McDonald's is A Competitive Fast Food Firm

A Competitive Fast Food Firm

Firms within the fast food industry fall under the market structure of

competition. Market structure is a classification for the key traits

of a market. The characteristics of a market that is competitive

would include: a large number of buyers and sellers, easy entry to and

exit from the market, homogeneous products, and the firm is a price

taker. Take McDonalds fast food restaurant for example.

In 1954, Ray Kroc became the first franchisee appointed by Mac and Dic

McDonald in San Bernadino, California. He opened his first restaurant

in De Plaines, Illinois (near Chicago), and the McDonald’s Corporation

was created. By 1959, the 100th McDonald’s had opened in Chicago. In

the early years of the 1960’s, Ray Kroc had bought all rights to the

McDonald’s concept from the McDonald’s brothers for $2.7 million. In

1963, the 500th restaurant had opened. By the end of the decade,

McDonald’s was listed on the New York stock exchange, had opened

restaurants in every state of the union and also outside the USA. By

1972, assets exceeded $500 million and sales surpassed $1 billion, a

new McDonald’s restaurant was opening nearly every day. In 1984, Ray

Kroc died, but his company was then serving 17 million customers a

day, equivalent to serving lunch to the entire population of Australia

and New Zealand. If McDonald’s lined up all the hamburgers sold since

1955, they would have circled the equator 103.75 times and reach to

the moon and back 5 times. Today, McDonald’s remains one of the most

competitive franchises ever created because they still have a large

number of buyers and sellers, easy entry to and exi...

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...dustry is the ease of

entry into the market. Start-up franchises within this market

structure can begin operating with relatively low initial investments

(compared to other industries). This is not the case where monopoly

companies, such as Microsoft is concerned. There are numerous

barriers to entry into a Monopolistic market structure, capital being

one of the most prominent barriers.

If a new franchise offered the consumer a quality product at a reduced

price, then the chance of success are greatly increased. McDonald’s

established a name for themselves by offering quality food and fast,

friendly service. This is a very important concept in the fast food

industry. Once they established themselves to the consumers and

became more visible, they created more demand, which lead to a greater

revenue for them.