Your SlideShare is downloading. ×
Fast food 2
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Fast food 2

1,838
views

Published on

fast food powerpoint

fast food powerpoint


0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,838
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
38
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Industry AnalysisIndustry Analysis Fast Food IndustryFast Food Industry Anna SterlingAnna Sterling Johnnie DavisJohnnie Davis Zane BarnesZane Barnes Kimberly SmithKimberly Smith Nolan BosworthNolan Bosworth Shaina WeaverShaina Weaver Clay JonesClay Jones
  • 2. History of Industry CompetitorsHistory of Industry Competitors  McDonaldsMcDonalds  First store opened in 1940 by the McDonald brothersFirst store opened in 1940 by the McDonald brothers  Headquarters- Oak Brook, ILHeadquarters- Oak Brook, IL  SonicSonic  First store opened in 1945First store opened in 1945  Headquarters- Oklahoma CityHeadquarters- Oklahoma City  Jack-In-The-BoxJack-In-The-Box  Founded in 1951Founded in 1951  Headquarters in San Diego, CAHeadquarters in San Diego, CA  Burger KingBurger King  Founded in 1954Founded in 1954  Headquarters in Miami, FloridaHeadquarters in Miami, Florida
  • 3. Industry OverviewIndustry Overview  Fast-food industry includes about 200,000Fast-food industry includes about 200,000 restaurantsrestaurants  Combined annual revenue of about $120Combined annual revenue of about $120 billionbillion  Industry is highly fragmented: the top 50Industry is highly fragmented: the top 50 companies hold 25% of salescompanies hold 25% of sales
  • 4. Industry DetailsIndustry Details  The industry is highly labor-intensive: the averageThe industry is highly labor-intensive: the average annual revenue per worker is just under $40,000annual revenue per worker is just under $40,000  Most fast-food restaurants specialize in a few mainMost fast-food restaurants specialize in a few main dishesdishes  Restaurants include national and regional chains,Restaurants include national and regional chains, franchises, and independent operatorsfranchises, and independent operators  Most fast-food restaurants use a POS (point of sale)Most fast-food restaurants use a POS (point of sale) system to take orders from drive-thrus and thesystem to take orders from drive-thrus and the registerregister
  • 5. The Fast Food Industry’s Dominant Economic, Political, and Social Features  Industry break downIndustry break down  Restaurant IndustryRestaurant Industry • Full-serviceFull-service • Limited-serviceLimited-service (NAICS 722211)(NAICS 722211) • Burger SegmentBurger Segment • SandwichesSandwiches • Pizza/pastaPizza/pasta • ChickenChicken • MexicanMexican • Etc.Etc.
  • 6. 2008 Burger segment Annual Sales (http://www.qsrmagazine.com/reports/qsr50/2008/burgers.phtml) RankRank QSR 50QSR 50 ChainChain Sales ($MilSales ($Mil)) 11 11 McDonald’sMcDonald’s $28,666$28,666 22 22 Burger King (U.S. & Canada)Burger King (U.S. & Canada) $8,781.0$8,781.0 33 44 Wendy’sWendy’s11 $7,956.0$7,956.0 44 1010 Sonic Drive-InSonic Drive-In $3,608.8$3,608.8 55 1313 Jack in the BoxJack in the Box11 $2,975.0$2,975.0
  • 7. Economic Factors  How does aHow does a RecessionRecession affect the limited-affect the limited- service restaurant industry?service restaurant industry?  As a general rule, when disposable personalAs a general rule, when disposable personal income is tight, fast food restaurants fareincome is tight, fast food restaurants fare better than their casual and high end cousinsbetter than their casual and high end cousins because people will shift their purchasesbecause people will shift their purchases downward.downward.  The best recession survival plan is having aThe best recession survival plan is having a well advertized $Dollar menu and tight costwell advertized $Dollar menu and tight cost controls in place .controls in place .
