Pizza Restaurant Report: Economic and Regulatory Forces Analysis

This report examines the key economic and regulatory forces that influence the establishment and operation of a pizza restaurant. It begins with a concept map outlining the external environment, including market structure, pricing, demand and supply, and elasticity, alongside relevant legislations such as the Corporations Act 2001, Queensland Food Act 2006, NSW Food Authority, and the Competition and Consumer Act 2010. The report delves into the importance of each piece of legislation, ensuring compliance and consumer safety. It then explores the impact of market structure and pricing strategies, including psychological pricing, on the pizza industry. The analysis includes an examination of supply and demand dynamics, elasticity, and how these factors influence the restaurant's operations. The report concludes by highlighting the significance of the macro environment in determining a business's success, emphasizing the conducive business environment in Australia and the low entry barriers in the pizza industry. References to relevant acts and research papers support the analysis.

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Pizza Restaurant
Name
Course
Tutor
University
City/State
Date

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Introduction
The establishment of a pizza restaurant requires adherence to various regulations and
analysis of various economic factors that can affect its operations. In this case, legislations such
as corporations Act and Queensland Food Act play a vital role.Moreover,the external
environment such as market structure and pricing and forces of demand and supply also impact
the pizza restaurant. Thus, it is the careful analysis of both the legislation and economic
dimensions that will translate to the successful operation of the pizza restaurant.
Diagram of the concept map
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Legislations affecting
1.Corporations Act 2001
2.Queensland Food Act
2006
3.NSW Food Authoriy
4.Competition and
consumers Act 2010
External environment
1.Market structure and Pricing
2.Demand and supply
3.Elasticity

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Relevant regulation and its importance
According to the Corporations Act 2001, any entrepreneur will be required to have a
registration for their company if they seek to run an enterprise in Australia. Thus, a public or
proprietary enterprise in Australia suffices if it gets registered by the Australian Securities and
Investments Commission, commonly known as ASIC. Though applying for a reservation of an
enterprise name is optional, it assists an applicant to reserve their proposed corporate name prior
to getting registered.
The Queensland’s Food Act of 2006 ensures that the sale of food for human consumption
is not only safe but also fit. Moreover, it shields from engagements in misleading behavior
regarding the purchase of food, thus facilitating the use of the Food Standards Code. The Act is,
therefore, imperative in ensuring that there are systems of control that regulate food from
preparation, handling, and sale of such commodities. Also, it establishes offenses that are
contrary to the Act and offers prosecutions and penalties for such vices. Thus, it provides a guide
that enables all food enterprises and individuals to comply with as per the Australia New Zealand
Food Standards Code.
The NSW Food Authority collaborates with the local councils at the level of retail
enterprises to frequently inspect hotels, cafes, and other eating joints to ascertain compliance
with regards to the Food Standards Code (NSW Government, 2019). The NSW Food Authority
is vital as it ensures that proprietors of food ventures become responsible for ensuring that all
individuals who handle food or are in the food environment indulge in healthy practices. It also
provides that food supervisors have the required knowledge and techniques to handle food

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conveniently. To adhere to the food compliance, such employees will not need skills and
knowledge for other occupations in the business. In this case of a pizza restaurant, those who will
be making pizzas will need skills and knowledge that are different from those who will be
cleaning the premises.
The Food Act 1984 is vital legislation that ensures regulations with regards to the sale of
food (Victoria Government, 2017). Thus, food proprietors are mandated to be solely responsible
for facilitating that the food they sell to their clients is not only fit for consumption but also
healthy. Such legislation is imperative as it provides for various penalties and defense to those
found breaching food laws. Such regulation is vital for a pizza restaurant as it will ensure that all
the pizzas are safe for consumers and also eliminate chances of food poisoning that arise in such
restaurants.
The competition and consumers Act 2010 is a clear manifestation of enhancing the
consumers’ welfare through improving fair trading practices and competition and also offers
protection of consumers from unscrupulous business traders (Australian Competition and
Consumer Commission, 2019). It encompasses various areas such as food safety and labeling in
this context, unhealthy market practices, and price monitoring, among other issues. Such an Act
is crucial for a pizza restaurant as it will shield it from unhealthy market competition from
market leaders who tend to charge cut throat prices aimed at driving new or other competitors
out of business.
Economic concepts and their importance
Market structure and pricing

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The pizza industry in Australia entails few mega chains scrambling for approximately
50% of the market, whereas small autonomous enterprises control the other 50%. This is a clear
indicator that the pizza joints are competing amongst themselves.
5% 11%
25%
4%2%
54%
market share(%)
Eagle Boys
Pizza Hut
Domino's
Pizza capers
La Porchetta
Others
Based on the low prices charged by pizza outlets in Australia coupled with price wars, a
pizza restaurant would best operate in such an environment by not indulging in price cuts but
concentrate on improving customer experience as one of the differentiation strategies. It would
also be imperative to marginally raise prices while offering more benefits and new pizza
products, as this seems a sustainable economic model in the pizza industry. According to Mathe-
Soulek,et al.,(2016) emerging product promotions are associated with a huge positive impact on
fast food outlets, while promotions based on prices lead to a decline in sales. Thus, competing
solely on price translates to a product becoming a commodity. Therefore, where customer loyalty
and repeat buying are vital components for success, a pizza restaurant should do more than price-
points in attracting and retaining clients.

