However, because fast food is in part defined by its price point, the companies have only limited pricing power at the high end. Firms in the industry also tend to adopt either permanent or temporary cost leadership strategies (such as 99 cent menus) in order to attract business. The companies are unable to sustain low prices in this industry because the margins are inherently low and because most other firms are capable of matching those prices, negating any market share gains the low prices offer. Thus, fast food companies only have a small degree of pricing power, another characteristic of monopolistic competition.

The fast food industry exists within a broader "food" industry, which is a more competitive environment. Fast food companies are able to set their own prices in order to compete and fast food companies have simply chosen to follow cost leadership strategies. The segment of the food industry...
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