  • 8. Political Factors EconomicEconomic Stabilization Act of 2008Stabilization Act of 2008 givesgives restaurants two helpful benefits duringrestaurants two helpful benefits during recession.recession.  Banks have an injection of capital and are beingBanks have an injection of capital and are being urged by the government to make loans.urged by the government to make loans.  Restaurants must acquire loans form banks to make muchRestaurants must acquire loans form banks to make much need expansions or updates.need expansions or updates.  Accelerated 15 year depreciation schedule for newAccelerated 15 year depreciation schedule for new construction on restaurants saves money.construction on restaurants saves money.  Old depreciation schedule was 39 ½ years.Old depreciation schedule was 39 ½ years.  Ex: on a $700,000 project it would save $7,000 a yearEx: on a $700,000 project it would save $7,000 a year versus the 39 ½ year schedule.versus the 39 ½ year schedule.
  • 9. Social Factors The fast food industry pays close attention toThe fast food industry pays close attention to what the American society wants and needs.what the American society wants and needs.  Must add value by beingMust add value by being affordableaffordable and ofand of consistent quality.consistent quality.  Menus with a vastMenus with a vast varietyvariety of productsof products  HealthierHealthier options and brand Image needs to beoptions and brand Image needs to be providedprovided  Must beMust be convenientconvenient and fast to accommodateand fast to accommodate the fast pace of American lifestyles.the fast pace of American lifestyles.
  • 10. The Five Forces ModelThe Five Forces Model  Threat of New EntrantsThreat of New Entrants  Economies of Scale:Economies of Scale:  The firms in the limited-service restaurant class do see some advantages to economiesThe firms in the limited-service restaurant class do see some advantages to economies of scale, but these advantages are undermined by the ease of creating a quick serviceof scale, but these advantages are undermined by the ease of creating a quick service restaurant. The saturation of the industry is also a huge limiter of how much anrestaurant. The saturation of the industry is also a huge limiter of how much an advantage can be attained by economies of scale.advantage can be attained by economies of scale.  Product Differentiation:Product Differentiation:  While differentiation is a large and necessary expense for the large fast food chains inWhile differentiation is a large and necessary expense for the large fast food chains in the industry, it is not difficult for private startups to overcome and thus not a significantthe industry, it is not difficult for private startups to overcome and thus not a significant barrier to market entry.barrier to market entry.  Capital Requirements:Capital Requirements:  Capital requirements will quell the formation of new, national competitors, but is not aCapital requirements will quell the formation of new, national competitors, but is not a significant barrier to private startups.significant barrier to private startups.  Cost Disadvantages:Cost Disadvantages:  These disadvantages stem form the fact that “established companies already haveThese disadvantages stem form the fact that “established companies already have product technology, access to raw materials, favorable sites, advantages in the form ofproduct technology, access to raw materials, favorable sites, advantages in the form of government subsidies, and experience” (referenceforbusiness.com). The extremegovernment subsidies, and experience” (referenceforbusiness.com). The extreme saturation and similarity in product offering make convenient locations essential forsaturation and similarity in product offering make convenient locations essential for quick service restaurants large and small. This is a significant barrier to entry.quick service restaurants large and small. This is a significant barrier to entry.
  • 11. The Five Forces Model Cont.The Five Forces Model Cont.  Threat of New Entrants Cont.Threat of New Entrants Cont.  Distribution Channels:Distribution Channels:  Speedy and reliable channels are essential among all firms in the industry, they are notSpeedy and reliable channels are essential among all firms in the industry, they are not necessarily difficult for new comers to attain, however. Also the economies of scalenecessarily difficult for new comers to attain, however. Also the economies of scale enjoyed by large firms are not so great as to shut out smaller competitors.enjoyed by large firms are not so great as to shut out smaller competitors.  Government Regulation:Government Regulation:  Government regulation is more intense for the larger firms which have to deal withGovernment regulation is more intense for the larger firms which have to deal with franchising regulations. Smaller establishments are subject to the standard array offranchising regulations. Smaller establishments are subject to the standard array of government regulations including: zoning, health, safety, sanitation, and building.government regulations including: zoning, health, safety, sanitation, and building. These are standard for almost any new business and thus do not pose large threat toThese are standard for almost any new business and thus do not pose large threat to new comers.new comers.  Conclusion:Conclusion:  Due to the lack of any of the barriers to entry being so significant as to thwart theDue to the lack of any of the barriers to entry being so significant as to thwart the majority of private startups, we feel the threat of new entrants is high.majority of private startups, we feel the threat of new entrants is high.
