The Pricing Strategies of Fast Foods vs. Restaurants

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The Pricing Strategies of Fast Foods vs. Restaurants
Dateesha L. Cavin
Webster University
28 April 2011

Abstract
This paper explores the difference in pricing strategies of Fast Food vs. Restaurants. Fast food restaurants compared to sit-down restaurants are exceedingly popular because they prove to fit comfortably in our active, modern day lives. Today, many people eat fast food instead of cooking meals at home. The reason for this is that many of us are constantly busy with our daily responsibilities and we are continuously on the go. We believe that we have a limit of time, and fast food restaurants are at the maximum of convenience for everyone at any hour. You can pretty much find a fast food restaurant at every corner of a street, and most of these establishments usually include a drive through. With this they were able to introduce a way to eat food without knives, forks or plates, and most meals can even be eaten while behind the steering wheel of a car. This paper examines various types of pricing strategies used by the Fast Food Industry to gain sales over restaurants.

Pricing Strategies of Fast Foods vs. Restaurants
The fast food industry has a history of more than 100 years. Because it has an early start, it has established a model of standards of technology, capital, brand, service, the company culture and the image design, which have distinctive features. Some authorities point that usually the price of the fast food is two and half or even three times more expensive than it its cost to the company. In the global market, the fast food has a fierce competition with numerous companies. The objective of this paper, therefore, is to review whether the pricing and promotion strategies of fast food firms increase the overall demand for fast food, or merely allocate market share among competing firms as compared to restaurants.

In doing so, we take into account many unique features of fast food demand. First, nutritionists, economists and marketing researchers have shown that fast food consumption is likely to be habitual (Colantuoni, et al., 2002; Del Parigi, et al., 2003). Second, fast food restaurants and the foods they sell are highly differentiated. They differentiate by two factors that influence the pricing. The first is to find out the market target and try to increase the market share on the original basis. Second, credit is quite important in the pricing. The company should try their best to maintain and promote the company image. It mainly centers on the quality of the service and the aspect of the operating, such as competing with rivals and establishing the brand.

Restaurants with its Fast Food competitor like KFC, McDonald prices a little lower which is the strategy to win in the competition. The price strategy of Fast Foods is determined by the market. The price is made according to the demand of the consumer. The company sets the equilibrium or optimized price by forecasting the revenue and the cost. During the pricing, the psychology of the consumer and the elasticity of the demand should be well considered. We can use studies to find the main customers of and Fast Food Company’s by reviewing studies that show specific age groups that may share some of the following characteristics 1. They are fond of the fashion. 2. They attach the importance to the credit of the product. 3. They have little limitation in the consumption.

While fast food demonstrates to be a quick and easy way to satisfy the hunger of the busybodies of today, this also includes the convenience it provides for mothers and their offspring. Foods away from home captured 40% of total food spending in 1995 (Lin, B. H., Guthrie, J. & Frazao, E., 1999). Foods away from home include those obtained from fast food establishments, schools, restaurants, other public places and vending machines. Away from home foods are typically ready-to-eat and consumed "as is," and the consumer has less control over portion size and...
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