How do fast food companies turn a profit in low income areas? Can you think of any legal issues that might be of conern to a company looking to cut corners in low income areas to help their profit margin?
Low income areas are characterized by low or very limited disposable incomes for local residents, who pay extra attention on seeking fast foods as economical main meal choices. Most fast companies, like McDonald etc., have relatively fixed cost structures with long term future contracts with major suppliers. As a result, the main focus for this type of business model is to maximize revenues. In low income areas, this is achieved by lowing the unit/meal price and therefore maximizing the volume coming into the stores. Therefore, deals such as, 99 cent burger and under $10 family meal, can often be seen in low income areas.
Before we go into the legal issue discussion, we should understand that profit margin is calculated as after-tax net profit as a ...
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