Most people have eaten at a fast food location at least once in their lives. The meals are fast, as the name says, but they are also delicious and, most importantly, cheap. With how expensive it can be to eat out, many price-conscious customers end up gravitating to fast food (Lopez, 2018). With that said, people who visit fast food places usually know of their reputation for unhealthy eating. According to Saranya, Shanifa, Shilpa Susan, Umarani, and Shetty (2016), most adolescents are at least moderately aware of the health hazards of such practices but choose to eat there regardless, likely due to the price. The difference can probably be explained with ingredient quality and production efficiency as well as a conscious effort by fast food companies to undercut the competition and exclude traditional restaurants.
As such, it is essential to understand why fast food prices are so low compared to other restaurants. Al-Saad (2016) claims that the low quality of the ingredients is a significant reason. This opinion is popular, but it may not apply in countries with strict regulations on food preparation. Instead, most fast food companies have used their size and experience to adopt lean methodologies such as JIT and reduce waste in a manner many competitors cannot imitate (Omar, Ahmad, and Mustaffa, 2019). As a result, they can deliver offerings with the same ingredients as other restaurants but at a lower price.
However, fast food companies do not necessarily need to undercut traditional restaurants with their prices, as they have other advantages. According to Rana, Lodhi, Butt, and Dar (2017), they do so to improve customer satisfaction by creating a perception that the price-value ratio is excellent. Customers tend to set a price as a reference when choosing where to but their food. By setting this price to a low value, fast food companies can exclude traditional restaurants from the selection, improve throughput, and increase their brand equity (Hanaysha, 2016). As a result, they only have to compete with each other for the attention of buyers.
References
Al-Saad, E. (2016). Causes and effects of fast food. International Journal of Scientific & Technology Research, 5(4), 279-280.
Hanaysha, J. (2016). Restaurant location and price fairness as key determinants of brand equity: A study on fast food restaurant industry. Business and Economic Research, 6(1), 310-323.
Lopez, M. O. (2018). Consumer buying behavior as loyalty antecedents at selected fast food chain restaurants. International Journal of Recent Innovations in Academic Research, 2(6), 186-201.
Omar, M. S., Ahmad, R., & Mustaffa, C. S. (2019). The description of fast food employees’ job involvement. Journal of Tourism, Hospitality and Environment Management, 4(13), 1-8.
Rana, M. W., Lodhi, R. N., Butt, G. R., & Dar, W. U. (2017). How determinants of customer satisfaction are affecting the brand image and behavioral intention in fast food industry of Pakistan. Journal of Tourism & Hospitality, 6(6). Web.
Saranya, P. V., Shanifa, N., Shilpa Susan, S. T., Umarani, J., & Shetty, A. P. (2016). Adolescents’ knowledge regarding the effects of fast food on health. International Journal of Current Medical Research, 5(3), 406-409.