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Executive Summary In early 1990, Wendy's introduced a mini-menu of "super value" items costing less than $1 and so did Burger King, as well as a host of other restaurants like Taco Bell, Pizza Hut, and Kentucky Fried Chicken. Late in 1990, McDonald's, the world's largest fast-food chain, was forced to respond and decided to mark down several of its menu items to well below $1 in a desperate effort to win back customers that it lost to competitors because of their lower prices. The move intensified an already brutal price war in the industry. While demand continues to grow, so does competition, and a shakeout in the fast-food industry is in the making with only the big chains probably surviving. Increased competition and lower profit margins at home are also driving the large fast-food chains to expand abroad, where competition is weaker and profit margins are higher. Free market condition is continuous with McDonalds, Wendy’s and Burger King. For these restaurant owners, this boils down to a growing competitive fervor with increased awareness of the factors that affect the demand for meals at restaurants, including demographic conditions, location, income levels, and prices. The cost of products used is the basis for pricing strategy. The fast food burger market is a well defined (and dominant) segment of the general fast food market. You have to be big and good. Introduction Competition occurs when there is freedom of entry into a market and there are alternative sellers in the market. It places pressure on producers to operate efficiently and cater to the preferences of consumers. If either McDonald's, Burger King or Wendy’s fails to provide an attractively priced sandwich with a smile, people will immediately turn and to the restaurant that is most accommodating. Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of a five-spindled milk shake maker called the Multimixer. Hearing about the McDonald's hamburger stand in California running eight Multimixers at a time, he packed up his car and headed West. It was 1954. Seizing the day, he pitched the idea of opening up several restaurants to the brothers Dick and Mac McDonald, convinced that he could sell eight of his Multimixers to each and every one. Ray Kroc opened the Des Plaines restaurant in 1955. First day's revenues-$366.12! (McDonalds Corporate Information) With the opening of a single restaurant that only served hamburgers, milkshakes, and soda in Miami in 1954, James W. McLamore and David Edgerton began what is now Burger King Corporation. Three years later, they introduced the Whopper® sandwich, and the rest is history. Burgers and shakes were 18 cents each. The Whopper, which appears in 1957, sold for 37 cents. (Burger King, Diversity, Moving Forward: Our History) Wendy's Restaurant was the dream of a man named Dave Thomas who wanted to build a better hamburger. His dream became a reality in Columbus, Ohio in 1969, when the first Wendy’s Old Fashioned Hamburgers restaurant, named after one of his daughters, Melinda Lou, nicknamed “Wendy”. More than five million customers are served each day in Wendy’s restaurants. (The history of Wendy’s Restaurant)) Supply and Demand A competitive market is one in which there are many buyers and sellers so that no one can have an impact on the market through his or her individual actions. Research shows that the fast food industry, with annual revenue of about 4.5-billion, has grown in terms of store numbers by an average 40% in the past five years. (SA chains feel the bite of burger wars). McDonalds, Burger King and Wendy's, rank 1-2-3 in national study of drive-through restaurants. (Delivering the Fast Food Goods). Supply and demand set the equilibrium price for goods offered. People want quick and convenient meals; they do not want to spend a lot of time preparing meals, traveling to pick up meals, or waiting for meals in restaurants. As a result, consumers rely on fast food. Knowing this, fast food providers are coming up with new ways to market their products that save time for consumers. The economy is becoming increasing service oriented. The food service industry that offers the highest levels of convenience will continuously be rewarded with strong sales growth. The demand for fast food hamburgers is the sum of the demand for McDonald's, Wendy's and Burger King.
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