S economy, at
In recent years there has been a growing epidemic of obesity, especially in America. According to the National Health and Nutrition Examination Survey posted on the Center for Disease Control website there are 12.5 million children from ages 2 through 19 that are obese. Many people are starting to complain that the commercials and ads for these restaurants are the result of such an incline in obesity. Although there have been current ad campaigns aiming at children to live a healthy life style there are still hundreds of advertisements that are putting restaurants in a sort of ultimatum position. Either restaurants change their advertisements or they improve their menus. In 1979 McDonalds debuted their world famous Happy Meals to the
As of now in the United States there are 22 fast food franchises. McDonalds was the first franchise to open in 1940 and since then they have been the leading and most successful franchise in America (“The Raw Prawn” n.p.). Other franchises include: Burger King, KFC, Wendy’s, Arby’s, and Taco Bell. Each of which target young students and children. Most of them have a value menu where items to purchase are cheap and tasty but very unhealthy. Some fast food restaurants provide a toy for children with their meal which attract them to come again and again ( “Eating Yourself to Death” n.p.). In addition, some restaurants contain an indoor play ground which attracts small children even more. The fast food industry mainly brings customers for their tasty food and simple convenience, they attach a drive thru to their building making it faster for customers to purchase and collect their food which is also less time consuming. Recently in the past few years, fast food franchises have begun to change their restaurant and attempt to become healthier as a whole, in some fast food restaurants they have a nutritional menu to choose from which generally contain healthier food compared to the regular menu (“The Raw Prawn” n.p.).
If we look at the fast food industry today there is room for success. Based on RNCOS’ new US Fast Food Market Outlook 2010, fast food industry growth rate is strong. Especially, hamburger sales growth is reported at the healthy rate of 4.6% in 2008. The market is expected to grow to cross the $170 billion marks by 2010.It is believed that due to the economic meltdown, fast food industry is benefiting from people being more prices conscious. People who were enjoying nice means at fancier restaurants are now turning their choice of means to more economical ways.
2.3 THREAT OF SUBSTITUTES Substitutes do not entirely replace existing products but may introduce new technology or reduce the costs of producing the same product (Porter, 1980). Substitutes may limit the profits in an industry by keeping their prices down (Porter, 1980). The threat of substitution is quite high in this industry because consumers are able to substitute to other major retailers, convenience stores, niche product outlets, restaurants, bakeries, butchers and farmers (Coriolis Research, 2004). Supermarkets like Tesco and ASDA have a range of products and services that have close substitutes, effecting price elasticity of demand because the market is sensitive to price (IBISWorld). The demand for a particular brand or retailer will increase or decrease concurrent to the movement of price in comparison to its competition (IBISWorld). The UK supermarkets are always trying to increase the quality of products and services resulting in a constant need to differentiate products and services from competition to make them less price sensitive.
In the last decade, a lot of emphasis has been put on adopting healthy eating habits and informing the consumers that the healthy-eating option was available in fast-food restaurant chains. Interestingly, consumers eating in fast-food chains were found to be more likely to order fattening side dishes if they think that they are consuming a healthy diet (Men’s Fitness, March 2008). This observation is also true in Subway restaurants where a 12 inch Italian sandwich contains over 900 calories compared to the 600 calories BigMac from MacDonald’s (Wilson Quarterly, Winter 2008). Thinking they are eating “healthy”, Subway patrons then splurge on soft drinks, potato chips and desserts accompanying their sandwich, especially is they are offered as part of value meals.
Therefore, it is important that food providers participate in campaigns developed by governments in their attempt to improve eating habits. Restaurants that provide healthy food have a better image on the market in comparison with fast food restaurants. But health food is considered to be more expensive. This refers to higher production costs, increased costs of
But before launching that product we want to know that “Is it worth it to our fast food restaurant to market healthy food”. To answer this management