Question
ARTICLE 1. Question 1. Read the following and answer the attached questions HE WALL STREET JOURNAL 8lcom FEBRUARY 23, 2009 FRANCHISING A Smaller Piece of the Pie Pizza chains were already struggling. Then the economic downturn hit. Times are tough in the U.S. pizza business. ith a cheap meal, pizza's popularity among America's fast-food consumers is waning. On the one hand, its reputation as a bargain has been eroded by pricey ingredients-- some in the industry refer to cheese as "white gold" -- and aggressive competition, especially from chains peddling cheap hamburgers.On the other hand, it is getting squeezed by changing tastes, as some consumers bypass pizza for fresher, more upscale dining options Exacerbating the situation is the most precipitous economic downturn in decades, w has sparked a dramatic pullback in consumer spending. hich Conditions late last year were "the worst I'd scen" since entering the business 32 years ago, says John Schnatter, founder and interim chief executive officer of the Papa John's International, which is based in Louisville, Ky. The industry's troubles are creating problems for franchisees of the three biggest chains: Papa John's, Domino's Inc. and industry leader Pizza Hut, a unit of fast-food giant Yum Brands Inc. While hamburger chain McDonald's Corp. has posted consistent gains in its domestic same-store sales, with 4% growth in 2008, U.S. franchised same-store sales at Domino's fell 1.7% in 2007 and 5.6% in the first nine months of 2008, Papa John's is predicting its same-store sales will be flat to down 2% this year, and Pizza Hut, whose same-store sales slipped 1% in the fourth quarter of 2008, is off to a slower start than expected this year, according to Yum, which has called the division its biggest challenge.
Explanation / Answer
The above articles reflects changes in US food chains over the years . It highlights how the pizza consumption has changes from high and faced low sales growth rate due to changes in preferences and high competitions from hamburgers and other food chains . The papa johns retailers are planning to role back royalty to focus more on their sales or they face a threat to shut down for about 200 stores . Mc donalds has seen a 4% growth in sale volumes compared to others .
1)since the demand changed with change in taste , it is highly elastic for pizzas compare to hamburgers in the food market .
2) demand for papa johns pizza has been more because other competitiors like dominos have performed differently in the market . There has been focus on franchisee performance which has been variating .
3)The supply for pizza has been elastic , papa johns is trying to increase its sales by reducing it prices as they want to protect their market share and stand up in the market .
4) income elasticity is positive for pizza because people get influence more by cheap meals because people will consume and focus on cheap products when income is low and the demand for expensive gourmet pizzas will also be low .