econlife - An Unusual Pizza Market by Elaine Schwartz

Nantucket’s pizza competition is very different from almost everywhere else.  I’ve been told that my favorite place for pizza, Pi Pizzeria, has a 50% market share. Meanwhile, the island’s other three or four restaurants that mostly make pizza split the other half.

Where are we going? To pizza markets.

Pizza Competition

In most of the U.S., the pizza market is about big and small. The big side is Domino’s and Pizza Hut. And yet, each of us could also name a small pizza restaurant located near us.

You can see that the big chains command more than half of the market:

Among the top 50 chains, Domino’s is #1 with global sales that total close to $12.25 billion while Pizza Hut, at approximately $12.03 billion is close behind. Then, with Little Caesar’s and Papa John’s in third and fourth place, we leap down to $4 billion each.

At the same time, the Independents’ slices of the pizza business are much smaller. Leading the Independents’ list, Marion’s Piazza’s nine units had 2018 sales of $21.31 million. Moving down the list, we quickly reach much smaller establishment groups with sales of less than $10 million.

Reading about the two groups, I got a very different sense of how they attract us. The larger chains are talking technology. They make online ordering easy and are experimenting with robotic delivery. Domino’s has even called itself an e-commerce company that sells pizza. At the same time, the Independents are benefiting from a more sophisticated pizza consumer that cares about fresh, local, and organic.

Here you can see that where you live determines the pizza you most prefer:

Our Bottom Line: Competitive Market Structures

As economists, we can return to our continuum of market structures where, moving from left to right, firms grow larger and more powerful. With perfect competition, we find markets populated by many small firms that produce almost identical products such as potatoes or asparagus. Next, monopolistic competition takes us to businesses that are somewhat larger like hair salons and supermarkets. Hair salons, for example, produce many of the same kinds of items (hair cuts) but have something distinctive (a certain stylist) that gives them some pricing power and product differentiation. Then with oligopoly we have several large firms that are dominant and finally, at the other end, just like the game, monopoly takes us to single firm dominance.

Pizza is in the monopolistic competition range.

But not Pi Pizza. When you produce incomparably delicious thin crust wood fired pies on an island, you wind up with more of a monopoly.

My sources and more: The 2019 Pizza Power Report and Pizza Today are good starting points for learning about pizza markets. I also recommend WSJ for more on Domino’s and Adage to confirm that Domino’s was #1 in the U.S. and globally.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - How To Get Speedier Fast Food by Elaine Schwartz

When you pull up to the  Naperville, Illinois McDonald’s drive thru, a voice says, ” Hey there, Welcome to McDonald’s. What would you like to order?”  Because it’s their voice recognition software, just be sure your daughter doesn’t shout from the back, “I want onion rings, Dad.” (This really is a problem—unless you plan to order them.)

Where are we going? To how McDonald’s competes.

Drive-Thru Speed

In 2012, average drive-thru time at McDonald’s was 188.83 seconds. Since then, adding  several seconds or more each year, the wait has gotten longer and longer. The reasons relate to more complexity, more accuracy, and more cars:

But still, McDonald’s has a problem. They know that compared to nine other fast-food chains, their wait is the longest. At the top for speed, Burger King was almost two minutes faster:

For now though, McDonald’s voice recognition software creates menus that reflect the weather and trendy items. It also encourages the extras like a donut stick with your McCafe. In the future, we can expect that employees will start an order while AI is still talking to the customer. We should eventually have more accuracy as data accumulates and recognition improves. But what really grabbed me was license plate scanning. Sort of like the barista who remembers your name and order, drive-thru technology might soon know what we want from our license plates.

Our Bottom Line: Monopolistic Competition

During the 1950s, a milk shake maker salesman named Ray Kroc realized that two brothers had unusually high milk shake sales. Visiting the McDonald brothers’ California roadside establishment, he saw how they speedily served a huge lunch time crowd with their version of mass production. Kroc bought their name, perfected the concept, and conquered a monopolistically competitive market. Because you just need a grill and hamburger meat, market entry is easy. We could say the same thing for a McDonald’s breakfast menu. But to be successful and have some price making power, you also require something unique—the monopolistic part. And that takes us to McDonald’s quest for the automation that achieves drive-thru speed, customizing, and accuracy as a product differentiator.

Along the following continuum, each McDonald’s restaurant would be close to monopolistic competition:

And speed has been one way that it has always competed.

My sources and more: The WSJ story on McDonald’s robots reminded me it was time to return to the drive thru and to QSR Magazine for the data. Then, if you want more about voice activation implementation and problems, this article had the detail (and was interesting) while Chicago media told about the Naperville restaurant. Finally, Yahoo Finance had the earnings call transcript where McDonald’s expressed its focus on drive-thru speed.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Solving McDonald’s Soggy French Fries Problem by Elaine Schwartz

Several months ago, McDonald’s said it had solved its soggy French fry problem. The firm assured a reporter that delivered fries would be crunchy. They just had to depart the restaurant when hot and fresh and arrive at our homes within 30 minutes.

