Software and Hamburgers don’t seem to have much in common, but when you look at the history of fast food chains McDonald’s and Wendy’s it becomes easier to see parallels between the two and Cincom.
McDonald’s
In the early 1950’s Ray Kroc bought a then very small California-based company that sold hamburgers at drive-in restaurants where customers could either eat in or take out their hamburgers. The entrepreneurial minded Kroc believed that the significant growth of automobiles and a rapid change in consumer lifestyles in the decade was an opportunity to promote and franchise limited menu restaurants which provided quick but simple fare.
To capitalize on his ideas, he began to offer the standard hamburger with French fries and a beverage at his franchised restaurants with the “golden arches,” which were a stylized “M” for McDonald’s. This standard fare, along with customer demands of consistency of quality, convenience and ease of consumption, cleanliness, good value, excellent marketing and competent, courteous and quick service all proved to be key factors in a great success.
In fact, Kroc’s idea, approach and execution was so well received that many imitators, like Burger Chef, Burger King and Big Boy hamburgers opened and thrived in the market.
As these imitators gained popularity, Kroc fought to further distinguish McDonald’s, so, he introduced the sesame seed bun around 1970. McDonald’s had differentiated itself without radically changing its successful corporate culture or offerings.
By the early 1980’s, when very heavy saturation of existing markets for hamburgers was being realized, McDonald’s innovative spirit moved to the idea of Egg McMuffins to expand same store revenues. But, in order to not lose afternoon and evening hamburger sales to breakfast-type choices, McDonald’s stopped serving the Egg McMuffin at 10:30 a.m.
Then, as more children began watching television in the early 1980’s, McDonald’s began to market directly to them. These appeals took the form of the Happy Meal and toy, Ronald McDonald and playgrounds attached to or near the restaurant.
In short, the tiny 1½ oz. hamburger patty demanded lots of superb marketing to generate preference and brand development. Since the patty was so small, McDonald’s really did not provide a very good comparative value for the money; so good marketing was used to stimulate and sustain demand and preference.
A new competitor – Wendy’s
Meanwhile, in 1969, Dave Thomas created another hamburger oriented fast-food restaurant which was to also become very successful using a very similar philosophy in Dublin, Ohio, a suburb of Columbus – Wendy’s.
To compete with McDonald’s, Thomas – a very late entrant into the fast food market – had to create an idea of difference or uniqueness through a better value and additional choices. To do so, Thomas offered a 4 oz. hamburger patty as compared to the 1½ oz. McDonald’s standard burger – more than 2½ times as much hamburger. Wendy’s also offered 11 different choices of toppings and sides whereas McDonald’s provided a very limited and standard hamburger. Wendy’s also customized each hamburger as requested, with all additions being fresh daily.
To further differentiate from McDonald’s and the other hamburger fast food franchises, Wendy’s designed its much larger hamburger patty into squares. This way, more hamburgers could be grilled at a time on the stoves, while each patty protruded off each corner of the round bun, which made the hamburger appear to overflow with beef.
It all came together beautifully and the up-start Wendy’s grew rapidly against much larger and already very well entrenched competitors.
Dave Thomas realized that once a franchise such as McDonald’s had become successful, it would be loath to change its offering in order to thwart competition. After all, why should McDonald’s provide more than 2½ times as much hamburger, when it could sell almost all the 1½ oz. burgers it could prepare every day? Moreover, McDonald’s was most surely not going to cut its price.
All of this resistance to change by the dominant market leader not only provided a very profitable price umbrella for other competitors but the normal resistance to change forces, worked to Wendy’s advantage. Just as challenging attackers have various advantages over almost all well-entrenched dominant providers in virtually every marketplace the history of commerce proves to us that once dominant firms can be successfully attacked when they are unwilling to change from the formulas, methods, processes and nature of the offerings which once helped to produce their dominance.
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