Even though one might make the assumption that fast-food restaurant prices are same across all franchises of the same brand, it is far from the truth. As reported by Insider, Riley Walz, a business major student at City University of New York has shared some illuminating findings on fast food pricing through his project, Fast Food Index.
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After realising that some of his favourite fast-foods were priced differently in different restaurants of the same chain, he tracked prices on four popular fast foods and generated data. These items are: McDonald's Big Mac, Taco Bell's crunchy taco, Chipotle's chicken burrito, and Chick-fil-A's chicken sandwich.
Fast Food Index
The main impetus behind the project was to pin down the reasons why fast-food prices differed across different locations. In order to find out price differentials, he coded script which could scrap menu data from different fast-food restaurants across the country.
The data generated gives us an indication of where fast-food items are most expensive versus where they are least expensive.
Walz is quoted by the report as saying,
I was interested to see where's the cheapest burrito in the entire country and where is the most expensive one.
The data shows that New York has the most expensive Chipotle burrito while in a surprising find, two different McDonald’s located on opposite side of the same street were found charging different prices for the same menu item. Menu prices tended to be higher closer to colleges. Also, in larger cities, price differences could be as high as 30%.
Findings from the Fast Food Index
The main reason for differential pricing is because fast-food franchises have the discretionary power to price menu item they serve. Hence, two chains of the same fast-food brand could end up charging different prices for the same item.
The report quotes Tim Powell managing principal at Foodservice IP in Chicago, who posits the cost of doing business as the determinant of food pricing. He states,
California and New York have very high labor and real-estate costs.
Each franchisee may charge a different price based on the cost of labor or food or real estate.
Insider states that though Wals’s index provides insight into how high operating costs for the franchises are carried forward and trickle down to consumers, the index itself is ‘not foolproof’ and carries some inconsistencies compared to what their researchers have found.
Sources used:
Insider: ‘You may pay nearly $8 for a McDonald's Big Mac in Massachusetts versus $3 in Oklahoma. Here's why costs can vary — even for locations across the street from one another.’
