“Pricing Strategies of Local Fast Food Restaurants in General Santos City”

A Research Proposal Presented to

In Partial Fulfillment of the Requirements in

BBA 315 - Business Research

Alonso, Rovie Joy

Cabanayan, John Loyd

Capuso, Carlo James Patrick

Introduction

Problem and Its Setting

Pricing strategy is the policy a firm adopts to determine what it will charge for its

products and services. Strategic approaches fall broadly into the three categories of

cost-based pricing, competition-based pricing, and value-based pricing. Pricing strategy

is a key variable in financial modeling, which determines the revenues achieved, the

profits earned, and the amounts reinvested in the firm's growth for its long-term survival.

A number of pricing strategy options are available, including cost-based pricing,

perceived value pricing, competition-based pricing, penetration pricing, and skimming

pricing. Sammut-Bonnici, T., & Channon, D. F. (2015).

In today’s rapidly evolving global marketplace, businesses face increasingly

complex challenges when it comes to establishing effective pricing strategies. With

factors such as fluctuating exchange rates, diverse consumer preferences, and varying

market conditions, organizations must take a nimble and strategic approach to ensure

optimal market penetration and profitability.

In the Philippines, there are 4357 locally registered fast food restaurants in the

Philippines. From 6.6 percent in April 2023, the Philippine Statistics Authority (PSA)

announced today that inflation further went down to 6.1 percent in May 2023 and since

July 2022, this is the lowest year-on-year inflation rate. This development brings the

year-to-date (January to May 2023) average inflation to 7.5 percent.

restaurants. Inflation rate of General Santos City as of January 2023 is 5.7% which is

lower from the previous year, which equates to competitiveness of General Santos City

among price commodities.

This study is undertaken with a crucial purpose in mind. Large fast-food

corporations possess the resources and strategies to navigate economic fluctuations

with relative ease. The focus of this research is in the perspective of local fast-food

businesses. These local establishments operate within a distinctly different context,

characterized by limited resources and localized customer bases. Understanding how

they adapt to the challenges posed by commodity price volatility and its subsequent

impact on pricing strategy is paramount.

This research acknowledges the crucial role played by local fast-food

establishments within their communities, as they create job opportunities and contribute

significantly to the local economy. Examining their approaches in the face of economic

uncertainties can provide valuable insights not only for these businesses but also for

policymakers and stakeholders interested in bolstering economic resilience at the

community level. By illuminating the adaptive measures adopted by local fast-food

outlets in General Santos City, this study aims to present a comprehensive view of the

dynamics within the fast-food industry and its contribution to sustaining local economies

amidst volatile commodity prices. The objective of this research is to gain an

understanding and ascertain the pricing strategies employed by locally-operated fast-

food establishments in General Santos City. Based on the issue presented, this study
will determine the Pricing Strategy of Local Fast Food Restaurants in General Santos

city.

Literature Review

This part will present the Related literature related to the pricing strategies of

restaurants.

Profile of local fast-food restaurants.

Chun, S. H., & Nyam-Ochir, A. (2020) The fast food restaurant business is one of the

fastest-growing industries in the world. International and local restaurant chains are

trying to satisfy the demands of customers for a variety of products and services.

Number of years operation;

According to data from the Bureau of Labor Statistics, as reported by Fundera,

approximately 20 percent of small businesses fail within the first year. By the end of the

second year, 30 percent of businesses will have failed. By the end of the fifth year,

about half will have failed. And by the end of the decade, only 30 percent of businesses

will remain — a 70 percent failure rate. Carter, T. (2021)

Form of Business;

One big step you’ll take is determining your business structure. But, this is a step you

need to take ever so cautiously. Kappel, M. (2021). In a sole proprietorship, the

individual who founded the business remains the sole owner. Sarah Edwards, &

Sarahedwards. (2022), partnership is the relationship existing between two or more

persons who join to carry on a trade or business. O’Brien, M. (2022). A corporation is a

P. (2017).

Average monthly income;

Reiley, L. (2023) Fast-food restaurants don’t require tipping and often have loyalty

rewards programs that amplify their affordability. (McDonald’s mobile app was

downloaded 127 million times globally last year.) In short, a large pizza from a national

chain may feed a family more affordably than a homemade chicken-rice-broccoli meal

(and often the kids are more enthusiastic).

Average monthly expense;

In some restaurant and hotel operations, food is transferred to the bar where it is served

as hors d’oeuvre to promote the sale of alcoholic beverages. This is really an expense

of the bar and should not be considered a kitchen expense. The cost of transferred food

should be deducted from the basic food cost figure. This cost is best considered a

promotional expense borne by the bar. Committee, B. C. A. (2015)

Average customers per day

Hodge et al. (2023b). An average American consumes 3 meals weekly from fast-food or

full-service restaurants, which contain more calories, fat, sodium, and cholesterol than

meals prepared at home.

The current Pricing of local fast-food restaurants.

