Monday, 26 March 2007

A Short Trip to McDonald’s

After a long and tiring day at work, I vowed not to think about economics at all for the rest of the night. The plan was to have a quick dinner followed by a therapeutic shower and a brief casual reading on bed before dreaming of sunbeams, sea breeze and autumn leaves.

I dropped by a McDonald’s for the quick dinner.

Fine Parking

The restaurant is relatively big for a MacDonald’s with its own personal space for free parking. It is also a 24-hour drive-thru. The first thing I noticed while entering the parking area was the ubiquity of large sign boards, telling everyone that the parking spaces were strictly for restaurant patrons, and cars parked for more than two hours would be clamped and fined a hefty sum. The motivation for doing this was obvious – if the spaces were taken up by non-customers, there would be less potential customers for McDonald’s. How they intended to enforce this however, was not too obvious. There were no tickets issued or any other mechanism in place to track how long a car had been parking. That didn’t mean that it couldn’t be done – someone could possibly be walking around and jotting down car number plates and clamping cars that had been parking at the same spot two hours ago– but just that it didn’t seem that McDonald’s was being all too earnest in enforcing the clamping rule. Chances were, McDonald’s does not clamp cars most of the time.

But chances were also, I thought, not too many non-customers actually park there too. This was much akin to ‘beware of dog’ or ‘trespassers will be shot’ signs. Quite probably, the dog behind the gate was just a cute beagle or the people behind the fence actually do not carry a shotgun everywhere they go, but there was also a possibility that it’s a deadly Rottweiler or a trigger-happy guard. In these situations, the risk – the potential costs – of an action outweigh the benefits. Getting a free parking might be tempting, but the prospects of the cost and hassle of having a clamped car would probably deter most drivers.

Knowing very well that my dinner would take not more than 20 minutes, I chose a nice spot in front of the entrance and parked my car.

Bubur Ayam

As I lined up to order my dinner, I glanced at the menu. Amidst all the American-styled food, the bubur ayam appeared most out of place – it was like a perfect specimen for the Sesame Street song, “All of these things belong together, one of these things, is not the same…” poking you to pick it from the rest. At first, it might seem weird that an iconic western fast food restaurant was selling such a plain and simple Malaysian food, and only this one.

And then I thought of the spectrum of potential customers that McDonald’s has. McDonald’s serves mostly families, and the typical families range from young families that might actually enjoy Big Mac and Oreo McFlurry to hardcore traditional families that include grandma and grandpa who would never eat such manufactured western food. Then there are those in the middle – families that include young members who like sundae, Happy Meal and the play area and grandparents who love to see their grandchildren having fun but wouldn’t really enjoy the food. Bubur ayam, being plain but easily recognizable, perhaps, was added to woo these families at the margin. With it, both the children could have fun and the grandparents not starve. And for McDonald’s, its group of potential customers expanded to include those that used to be at the margin which should translate to more business.

Early Breakfast

Then I sat down to eat my spicy beef foldover and I noticed the paper placemat, informing me the restaurant was now opening from 4am to 11am to serve its breakfast menu. At first, this might appear to be silly – who would actually wake up at 3.30am in the morning so that they could go eat McDonald’s for breakfast at 4am? But an establishment like McDonald’s would not usually make silly business decisions.

Firstly, from the cost perspective, this restaurant was already operating 24-hours for its drive-thru business. Thus, the extra fixed and labour cost from serving breakfast at 4am was marginal. Secondly, and perhaps more importantly, McDonald’s naturally has a lot of competition for its business, but competition is not a fixed thing. At different times of the day, due to the different opening times for different restaurants, the degree of competition would be different. At 4am in the morning, this McDonald’s was basically a monopoly, and a monopoly perhaps for a good 2-3 hours before nearby kopitiams open. The number of customers that early in the morning might be small, but given the small extra cost and the fact that most people who actually needed breakfast at that time would not have many alternatives to go to, serving breakfast at 4am might just be a brilliant strategy to gain more marginal customers.

And at around this time, it was clear to me that trying not to think about economics for me was an exercise in futility.

Oh well.



Chewxy said...

Lemme guess... Kota Kemuning's McDonalds?

shag said...

You are a gone case.
Even when not thinking economics you managed to squeeze asymmetric information, game theory, competition and sunk costs into a post about mcdonalds.

zewt said...

or is it the one at ampang... attached to the petrol station...?

johnleemk said...

I'm almost 100% confident that this is the Bandar Utama McDonald's.