DP8534 Retail Chain Expansion: The Early Years of McDonalds in Great Britain
|Author(s):||Otto Toivanen, Michael Waterson|
|Publication Date:||August 2011|
|Keyword(s):||Cost of entry, diffusion, economies of density, economies of scale, entry, expansion|
|JEL(s):||L10, L22, L81|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8534|
Understanding the development of chainstores is important given the large GDP share of services and the continuing importance of chains in bringing these services to market. Service chains provide a puzzle because they take a long time to develop even when there are obvious expansion opportunities. We study the spread of McDonalds in Britain. We find cannibalization on the demand side and economies of density both within and between markets on the cost side, and evidence of learning by doing at the firm level. Within-period diseconomies of scale at the firm level help explain the lengthy opening pattern.