Competitive Positioning and Relative Cost of Fast Food

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This memo discusses the fast food industry and how competitive positioning and relative cost determine a company’s success. Fast food restaurants offer quick meals through restaurants, drive-through stops, or takeout express. Chipolata Mexican Grill is a popular fast food restaurant that places itself apart from others by using fresh, organic ingredients in its healthy food strategy. While this strategy results in a large food supplies expense, producing everything in its own stores requires a high labor demand and results in a large labor expense. The company also incurs high marketing costs due to its quick expansion. In comparison, Burger King operates in a total of 12,700 locations and uses semi-manufactured food and innovative cooking equipment to lower operating costs and cut employee demand. However, Chipolata’s focus on healthy food strategy and rising willingness to pay has resulted in above industry average prices and ROAR, earning a great profit despite having a small number of stores.

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This memo discusses competitive positioning and relative cost that determine the fast food fast food industry includes companies who provide quick meals with limited-services through restaurants, drive-through stops, or takeout express (Exhibit la-e). Restaurants produce food from ingredients and semi- manufactured food; they sell each meal with a main dish, a beverage, and sometime an additional dessert. Customers, vary from individuals to families, always make payment before receiving their meals.

In such a competitive industry, Chipolata Mexican Grill earns a great profit by placing itself apart from others. Chipolata, a popular fast food restaurant, sits in the differentiation broad market position . According to its healthy food strategy using only fresh, organic ingredients Chipolata maintains a large food supplies expense. At the same time, producing everything in own stores, the restaurant requires a high labor demand and results a large labor expense. Although currently owns only 1,400 restaurants, Chipolata expands quickly, which occurs a high marketing cost.

In order to control service and food inconsistencies, the company trains workers in its existing stores before sending them to new locations. Nevertheless, this training program increases labor cost . In additional, Chipolata encourages customers to order their food through website or smart phone APS. This technical advantage attracts more customers but generates a technical innovation fee. Comparing to Chipolata small number of stores, Burger King operates restaurants and express stops in a total of 12,700 locations. Although this geographic strategy brings more customers, Burger King has to pay a relative high rent expense.

Due to using semi-manufactured food (like chicken nuggets) and innovative cooking equipment, Burger King raises food making capability, lowers operating cost, and cuts employee demand. Hence, fast food restaurants like Burger King have lower prices and smaller costs than industry average because of machine- making food and high economic of scales. Different from its competitors, Chipolata focuses on rising willingness to pay by its main competitive advantage: healthy food strategy. Despite the large amount of price and ROAR are above industry average and earns a great profit .

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Competitive Positioning and Relative Cost of Fast Food. (2017, Aug 17). Retrieved from

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