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We all know McDonald's, Burger King, Wendy's, etc. Low(er) quality food using the benefits of economies of scale and low wages to crank out a product that millions of us enjoy. But, places like Shake Shack and Smashburger crank out much higher quality food and seemingly are better employers.
Is it because they're young companies, not beholden to shareholders to cut every cost they can? Or is something fundamentally different with their approach?
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That's like our local chain, Dick's. They start at $10.25 and offer great benefits. As a family-owned company they can buy from any supplier they like and have no royalty fees to pay like the franchises. They are doing well enough that they opened a new store in the height of the economic crisis.
We all know McDonald's, Burger King, Wendy's, etc. Low(er) quality food using the benefits of economies of scale and low wages to crank out a product that millions of us enjoy. But, places like Shake Shack and Smashburger crank out much higher quality food and seemingly are better employers.
Is it because they're young companies, not beholden to shareholders to cut every cost they can? Or is something fundamentally different with their approach?
I don't go to mcdonalds to spend 6 bucks on a burger, or 10 bucks on a burger, fries and a drink. I do go to five guys to do that.
$6 burgers have way more margin than $1 burgers, and that allows for higher wages.
I'm in CA and IN N OUT (which is in Nevada and Arizona too now) is one privately owned chain that has been paying above min wage for a while.
Interestingly their prices seem to be lower than places like McD's and especially Wendys. The quality is also higher which is why there is usually a wait.
Shake Shack sounds considerably more expensive.
I believe being privately owned rather than franchised allows for more quality control. IN N OUT does not even franchise and they are privately owned. Looks like Shake Shack is the same.
At IN N OUT the considerancy is pretty much all the same.
I can't say the same for the huge chains.
In my area it's common to get poor quality products . I have a KFC across the street from me, but the times I've tried it i've gotten low quality product that doesn't taste fresh..
I've also gotten fries from other places that aren't warm and seem like they were sitting around
In general now with food you are getting consumers that are more aware of various types of foods and food quality. This is why you are seeing even the big chains offer sweet potato fries...something that would of been viewed as almost "gourmet" a few years back.
The internet makes trends spread quicker than the past and the 'foodie' lifestyle has gone more mainstream with Yelp and other food related sites.
People are also a lot more aware now of organic/local produce and demand it more often than in the past.
People are more willing to pay the extra few $ for a higher quality product.
I do think the big chains are capable of putting out quality products...but it's more rare for this to happen at a big chain versus a small chain.
It all depends though, as there are tons of small mom and pops that put out low quality product too.
Size isn't directly related to quality.
I also see the IN N OUT workers working incredibly hard. I don't think fast food is an easy job, but IN N OUT workers seem to really hustle hard.
I'm guessing since their volume seems a lot higher than the average McD's ,etc they can afford to pay their workers more.
I also heard the simpler menu can result in higher profit margins.
its gonna be tough to pay anyone below $10 an hour in nyc these days. thats becoming the market rate for the lowest decent person.
when i would go to a mcdonald's in NYC, a 2 cheeseburger meal or a QPC meal would run me about $8-$9 (near grand central). that was years ago, but i can't imagine prices have changed too much. shake shack usually runs me about $10-$11. but they're meat is obviously better quality and the french fries actually seem like real potatoes.
there's a shake shack in Paramus, with another one announced going in garden state plaza. so it's not just NYC. they have one in Philly also, and a few other locations.
I don't go to mcdonalds to spend 6 bucks on a burger, or 10 bucks on a burger, fries and a drink. I do go to five guys to do that.
$6 burgers have way more margin than $1 burgers, and that allows for higher wages.
But not everyone can afford $6 burgers.
a single shake shack burger in Paramus, NJ is $4.75. that's an angus beef burger with cheese. been a while since i've been to McDonald's, but their Angus burgers are not $1. a two cheeseburger meal at my local mcdonald's (medium fries and coke) comes to $8 after tax.
Single Burger (with cheese): $4.75
Fries: $2.85 (my wife and i split an order when we go)
Fountain Soda: $2
That's a total of $9.60, but we're splitting the order of fries, so subtract $1.42 for a grand total of $8.18 for my "meal". Add on NJ's 7% sales tax - $8.75 vs $8 even for a two cheeseburger meal (smaller burger patties at Mcdonald's) at my local McDonald's.
In this case it does seem to be a better value at SS.
I don't think the Value menu at McDonald's is a great value anymore.
Especially with these other chains that have popped up or even places like Chipotle (which i'm not crazy about)
McD's actually was a major investor in Chipotle some years ago.
Is it because they're young companies, not beholden to shareholders to cut every cost they can? Or is something fundamentally different with their approach?
It's because they are selling different products to a different market. Smashburger is in the higher margin/lower volume casual dining business while McDonalds/Wendy's/BK are in the fast food business. Think clothing at Macey's/Nordstrom's versus Wal-Mart. Higher margins means you can afford to pay your employees more. The key is you have to have well off customers that are willing and able to afford higher prices. I think to some extent, higher prices are part of the appeal of Smashburger as it keeps the riff-raff out.
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