Life in the Fast Lane: Fast Food

Chains Race to Be Numbered One

Fast food restaurants have been characterized by their limited menus, self service, high turnover, and
high percentage of take-out orders. The four market leaders McDonalds Burger King, Taco Bell, and
Wendys comprise about half of the 59,960 fast food restaurants in the United States and collectively
assumed 70 percent of the $467 million market in 2005. McDonalds, the market leader, had sales to
over $16 million in its U.S. system alone from its 12,094 U.S. locations. Chief competitor Burger King
sold over $7 million worth of fast food with about half the number of stores as McDonalds . although
the domination of these market leaders was once thought to spell doom for local regional operators,
smaller chains are instead rebounding and experiencing new levels of growth. Chains such as Sonic
and Carls Jr. are invading markets that were formerly havens to their larger counterparts. With more
and more chains competing for the consumers fast food buck, marketing is becoming increasingly
important. McDonalds, which is expected to spend over $600 million in advertising in 1998, reorganized
its management structure to better tackle the challenges posed in regional markets. Meanwhile, Burger
King has made plans to challenge the leader on its chief products, the Big Mac and French fries,
increasing its ad budget 4 percent to an estimated $385 million in 1998. McDonalds is still the market
share leader with 42.1 percent of the U.S. market, but Burger Kings share jumped 9.2 percent in 1996
alone to reach a 19.2 percent share and Wendys gained 6.4 percent to reach 11 percent. Now more
than ever, marketing to consumers tastes is likely to be key in competing in the increasingly
concentrated fast food restaurant war.
Capturing over retaining market position is intuitively tied to keeping up with the changing preferences of
the American consumer. In a recent study conducted by Maritz marketing Research, convenience of
location, quality of food, menu selection, and then service were shown to be the most important
influences on adults fast food choices. Surprisingly, low price was not among the top four reasons.
Americans made their fast food selections. Only 8 percent of those surveyed made a fast food choice
based on price.
Adults under the age of 65 cited proximity of location as the most important factor in their fast food
purchase, with 26 percent of those polled stating it to be the chief criterion influencing their dining
choice. After convenience of location, quality of the fast food itself was most important to consumers.
This is interpreted to mean that not only do consumer want a superior product, but they want
consistency in quality in each order at any location. Taco Bell recently shed its emphasis on low price
for a focus on quality. The chain transformed its Extra Value Meals multimune item combination
package into Border Select meal platters by upgrading and modifying the food offered and the ijage
presented. Arbys , a chin specializing in roast beef sandwiches, holds the phrase a cut above not only
as an advertising slogan but as an intended view of its restaurants in general. In everything we talk
aboutour uniforms, our buildings, our sandwicheswe want to be a little bit better than our competitors,
proclaims the chain spokesman.
Moreover, customers are craving a variety of selections. Menu selection was also important to
consumers, with 16 percent of adults polled citing it as the chief reason for choosing a fast food outlets.

Chains offered diversified menus and often try to offer unique items. The Oklahoma City-based Sonic
chain offers, in addition to the traditional sandwich, things that you cant get as competitors like --onion rings and cherry limeades. Market leaders are also looking to capitalize on that one item that the
competitor is not offering. Wendys restaurants offered a unique four-item line of pita sandwiches in
1996, and racked up new highs in sales according to the firm. Menu selection was primarily important to
senior citizens. One in four senior citizens felt that menu selection was the most important factor in their
choice of dining establishments. Experts have predicted that the number of menu items will continue to
grow as all fast food restaurateurs offer new items to avoid consumer boredom and maintain growth and
market share. As a spokesman for Burger Kind said, Well stay with that we know best, but we have to
add items to meet consumer preferences.
About 12 percent of adults surveyed felt that fast service was the basis of their fast food restaurant
choice. McDonalds strategy is to attract customers with price and keep them with service and become
recognized as the service leader in the nation according to the corporations U.S. president. To
emphasize this quality, McDonalds plans to extol its drive-through operations in a series of TV ads,
showcasing the speed with which the hard-working staff diligently prepares the customers orders. Taco
Bell too exalts service qualities in its stores, with a mission summarized in the acronym FACT, which
stands for Fast food, accurate orders, Cleanliness, and food served at the right Temperature. Wendys
has adopted a special M.B.A., which stands for A Mop Bucker Attitude. This represents Wendys
commitment to the traditional definition of customer satisfaction, which mens putting customer service
(cleanliness, quality food, and atmosphere) before numbers and computer printouts. Wendys
maintains that this is one of the major reasons for their success. Burger King has long recognized that
important of creating a favorable and memorable dining experience. Burger Kind was the first fast food
restaurant to introduce dining rooms that allowed its customers to dine inside of its facilities. In 1992
Burger King became the first fast food restaurant to introduce table service and an expanded diner
menu in 9order to enhance the customers dining experience.
The most recent trend in fast food restaurants has been toward value pricing. This trend was ushered in
by Taco Bell, which dropped prices and boosted system-wide sales by 18.5 percent in only two years.
While it was a novelty for a short time, value pricing has become a part of almost every major
competitor. McDonalds offers its Extra Value Menu; Wendys has a 99c Super Value Menu that
emphasizes variety by offering items ranging from ready-to-go Side Salads to a Country Fried Steak
Sandwich; and Burger King and Hardees offer plans similar to that of McDonalds.
In a further to expand the fast food market, the industry has looked overseas. Because Asian and
European markets are at the stage of fast food that America reached in 1960. American chains have a
substantial competitive advantage there. Marketing experts have predicted that it will be easier for
established American chains to expand overseas than at home. McDonalds is expected to realize
about 40 percent of its operating profits outside the United States in 2000, as compared with 21 percent
in 1990. Burger King has also focused on Japan as a wide-open market for its burgers and has also
given much attention to the Eastern European market. It has recently opened up restaurants in Poland,
the former East Germany, and Hungary, while at the same time establishing a training academy in
London to service its European franchises. Wendys has recently been recognized as a serious
competitor in the international fast food market. Wendys is currently contracted with more than 50
countries outside of the United States. Given the stiff competition, it remains to be seen if McDonalds

can continue to be the leader in the domestic fast food race, as well as become the front runner in the
international fast food race.
Questions
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5.

Describe the marketing information needs of the fast food industry.

What role can marketing research play in providing the information need?
Give some examples of problem identification research that McDonalds can undertake to
ensure their continued leadership in the fast food industry.
Describe the kinds of problem/solution research that Wendys might undertake to improve its
sales and market share.
Give the market potential overseas, should fast food chains conduct marketing research in
foreign countries? What kind of opportunities and challenges will the fast foods chains
encounter in conducting international marketing research?

References
Mark Hamstra, McDonalds to Intensify Tech, Regionalization Efforts in 1998, Nations
Restaurant News 31(47 (November 24,1997:1, 97.
Cyndee Miller, McDonalds Shifts Strategy as Competitors Get Stronger, Marketing News 31(9) (April
28, 1997): 1, 10.
Karen Benezra and Shannon Stevens, NK to Boost 98 Media by $15M, Brandweek38(43) (November
17, 1997): 37.