  • 12. The Five Forces Model Cont.The Five Forces Model Cont.  Bargaining Power of CustomersBargaining Power of Customers  Even though customer switching costs are nearly zero, the fast foodEven though customer switching costs are nearly zero, the fast food industry does not worry about loyalty because “On average, one-fifth ofindustry does not worry about loyalty because “On average, one-fifth of the population of the USA eats in a fast-food restaurant each day”the population of the USA eats in a fast-food restaurant each day” (Oxford University Press). It is this volume that keeps customer(Oxford University Press). It is this volume that keeps customer bargaining power low by diluting the effect of a few picky customers.bargaining power low by diluting the effect of a few picky customers.  Bargaining Power of SuppliersBargaining Power of Suppliers  Large fast food chains thousands of suppliers to choose from and selectLarge fast food chains thousands of suppliers to choose from and select theirs through a competitive bid process. They can switch supplierstheirs through a competitive bid process. They can switch suppliers easily and tend to make up a large portion of the supplier’s revenue.easily and tend to make up a large portion of the supplier’s revenue. This severely limits the bargaining power of suppliers.This severely limits the bargaining power of suppliers.
  • 13. The Five Forces Model Cont.The Five Forces Model Cont.  Threat of SubstitutesThreat of Substitutes  With so many firms in the quickWith so many firms in the quick service/burger industry, lowservice/burger industry, low switching costs, similar products,switching costs, similar products, and healthier options, the threat ofand healthier options, the threat of substitutes is very high.substitutes is very high.  Rivalry Among Existing FirmsRivalry Among Existing Firms  The limited-service industryThe limited-service industry defines a red ocean industry.defines a red ocean industry. Firms compete for market share inFirms compete for market share in a saturated market. Growth,a saturated market. Growth, particularly in hamburger chains,particularly in hamburger chains, is very slow so the customer baseis very slow so the customer base is not growing as fast as theis not growing as fast as the industry. This leads to high rivalryindustry. This leads to high rivalry among firms.among firms. ConclusionConclusion Threat of NewThreat of New EntrantsEntrants HighHigh Bargaining Power ofBargaining Power of CustomersCustomers LowLow Bargaining Power ofBargaining Power of SuppliersSuppliers LowLow Threat of SubstitutesThreat of Substitutes HighHigh Rivalry Among FirmsRivalry Among Firms HighHigh
  • 14. Price PerformancePrice Performance
  • 15. Price PerformancePrice Performance
  • 16. Changes in Social NormsChanges in Social Norms  Changing American attitudes toward food.Changing American attitudes toward food.  Companies AnswersCompanies Answers  New CompetitionNew Competition
  • 17. Industry Risks FactorsIndustry Risks Factors  Events Reported by MediaEvents Reported by Media  Competition of IndustryCompetition of Industry  Changes in Economic and MarketChanges in Economic and Market ConditionsConditions
  • 18. Industry Risks FactorsIndustry Risks Factors  Earnings Dependant on FranchiseEarnings Dependant on Franchise  Litigation Affects all Members of ChainLitigation Affects all Members of Chain
  • 19. Positions Within the IndustryPositions Within the Industry  Jack in the Box-Jack in the Box- The first mover.The first mover.  McDonalds-McDonalds- Universally accepted name.Universally accepted name.  Burger King-Burger King- Competing with McDonalds.Competing with McDonalds.  Sonic-Sonic- American values.American values.
  • 20. StrategiesStrategies • Jack in the Box- “We don’t make it ‘till you order it.”Jack in the Box- “We don’t make it ‘till you order it.” • McDonalds- Global.McDonalds- Global. • Burger King- “Have it your way.”Burger King- “Have it your way.” • Sonic- “America’s Drive-In” and “Your ultimate drinkSonic- “America’s Drive-In” and “Your ultimate drink stop!”stop!”
