Supply and Demand of Food in our Economy

Food is one of the most important necessities. You need to consume food in order to stay alive and be healthy. This has obviously created huge demand for fast food, and in particular, one franchise has thrived over the years.

As of 3 October 2019, McDonald’s serves over 69 million people across the world in 100 different countries. On the global population average, that’s the equivalent of serving 1 in 100 people daily.

According to American statistics, the average household spends around US$7,700 per year on food, including groceries and dining out. This has been continually rising over the years, with one of the main factors being inflation.

Another American survey shows how much money each person spends on food each year according to their annual income. The top 20% of the lowest earners spend around US$2,500 each year on food; whereas the top 20% of highest earners spend roughly US$13,000.

The USA has a total population of around 327 million people, which represents a colossal economy for fast food. So let’s take a look at some restaurant companies that are listed on the stock market and find out how well they have performed over the years.

Food Companies That Are Thriving on the Stock Exchange
Among the many food franchises listed on the US stock exchange are three popular names that you will recognise — McDonald’s Corporation (MCD), Domino’s Pizza (DPZ), and Wendy’s Company (WEN).

On 10 October 2014, McDonald’s Corporation was valued at US$92.30 per share. As of 3 October 2019, the share price is at US $210.03.

As of 10 October 2014, Domino’s Pizza was valued at US $76.41 per share. As of 3 October 2019, the share price is US $243.35.

On 10 October 2014, Wendy’s was valued at US $8.41 per share.

As of 3 October 2019, the share price is US $20.26.

Our brief analysis of these 3 companies shows that there is a lot of potential capital growth in food franchises. There is high public demand, and the share value moves with inflation.

Why is McDonald’s a Phenomenal Success?
McDonald’s was founded in 1940, originally built and run by two brothers, Richard and Maurice McDonald. Its first restaurant location was 14th Street in San Bernardino, California.

In 1948, Ray Kroc made changes to the business to modernise it. He later took over the franchise completely.

From the start, what set McDonald’s apart from other restaurant franchises was a high level of customer satisfaction. Service was fast in terms of delivery, and the food was always hot. Ray Kroc made it a rule that if customers waited longer than 5 minutes for food, they would get a refund.

McDonald’s has gone from strength to strength ever since. In 2018, McDonald’s recorded a record high of 37,855 restaurants worldwide. The brand has over 1.7 million workers, making it the fourth-largest employer in the world.

The bullish movement in the McDonald’s share price is driven, in large part, by the company’s ability to adapt to the service environment.

For example, in the 1990s, the company introduced McCafe, which acted as competition to Starbucks and other coffee outlets. This has allowed McDonald’s to seize a decent chunk of the café-style beverage market.

In the early 21st century, McDonald’s extended its reach again by bringing out healthier options to make the restaurant more family-friendly.

Also, McDonald’s brought in self-service kiosks, which allowed more orders to be processed quicker. This steadily reduced the cost of employee labour, while generating more revenue.

Continuous innovation and superior management has made McDonald’s a phenomenal success. The company is always on its toes, looking for opportunities to excel and expand.

For 20 years, this unique business culture has kept McDonald’s on a steady incline in terms of growth and revenue. Prospects for the future look bright!

Adam Torkildson