It’s not because of the taste of the hamburgers or its ice cream flavors. Instead, Wendy’s figured out a new way to compete against McDonald’s.

Fast Food Competition

McDonald’s has an ice cream machine problem. According to McBroken’s ice cream equipment data base, especially during the lunch rush, between 11 a.m. and 3 p.m., McDonald’s ice cream machines have been inoperative. For those of us in the U.S., the U.K., or Germany, we just need to look at McBroken.com to see where and when.

It appears that McDonald’s can’t depend on its McFlurry machines. With their exclusive design from an otherwise dependable manufacturer, the machines tend to break during their lengthy self-cleaning process. At allrecipes, they told us that the 4-hour cleaning is scheduled for a nighttime cycle. However, crews, arriving in the morning frequently found an error notice that meant they had to restart the process during business hours. Then further complicating the situation, franchisees discovered a fix that the machines’ manufacturer copied, and it all wound up in court with everyone suing.

At this point, McBroken started letting us know which McDonald’s to avoid if we wanted a dairy treat. They also posted Wendy’s ads suggesting a Frosty. And now, to make the switch even more attractive, Wendy’s has a dollar deal for its Frosty–a chocolate, vanilla, milk shake-like, ice creamy confection.

While McBroken tells us the specific stores, it also conveys the bigger picture:

Our Bottom Line: Monopolistic Competition

With many fast food outlets, Wendy’s and McDonald’s are in a monopolistically competitive market. As “monopolies,” each one has something unique that attracts customers. However, the “competitive’ part of their market’s name refers to the massive numbers of small establishments that have minimal pricing power. In monopolistically competitive markets, firms can enter and exit with relative ease.

Both though want the product differentiation that lets them move to the right on the competitive market structure continuum. Consequently, Wendy’s uses its Frosty and McDonald’s the McFlurry to gain market power:

Moving to the right, firms increase their size and pricing power. Meanwhile market entry and exit become increasingly difficult.

Although last quarter’s revenue at McDonald’s ($6.49B) far exceeded Wendy’s ($570m), the Frosty shows us how big and small firms can have an equal fight through monopolistic competition.

My sources and more: Thanks to my Hustle newsletter for alerting me to McBroken. and a new kind of fast food competition. From there, following the ice cream trail, here and here, I learned more about McFlurries and Frosties.