  • 21. Financial Performance: Last 12Financial Performance: Last 12 MonthsMonths  Jack in the Box- sales were 2.54 billion, incomeJack in the Box- sales were 2.54 billion, income was 118.21 million, sales growth was up 1%, andwas 118.21 million, sales growth was up 1%, and income growth was down 23%.income growth was down 23%.  McDonald- sales were 23.52 billion, income wasMcDonald- sales were 23.52 billion, income was 4.31 billion, sales growth was up 3.2%, and4.31 billion, sales growth was up 3.2%, and income growth was down 22.6%.income growth was down 22.6%.  Burger King- sales were 2.55 billion, income wasBurger King- sales were 2.55 billion, income was 186 million, sales growth was up 9.9%, and186 million, sales growth was up 9.9%, and income growth was down 10.2%.income growth was down 10.2%.  Sonic- sales were 798.6 million, income was 53.87Sonic- sales were 798.6 million, income was 53.87 million, sales growth was up 4.4%, and incomemillion, sales growth was up 4.4%, and income growth was down 47.5%.growth was down 47.5%.
  • 22. Stock Price HistoryStock Price History
  • 23. Key Success FactorsKey Success Factors  What are key success factors?What are key success factors? -Things that a company must do to be-Things that a company must do to be successful in an industrysuccessful in an industry
  • 24. MisconceptionMisconception  Key success factors are often looked at asKey success factors are often looked at as core-competencies, which are sets ofcore-competencies, which are sets of skills or systems that create a uniquelyskills or systems that create a uniquely high value for customershigh value for customers
  • 25. Key Success FactorsKey Success Factors  DifferentiationDifferentiation -The fast-food burger industry is difficult to-The fast-food burger industry is difficult to differentiate on a single product, such as thedifferentiate on a single product, such as the burgerburger -Differentiation in this industry can be focused-Differentiation in this industry can be focused more towards your atmosphere and uniquemore towards your atmosphere and unique menu itemsmenu items -Brand and product advertisement can also be-Brand and product advertisement can also be major players in becoming a household namemajor players in becoming a household name and bringing customers in to your industryand bringing customers in to your industry
  • 26. Key Success FactorsKey Success Factors AnswerAnswer TotalTotal PercentagePercentage AgreeAgree 41%41% NeitherNeither Agree/DisagreeAgree/Disagree 29%29% DisagreeDisagree 18%18% Strongly AgreeStrongly Agree 10%10% StronglyStrongly DisagreeDisagree 3%3%
  • 27. Key Success FactorsKey Success Factors  Competing on Low CostCompeting on Low Cost -In a synonymous industry, consumers-In a synonymous industry, consumers can find a good burger at a comparablecan find a good burger at a comparable price from just about any of theprice from just about any of the competitorscompetitors -It is important to cut down on overhead-It is important to cut down on overhead cost of your firm in order to make the mostcost of your firm in order to make the most off of your salesoff of your sales
  • 28. Quick-Service Restaurant SegmentQuick-Service Restaurant Segment (QSR)(QSR)  In the United States QSR is the largest segmentIn the United States QSR is the largest segment of the restaurant industryof the restaurant industry  Growth in sales include…Growth in sales include… -Rising population-Rising population -increases in real disposable income-increases in real disposable income -busier lifestyles-busier lifestyles  Fast food chains provide consumers with food atFast food chains provide consumers with food at reasonable prices which offers an alternative toreasonable prices which offers an alternative to cooking at homecooking at home
  • 29. Industry AttractivenessIndustry Attractiveness  The restaurant industry is highly competitive in terms ofThe restaurant industry is highly competitive in terms of price, service, location, and food quality and is oftenprice, service, location, and food quality and is often affected by changes in consumer trends, economicaffected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concernsconditions, demographics, traffic patterns, and concerns about the nutritional content of quick-service foods.about the nutritional content of quick-service foods.