Value-based Pricing;

Garner, S., Rintoul, A., & Hill, S. (2017).We address the following paradox: most

scholars consider value based pricing as superior to cost and competition based
approaches in industrial markets -yet, few firms use it. Semi-structured interviews with

44 managers of small to medium size U.S. industrial firms revealed key characteristics

that are common to the firms who successfully implement value-based pricing: the

ability to face deep transformational change, the role of champions as transformational

leaders, the creation and diffusion of organizational mindfulness, the building of

organizational confidence to fuel the transformation, and the design of center-led and

specialized teams of experts supporting the firm’s pricing process. Our data

demonstrates that value-based pricing is not simply adopted but internalized through a

long and purposeful process supported by a mindful, experiential and transformative

learning environment.

Competitive-based Pricing

Kutschinski, E., Uthmann, T., & Polani, D. (2003). In electronic marketplaces automated

and dynamic pricing is becoming increasingly popular. Agents that perform this task can

improve themselves by learning from past observations, possibly using reinforcement

learning techniques. Co-learning of several adaptive agents against each other may

lead to unforeseen results and increasingly dynamic behavior of the market. In this

article we shed some light on price developments arising from a simple price adaptation

strategy. Furthermore, we examine several adaptive pricing strategies and their learning

behavior in a co-learning scenario with different levels of competition. Q-learning

manages to learn best-reply strategies well, but is expensive to train.

A company's pricing strategy is the method it employs to determine how much it will

charge for its goods and services. Cost-based pricing, competition-based pricing, and

value-based pricing are the three pricing techniques. The common aspect of all pricing

plans is that, in the end, the total income earned from the set price multiplied by the

units sold must cover operational costs while also allowing for a suitable profit margin to

ensure an acceptable return on investment. The mechanism for doing so differs based

on the industry and market conditions, the underlying competitive advantage, and, in

some cases, governmental limitations (Sammut-Bonnici & Channon, 2015).

Conceptual Framework

It is used in research to outline possible courses of action or to present a

preferred approach to an idea or thought. It is the researchers' understanding of how the

particular variables in the study connect.

Profile of the restaurant Pricing Strategy

The independent variable in this study is the profile of the fast-food restaurants in

General Santos City, the dependent variable it affects is the pricing strategy of the

restaurant. It is conceptualized in this study that the profile of the restaurant affects the

pricing of the fast-food restaurants businesses in General Santos City.

This study aims to determine the Pricing Strategies of Local Fast Food

Restaurants in General Santos City.

And it seeks to answer the following question:

1. What are the demographic profile of the restaurants in terms of:

1.1 Number of years operation;

1.2 Form of Business;

1.3 Average monthly income;

1.4 Average monthly expense;

1.5 Average customers per day

2. What is the current pricing strategy of the business?

3. Based on the findings of the study, what pricing strategy can be recommended?

Scope and Delimitation

This study is limited to the title of the study. It will focus on the profile of the local

fast-food restaurants in terms of its number of years operations, form of business,

average monthly income, average monthly expense, average customers per day and

the current pricing strategy of the business. This study will be conducted in the first

semester of SY 2023-2024. Aims to analyze the pricing strategies employed by locally

established fast-food restaurants in General Santos, which have been operating in the

market for a minimum of three years. The research will utilize purposive sampling,

selecting a sample size of 10 local fast-food restaurants in General Santos City.

To the owners, this would offer an alternative viewpoint and a more all-encompassing

comprehension of industry stakeholders. It would enable them to formulate future

economic plans and devise strategies, harnessing their adaptability to address any

challenges their business may encounter during its journey.

To the employees, they would acquire fresh insights into how sudden economic shifts

influence the food industry, particularly with regard to their income and purchasing

capacity. This experience would provide them with a deeper understanding of how

economic conditions can affect all facets of society.

To the customers, they will gain an appreciation for why prices, portion sizes, and even

the quality of food can undergo substantial fluctuations in response to significant

economic shifts. Their understanding will extend to recognizing why the economy has

a particularly pronounced influence on essential necessities and other goods.

To the economy, business owners, especially those in the food industry, will gain a

new outlook on how to approach strategic planning when dealing with fluctuating

market prices. They will develop a more comprehensive understanding of how to

navigate such economic circumstances, which many are currently encountering.

To the researchers, this will serve as a foundation for future researchers who aim to

uncover solutions or seek answers to their questions regarding future circumstances

related to this topic. They will discern the differences between the past and the future

in terms of changes, causes, outcomes, and the relevance of this study to their own
research.

To the business, this will act as a guide for them in understanding how established

food businesses formulate their pricing strategies in response to economic fluctuations

and how they navigate sudden changes in the economy.

To the business students, this will provide them with a fundamental understanding of

how economic volatility influences food industry prices. It will also equip them with

insights for potentially establishing their own businesses in the future, serving as a

guide and raising awareness about how the economy can profoundly impact industries

like food.