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Various firms have different costs that they account for when setting rates though each
has to establish a breakeven point to recover the expenses and then gain some profit (Wieseke,
et al., 2016). Fundamentally, there are three pricing strategies.
Pricing technique Nature of the
enterprise
Type of Pizza Technique employed
High end Gourmet pizza outlets Woodfired Competition based on
quality
Middle Regional takeaway
pizza joints
Medium Prices depend on
regional rivalry
Cost Based Domino’s Lower quality that
utilizes mass bought
ingredients
Competes on price to
lure the crowd. Prices
are a sum of cost and
markup
Though the process of determining prices is the most influential with regards to profits, the pizza
restaurant should understand that it is not only about making money but also about consumer
psychology and pizza positioning and branding.
Psychological pricing
Though economics and maximizing profits are vital, pricing features predominately in
consumer perceptions. The pizza restaurant should offer multiple pricing points, particularly

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near-pricing. Psychological pricing deliberately works for convenience-conscious customers who
value round prices as more convenient compared to just below rates, for instance, $6.95, while
such a rate is probably for consumers who place lower emphasis with regards to convenience. It
is also postulated that there are socially and mentally vital encounters, feelings, and value for
customers and businesses in the commodity trade; thus, convenient pricing is crucial. Customers
channel their focus on price and pay a premium price for their orders to enjoy class, and the
occurrence of such deems the nexus between price and quality as irrelevant. The unfairness of
price where customers pay unreasonably higher rates compared to others can endanger customer
experience and translate to retaliation.
Supply and demand
Based on liberal economics, when pizza prices rise, the demand by the consumers goes
down. Such an equation translates to a sloping demand curve. When the supply curve gets
incorporated, it indicates the restaurant’s willingness to supply pizza, which increases with price
increment, and it is the intersection point that gives the equilibrium market price.
Price
$3
D
S

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8 Quantity of Pizza
However, other factors such as tastes and preferences, price of substitutes, changes in
seasons affect demand. While elements such as cost of inputs, changes in seasons, among others,
contribute to change in supply. In this case, taste and preferences with regards to certain pizza
types, for instance, medium-sized pizzas, will lead to an increase in demand leading to a shift in
the demand curve. A reduction in the cost of inputs such as wheat, meat, and spices will translate
to an increase in the supply of pizzas, and this is demonstrated in the below diagrams.
Elasticity
However, it is essential to note that deriving a demand curve is not as simple as it
appears, particularly when price elasticity is incorporated in such a model. Since price is not the
only element that affects demand, other variables for instance tastes and preferences also affect
the market, hence, it is hard to model fluctuations in demand in response to price fluctuations.
While necessities account for demand-inelastic commodities, elasticity case studies are
relevant to the pizza sector. For instance, a client who prefers pizza premiums from their
domestic outlet is less probable to visit Domino’s for a low-rate offer or if the café hikes prices.
Thus, for such clients the demand for pizzas can be said to be relatively price-inelastic. Contrary,
customers who want the lowest-priced pizza may place an order from any outlet; hence, thus
such demand is deemed elastic.
Conclusion

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The macro environment holds a significant position in determining the success of an
enterprise. Australia’s demand and supply of pizza provides a good market for venturing
companies. Also, the various pricing systems in pizza industry makes it a lucrative venture for
new enterprises as entry barriers are low. It is crucial to note that Australia’s legislation
regarding businesses are conducive thus providing an enabling business environment.
References
Australian Competition and Consumer Commission, 2019. The Competition and Consumer Act 2010.
[Online]
Available at: https://www.accc.gov.au/about-us/australian-competition-consumer-commission/
legislation
[Accessed 3 April 2020].
Mathe-Soulek, K., Krawczyk, M., Harrington, R. & Ottenbacher, M., 2016. The impact of price-based and
new product promotions on fast food restaurant sales and stock prices. Journal of Food Products
Marketing, 22(4), pp. 100-117.
NSW Government, 2019. Cafés, restaurants and retail outlets. [Online]
Available at: https://www.foodauthority.nsw.gov.au/retail/cafes-restaurants-and-retail-outlets
[Accessed 3 April 2020].
Victoria Government, 2017. Australia New Zealand Food Standards Code. [Online]
Available at: https://www2.health.vic.gov.au/public-health/food-safety/food-businesses/food-
standards-code
[Accessed 3 April 2020].
Victoria Government, 2017. Food safety laws and regulations. [Online]
Available at: https://www2.health.vic.gov.au/public-health/food-safety/food-safety-laws-local-
government-and-auditors/food-safety-laws-and-regulations
[Accessed 3 April 2020].
Wieseke, J., Kolberg, A. & Schons, L., 2016. Life could be so easy: the convenience effect of round price
endings’. Journal of the Academy of Marketing Science, 44(4), pp. 474-494.

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