For deliveries though, it might not be so easy.

We’ll start with McDonald’s first French fry problem…

A Consistent Crunch

Ray Kroc

One day in 1954, a curious milk shake maker salesman appeared at the McDonald’s restaurant near Pasadena, California. No one restaurant had ever before ordered ten of his Multi-mixers (simultaneously, each one could make five shakes). He personally wanted to see what hamburger restaurant could possibly require so many milk shakes.

The salesman’s name was Ray Kroc and he was amazed at what he observed. “Like ants at a picnic,” McDonald’s workers began their day carrying the meat and potatoes from a shed to the restaurant in a perfectly regimented fashion. They were dressed meticulously in trousers, white shirts, and hats. Close to opening time, lines of customers formed. When asked, many said they returned daily. Some left with bags full of the fifteen-cent hamburgers.

Immediately Ray Kroc grasped the potential of the McDonald’s operation. He asked the brothers if he could have the exclusive right to develop a national chain of McDonald’s franchises. “Yes,” was the answer (with much more negotiation) and the rest is history.

The French Fries

One of Kroc’s first problems was developing a consistent crunch for his French fries.  Although suppliers were providing the same russet potatoes and using precisely the same soaking and cooking techniques, still the franchises’ fries varied. Some would be perfect while others were too soggy.

After spending millions of dollars and hundreds of hours, McDonald’s researchers concluded that their storage and frying procedures needed tweaking. Storage time had to be three weeks—long enough for the sugars to turn to starches. Frying them, they had to be sure that the oil temperature did not rise more than three degrees above its lowest point. Then, with an electrical sensor maintaining the three-degree difference, they achieved a consistent McDonald’s crunch.

The Current Crunch

Maybe we should say déjà vu.

Now, McDonald’s seems to have an equally tough French fry problem.  Describing his French fries, an eater.com reporter wrote that the delivery had arrived within a half hour. However, only half were crispy and all were lukewarm.

Two days ago, the NY Times explained the solution in a lengthy article. Its focus was Lamb Weston, a McDonald’s French fry supplier. At one of its farms, Lamb Weston has been trying to figure out the kind of potato that would make a less limp fry. Concluding that water is the enemy, they’ve been using minimal irrigation through computers that monitor potatoes’ nutrient levels.

But that was only the beginning.

At the frying stage, they developed a new batter that, when combined with the new potatoes, will remain crunchy for almost an hour. (The current state-of-the-art is 12 minutes.) As you might imagine though, the fries’ journey from the restaurant to our homes could undo all. If that fry is placed next to a milk shake, both will wither. Appropriate ventilation and a moisture free environment are crucial. Ideally, they just need to put the French fries in a lightly folded paper bag.

Our Bottom Line: Monopolistic Competition

Last year, McDonald’s tested its delivery service in Florida. The next step was to offer it at 5,000 U.S. locations. Because they project a $100 billion market, you can see why a crispy French fry is so important.

French fries are their #1 delivery product:



As economists we can say that McDonald’s is trying to achieve product differentiation. Especially because they compete in a monopolistically competitive market, they have to make themselves better than other restaurants. As a market structure with many smaller firms that can easily enter and exit, monopolistic competition means that McDonald’s needs to stand out.




Having crunchy French fry deliveries would help.

My sources and more: Thanks to the NY Times for alerting me to the leap forward in French fry crunch technology. Then, Bloomberg and Eater had the McDonald’s facts as did excerpts from my Econ 101 1/2 about Ray Kroc.

Please note that today’s featured picture is from Eater.com.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why We Need Holey Cow and Other Cheesy Names by Elaine Schwartz

More than 30 years ago, an Italian family and two master cheesemakers moved to the United States. Preserving their great grandfather’s legacy in Wisconsin, the family produced traditional Italian cheeses like Parmesan.


The brand was BelGioioso:

But now, they might have to stop calling it Parmesan.


EU Cheese Naming Rights

Our story starts in an EU (European Union) book of regulations. Including Parma ham, Dutch Gouda and Champagne, each product in a 1000+ list has the exclusive right to its name. The privileges are called PDO (Protected Designation of Origin), PGI (Protected Geographical Indication), and TSG (Traditional Specialties Guaranteed). But let’s just call it GIs (Geographical Indications).

The battle over GIs has been raging for decades. In 2005, a fight about feta ended with Greek cheesemakers winning. From then onward, in the EU, no one could place the feta label on an identical cheese that wasn’t Greek. Instead, a Danish dairy cooperative resorted to calling its feta “salad cheese” or “white cheese.”



