I found this article really informative, particularly the concept of diseconomies of scope, clearly revealed in the improved fast food menu choices over time, an aspect not revealed in productivity measures in hospitality. Which links nicely to an earlier blog "Productivity, or how to widen the long and narrow path" where it was revealed that hospitality was a key contributor to labour productivity slowdown, summed up nicely above "The industry has responded to consumer choice. That’s a good thing, even if sometimes it is productivity reducing."
Excellent analysis on the relative price changes between fast food, restaurants, and home cooking. The productivity story makes good sense as an explanatory factor.
That prompts an interesting tangent about McDonald's burger prices. I too have loosely assumed McDonald's earns minimal super-normal profits overall. However, right now the McDonald's app shows Big Mac combo prices of $7.45/$12.85 and $7.10/$12.40 at two locations less than 20km apart in Victoria.
This variance raises some questions. Do input prices (rents, wages, transport) differ substantially between these nearby stores? Or is it that willingness to pay is higher in some spots, moving the location up its own supply curve? Might it simply be noise from individual franchisees' operations?
While not directly about productivity, it relates. 'Productivity' as we economists define it is an attempt at a useful simplified statistic, but necessarily glosses over real-world complexity. Comparing those two outlets' productivity statistically (and this is a critique of some of the productivity-style analyses using microdata) would likely be very time-sensitive, rely heavily on assumptions embedded in the analytical framework, and be a function of the purposes for which the data was actually collected.
The other quality improvement not captured in McD’s is the move from batch prep to ‘cook on demand’, which as anyone who’s gotten a cold burger knows is a big improvement in average quality!
It’s been interesting to observe the technology improvements McDonald’s has been pursuing. From my understanding working in the kitchen has changed fundamentally, from a batch cooking model (still pursued by KFC for the most part) to the on demand, which has a very high IT component compared to the 1970s. We also see cashier-less ordering, online ordering, and quite a lot of transformation in terms of the way individual items are cooked. Plus changes in the supply chain to emphasise fresher ingredients and a move to a JIT model over a large frozen inventory model.
Overall – I’d be very surprised if burgers per staff hour hasn’t improved substantially over the period. I think the MFP story might be more in the capital.
I found this article really informative, particularly the concept of diseconomies of scope, clearly revealed in the improved fast food menu choices over time, an aspect not revealed in productivity measures in hospitality. Which links nicely to an earlier blog "Productivity, or how to widen the long and narrow path" where it was revealed that hospitality was a key contributor to labour productivity slowdown, summed up nicely above "The industry has responded to consumer choice. That’s a good thing, even if sometimes it is productivity reducing."
Excellent analysis on the relative price changes between fast food, restaurants, and home cooking. The productivity story makes good sense as an explanatory factor.
That prompts an interesting tangent about McDonald's burger prices. I too have loosely assumed McDonald's earns minimal super-normal profits overall. However, right now the McDonald's app shows Big Mac combo prices of $7.45/$12.85 and $7.10/$12.40 at two locations less than 20km apart in Victoria.
This variance raises some questions. Do input prices (rents, wages, transport) differ substantially between these nearby stores? Or is it that willingness to pay is higher in some spots, moving the location up its own supply curve? Might it simply be noise from individual franchisees' operations?
While not directly about productivity, it relates. 'Productivity' as we economists define it is an attempt at a useful simplified statistic, but necessarily glosses over real-world complexity. Comparing those two outlets' productivity statistically (and this is a critique of some of the productivity-style analyses using microdata) would likely be very time-sensitive, rely heavily on assumptions embedded in the analytical framework, and be a function of the purposes for which the data was actually collected.
The other quality improvement not captured in McD’s is the move from batch prep to ‘cook on demand’, which as anyone who’s gotten a cold burger knows is a big improvement in average quality!
It’s been interesting to observe the technology improvements McDonald’s has been pursuing. From my understanding working in the kitchen has changed fundamentally, from a batch cooking model (still pursued by KFC for the most part) to the on demand, which has a very high IT component compared to the 1970s. We also see cashier-less ordering, online ordering, and quite a lot of transformation in terms of the way individual items are cooked. Plus changes in the supply chain to emphasise fresher ingredients and a move to a JIT model over a large frozen inventory model.
Overall – I’d be very surprised if burgers per staff hour hasn’t improved substantially over the period. I think the MFP story might be more in the capital.
https://www.npr.org/transcripts/1072164745