  • 30. Factors that could affect the quick-Factors that could affect the quick- service restaurant industryservice restaurant industry  Changing dietary preferences amongChanging dietary preferences among consumers in favor of alternative foodsconsumers in favor of alternative foods  Changes in economic conditions, consumerChanges in economic conditions, consumer tastes and preferences, and the type andtastes and preferences, and the type and location of competing restaurantslocation of competing restaurants  Sales promotions by competitors, changes inSales promotions by competitors, changes in customer visits, and changes in things such ascustomer visits, and changes in things such as energy costsenergy costs
  • 31. GrowthGrowth  According to Dun and BradstreetAccording to Dun and Bradstreet subsidiary First Research, the output ofsubsidiary First Research, the output of US food and drinking places, whichUS food and drinking places, which includes fast food restaurants, is forecastincludes fast food restaurants, is forecast to grow at an annual compounded rate ofto grow at an annual compounded rate of 4.3% between 2007 and 2012. Quick-4.3% between 2007 and 2012. Quick- service restaurants are projected to postservice restaurants are projected to post sales of $163.8 billion in 2009.sales of $163.8 billion in 2009.
  • 32. GrowthGrowth  According to a leading marketing research company, the NPDAccording to a leading marketing research company, the NPD Group, the restaurant industry remained stable for most of 2008,Group, the restaurant industry remained stable for most of 2008, although traffic dipped in the fourth quarter, leading to the industry’salthough traffic dipped in the fourth quarter, leading to the industry’s slowest traffic and dollar growth since the recession of 2002-2003…slowest traffic and dollar growth since the recession of 2002-2003…  The graph shows the total restaurant industry traffic from NovemberThe graph shows the total restaurant industry traffic from November 2003 up until November 2008.2003 up until November 2008.
  • 33. Prospects for long-term profitabilityProspects for long-term profitability  The QSR segment is generally less vulnerable toThe QSR segment is generally less vulnerable to economic downturns and increases in energy prices thaneconomic downturns and increases in energy prices than the casual dining segment is, although the economy maythe casual dining segment is, although the economy may adversely impact QSR chains.adversely impact QSR chains.  The following information in the graph is done by FirstThe following information in the graph is done by First Research and forecasts the estimated growth of the foodResearch and forecasts the estimated growth of the food industry in relation to the economy…industry in relation to the economy…
  • 34. National Restaurant AssociationNational Restaurant Association  According to QSR Magazine, “Nearly 7 in 10According to QSR Magazine, “Nearly 7 in 10 adults agreed in a recent National Restaurantadults agreed in a recent National Restaurant Association survey that purchasing meals fromAssociation survey that purchasing meals from restaurants, take-out and delivery places makesrestaurants, take-out and delivery places makes it easier for families with children to manageit easier for families with children to manage their day-to-day lives, and nearly eight in tentheir day-to-day lives, and nearly eight in ten agreed that it is a better way for them to makeagreed that it is a better way for them to make use of their leisure time rather than cooking atuse of their leisure time rather than cooking at home.”home.”
  • 35. ConclusionConclusion  Despite the downturn in the economy, the QSR industryDespite the downturn in the economy, the QSR industry will remain a cornerstone of the economy, representingwill remain a cornerstone of the economy, representing 4% of the U.S. gross domestic product and employing4% of the U.S. gross domestic product and employing 9% of the U.S. workforce.9% of the U.S. workforce.  Future growth in the fast-food restaurant industryFuture growth in the fast-food restaurant industry depends on how well retailers are able to innovate,depends on how well retailers are able to innovate, provide value for money, and keep up and surpassprovide value for money, and keep up and surpass competitors.competitors.
  • 36. ConclusionConclusion  The fast-food industry is becoming moreThe fast-food industry is becoming more global and it seems that will continueglobal and it seems that will continue  Fast-food restaurants mostly compete onFast-food restaurants mostly compete on price, location, and food qualityprice, location, and food quality  The growth of the fast-food industry isThe growth of the fast-food industry is expected to generally stay the same overexpected to generally stay the same over the next few yearsthe next few years