U.S. Cheese Naming Rights

Of course, a Wisconsin cheesemaker can call its cheese Parmesan in the U.S.


The problem starts when they want to sell it elsewhere. Ranging from Mexico to Japan and South Korea, a host of nations are signing free trade agreements with the EU that exclude the U.S. Because many of those agreements extend the reach of GI restrictions to each signatory, our cheesemakers suffer. A U.S. producer saw sales plunge when he had to call his Asiago cheese, “Sartiago.”


Others though have been a bit more creative. A California cheesemaker called its Emmenthaler-like cheese Holey Cow:

Our Bottom Line: Competitive Market Structures

Looking through an economic lens, we can see the benefit of the GI designation. From monopolistic competition among many small producers, the EU trademark protection moves the product to the right along a competitive market structure continuum.

And, like the monopoly that it is nearing, the firm with name protection has more price making power:

My sources and more: This WSJ article and Modern Farmer reminded me that it was time for an update on cheese names. Meanwhile, the feta story came from Reuters and I learned about BelGioioso from their website. However, if you just visit one mouthwatering link, do go to Cowgirl Creamery for great cheese names and taste. I recommend Mt. Tam and reading the Cowgirl story.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - What We Don’t Know About Dirt by Elaine Schwartz

Next time you go to a Major League Baseball game or even a local stadium, take a good look at the infield. There’s no such thing as normal dirt anymore.

Where are we going? To how dirt dealers compete for baseball business.

But first, some infield insight…

How Dirt Differs

Our story starts at Slippery Rock University. Located in Western Pennsylvania, the school needed an infield for its new baseball stadium. A nearby dirt dealer, who had never done an infield before, got the job. But then he had to figure out which dirt to use. Bringing samples to the field, he appears to have wound up with a unique silt, clay, and sand mixture.

You can imagine what the goals are. You don’t want “a trail of chunks” from baserunners. You want the surface to remain smooth so the ball doesn’t take some weird hops. Meanwhile the pitcher needs a gloppier mix for a more secure foothold. And then there’s the weather. With a sufficiently absorbent surface, you can minimize the rain delays and cancellations.

DuraEdge Products was the Pennsylvania firm with a new dirt recipe. From Slippery Rock, their business expanded to the Philadelphia Phillies and to other Major League stadiums. The following map shows some teams that have their infields:

Our Bottom Line: Monopolistic Competition

In monopolistically competitive markets, small and medium size firms sell very similar products. So it makes sense that they try to differentiate themselves. If you are in the infield surface business, then you might say your clay is unusual or your silt is special. Your goal is to move to the right on a competitive market structure continuum to get some pricing power:



The result? Even dirt can provide a competitive advantage.

My sources and more: Since we’ve already looked at sand, I was curious about this WSJ article on dirt. And that took me to the Pittsburgh Post-Gazette.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - A Closer Look at the Digitization in Our Lives by Elaine Schwartz

Recorded music used to start with a label and an artist. The production process was expensive because of the skilled technicians and the sophisticated equipment. Add to that a music video, the physical album, the distribution process, and what do you get? For a new artist, the tab is $1 million and the success, unlikely.

But then came digitization…and The Piano Guys:

 For this one video, so far, there have been 62.5 million views.

And a considerable shift in market behavior.

The Digital Impact

Looking at music, movies and books, we can see a seismic shift because of digitization.

McKinsey concluded that the media were the digitization leaders:

Summarizing a huge body of digitization research, we can say that supply side costs are down–with marginal costs as low as zero. And on the consumer side, we have an increase in welfare as choice and potential quality skyrocket.

Some of the changes relate to sinking production costs. As a musician, an artist or a writer, you once needed an agent just to sign a contract. No more. Now, do-it-yourself lets you bypass the gatekeepers.

We have also seen the distribution revolution as online media supply what we used to buy exclusively from record and book stores, and movie theaters. In 2012, there were 550 films released through movie theaters. By the next year, Netflix alone had 1058.

For the media, you can see the whopping increase:

Our Bottom Line: Market Structures

Let’s just conclude with a look at our market structure continuum. On the left, we have smaller less powerful firms that can easily enter and exit markets. Meanwhile, moving rightward, pricing power and firm size increase.

Digitization is upsetting our traditional market structure order. In some markets we have more competitors. Because of easy entry and exit, digitization is adding more of the characteristics of monopolistic competition. Also though, thinking of Amazon, some firms have much more pricing power, taking us to the right side of the scale.

Maybe though we should remove our economic lenses and simply enjoy the Piano Guys.

My sources and more: Always selecting interesting topics, economist Joel Waldfogel now has a paper on digitization in the Journal of Economic Perspectives. Also, I discovered  this NBER paper that complemented his analysis. Finally, you might enjoy looking at McKinsey (as did I) here and here, with its real life examples.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.