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Fast Food - Essay Example

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Burger King and McDonalds are apparently two most well known brands in the industry of the fast food. Both these companies provide almost identical menus and services to their customers. No wonder that they compete fiercely in the niche of the market they operate in.
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Fast Food Essay
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Fast Food

By 1967 Burger King had already acquired more than 220 outlets around the country and had achieved huge success in the fast food industry, this result prompted Pillsbury Co to purchase Burger King Corporation.2 By June 22, the acquisition had been completed and Pillsbury Co had acquired Burger King in exchange for 350000 shares of Pillsbury common and 60000 shares of convertible preferred3.
At the same time McDonald brothers sold their business to Kroc for the sum of 2.7 million, however they did not retain the right to keep McDonald's franchise. By the mid seventies both these companies faced similar problems: high costs of raw materials, rising labor costs as well as fierce competition in the market; however energy crisis was one of the biggest threats that the companies faced. In view of many experts at that time the industry could be adversely affected by high energy and fuel costs that might have restricted the mobility of potential customers4.
However as both of these companies provided their customers with "take -away" service the crisis did not have profound effect on their businesses, even though high prices on gas hampered expansion policies of fast food restaurants, which was an important element in the business development of the companies. (In 1972, for instance, more than 80 % of the revenues of McDonalds came from the sales of the outlets owned by the corporation yet, 62% of profit was derived from rental incomes as well as franchising fees. The same hold true for burger King).


In spite of the rising costs of energy and fuel, McDonalds and Burger King managed to adjust to energy crisis and by the middle of the seventies they had started implementing new marketing strategy-wide expansion in the regional market.
One of the reasons for massive expansion of fast food restaurants in the regional area was the absence of competition in rural areas. Both McDonalds and Burger King implemented almost identical marketing strategy-they reduced the sizes of their restaurants. For instance McDonalds Corporation introduced so called "Mini- Mac" (new types of the restaurants destined for rural areas) which were much smaller than their traditional types of the outlets in large cities; whereas Burger King established several restaurants in rural areas which could host 40 or 50 clients, instead of 100 customers 5

Right from the start, McDonalds and Burger King relied heavily in their business on franchising operations. In 1975, Carrols Development Corporation signed the agreement to convert two thirds of its facilities into Burger King's restaurants (in mid seventies Carrols corporation already had restaurants in Northern States, Canada and some Scandinavian countries) 6


Increased competition in the market led to the possibility of price war between two companies in 1979. That year McDonalds decided to reduce the price on its hamburger an cheeseburger by 10%. Representatives of the company justified this step by claiming that the reduction in the costs (especially the price on beef) allowed them to reduce the price on some of its products. 7Nevertheless many specialists hold the belief that it was just another step to win competition and increase consumers' traffic to the company. Yet, many of the fast food chains decided not to cut the prices on their products and representatives of Burger King claimed that their had much better products (with more quantity of meat) and thus they would abstain from retaliatory measures. 8

Both of these companies ... Read More
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