Buzz
What seems like a paradox is actually a strategic move by these fast food giants.
In many bustling areas, you'll often find KFC and McDonald's restaurants side by side. In China, for example, a staggering 55% of their outlets are within a mere 500 meters of each other.
These fierce competitors are always mentioned together, regardless of market conditions. It's not uncommon to spot a KFC right next to a McDonald's. This phenomenon extends beyond fast food, evident in various industries.
Is this mere coincidence or is there a deeper business strategy at play?
The Business Cycle Effect
There's a tale about two tofu-selling brothers, each with a shop not far from the other. Yet, one's tofu is soft and delicate, while the other's is firm and robust. Initially, customers favored the younger brother's shop, but as the soft tofu grew monotonous, they switched to the elder brother's for a change.
Subsequently, the elder brother's business flourished. Conversely, patrons of the younger brother's shop dwindled. Eventually, both establishments reached equilibrium. Over time, customers preferred visiting this area for their tofu needs.
McDonald's and KFC can be likened to the tale above. It's a mutually beneficial competition.
Opening adjacent stores is merely a tactic to gather scattered consumers initially, gather clientele, and build scale.
With multiple competing rivals but mutual support, each side divides the customer base, forming a business cycle that caters to everyone. This may be more advantageous than monopoly power.
Imagine McDonald's, KFC, and several competitors operating on the same street. Thus, a small 'food hub' forms, offering diverse options within the vicinity.
Hence, when people seek out a dining spot, they immediately think of this street and opt for the eateries along it. According to the business cycle theory, KFC and McDonald's compete but also co-develop.
In essence, these rivals band together to collectively attract customers.
The Nash Equilibrium Principle
A prime location holds significant importance for every business when opening a store. Once they spot a 'right time, right place, right people' location, they spare no effort to invest.
McDonald's and KFC walk hand in hand due to similar viewpoints in selecting locations and dividing business areas.
On November 12, 1987, KFC's first restaurant was inaugurated in Beijing, China, on an unprecedented scale.
As reported by the media at the time: Despite the extremely cold weather and snowfall, people lined up tightly at the door for over an hour just to purchase a piece of chicken here. Over 30 years later, KFC's store still operates normally and continues to grow.
When someone opens a map to locate a KFC, they find a McDonald's right next to it.
Speaking of McDonald's, the first store in China opened on October 8, 1990, at the Pedestrian Commercial Street in Shenzhen.
This pedestrian street is also the earliest, longest-standing, and largest commercial area in Shenzhen. When it opened, countless Shenzhen residents queued with their families from the first floor to the second floor of the restaurant.
Like KFC, McDonald's has survived and thrived to this day. Moreover, it's common to see a KFC next to a McDonald's.
From the above, it's evident that both McDonald's and KFC excel in location selection. In large food service companies like KFC and McDonald's, there is a team of no less than 100 people dedicated to strict calculations and responsible for selecting locations nationwide.
The essence of site selection work can be said to be examining the business district. The inspection points include but are not limited to:
1. The current number of fast food outlets in the business district
2. The population distribution of the business district
3. The spending capacity of users in the business district
When considering business district selection criteria, on one hand, it's necessary to consider the market positioning of the store itself, and on the other hand, it's important to consider the stability and development of the business district. The market positioning of restaurants varies, the customer groups they attract vary, and the selection of business areas also varies.
For example, Lanzhou Ramen and KFC have different market positioning and different customer groups, so the location of Lanzhou Ramen is naturally different from KFC. KFC and McDonald's have similar market positioning, and their customer bases are essentially the same, so the choice of business district is also similar.
Behind this choice lies a famous economic principle - the 'Nash Equilibrium', also known as the non-cooperative game equilibrium, proposed by economist John Nash, the founder of game theory - society is not an isolated existence, everyone faces cooperation and competition. Thus, the two fast food chains have chosen the same location to achieve a balanced control over each other.
Leveraging Marketing Advantages
KFC and McDonald's together establish their stores, essentially a form of 'progressive marketing'. This plays a crucial role in enhancing brand awareness and increasing product sales. 'Olympic marketing' during the Olympic Games is a typical representation.
Business wizard Uber Ross ingeniously combined the Olympics with business and turned the 1984 Los Angeles Olympics into the 'first profitable Olympics'. The Olympic economy is increasingly becoming the focus of the business world.
Economics has shown that product homogeneity leads to fierce price wars, and brands need to choose a balance of differences between products. KFC and McDonald's are seeking this additional balance in the relentless competition.
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