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The Fast Food Industry
Jason Gross, Firatcan Kutuk, Sohail Paracha, Amanda Reiner,
Michael Taglienti, Charles Warkenthien
Agenda
● Background
● Segments
● SWOT
● 5 forces
● Individual Positioning
● Maturity
● Trends
● Financials
Background
● Fast food industry began after WW2 when a group of men introduced
increased mechanization which allowed them to hire low wage unskilled labor
● There are over 300,000 restaurant locations with revenue climbing to $160
billion in 2014, an 8.6% annualized rate since the 1970 mark of $6 billion
● Forecasted to be at $210 billion is 2018
● Of all restaurants visited in the US, fast food outlets account for 78% of that
total
● Highly Fragmented Industry
● In the US, the top 50 companies account for about 25% of the industry
revenue
Segments
● Burger, Sandwich, Snack, Mexican, Pizza/Pasta, Chicken, Asian & Seafood
○ McDonald’s, Burger King, Wendy’s, Five Guys
● Sandwich
○ Subway, Quiznos, Jimmy John’s
● Snack
○ Starbucks, Dunkin’ Donuts, Cold Stone Creamery
● Mexican
○ Taco Bell, Qdoba
● Pizza/Pasta
○ Pizza Hut, Domino’s Pizza, Sbarro
● Chicken
○ KFC, Chick-fil-A, Popeyes
● Asian & Seafood
○ Panda Express, Long John Silver’s
● Fast and Casual
○ Panera Bread, Chipotle
SWOT
Strengths
● Attractive to all social classes
● Convenient and offers on-demand service through their drive throughs
● Diversification of products offered
● International presence include both global and multidomestic strategies
● Open 24/7 in many locations
Weaknesses
● High-calorie food with inadequate amount of nutrition
● Consumer’s negative perceptions of the quality of the food
● The “mystery meat” phenomena
● Undertone perception of the unsanitary ways of production
● The “obesity” factor which has a negative connotation with food being served
SWOT
Opportunities
● Adding learning centers within their playhouse so that kids can learn while having a fun time
● Differentiate the atmosphere and offer unique menu items
● Brand and product advertisements
● Cut overhead costs to make the most of your sales
● Mass customization
● Boutique locations
● Inter/intra group mergers
Threats
● Fierce competition from similar businesses worldwide
● Laws and regulations within the industry which allow malpractice
● Change in economic conditions
● Change in dietary preferences due to concerns in nutritional facts
● Type and location of competing restaurants
● Promotions by competitors
● Customer loyalty/brand awareness
● Trademarks
● Economies of scale
● Distribution channels
● High overhead costs
○ Rent and labor
● State and federal regulations
Threat of New Entrants
Low
● Customer switching costs are nearly zero
● Customers supply opinions that influence others
● Large amount of customers
○ Dilutes the effect of a few picky customers
Bargaining Power of Buyers
Moderate
● Thousands of suppliers to choose from
● Fast food industry makes up a large portion of a supplier’s revenue
● Supplier relations are very important
Bargaining Power of Suppliers
Moderate
● Many substitutes available
○ Casual restaurants
○ Grocery stores (pre-made sandwich)
○ Cooking at home
● Low switching costs
*These take away from fast food companies’ revenues
Threat of Substitute Products
High
● Red Ocean industry
○ High competition
○ Saturated market
● Customer base is not growing as fast as the industry
Intensity of Rivalry within the
Industry
High
6th Force: Complementors
● Packing industry
○ Paper boxes, plastic wrappers, utensils and paper goods
● Beverage companies
○ Coca cola, Pepsi, Nestle
● Condiments companies
○ Heinz, French’s, Kraft
● Toy/game company
○ Hasbro
High
Individual Firm Positioning
How Mature?
● Fast food industry is in the maturity phase of the retail life cycle
● The rlc theory states that all retail institutions pass through 4 life stages:
introduction, growth, maturity, and decline
● During the maturity phase there is intense competition as many of the fast food
chains are trying to increase their market share
● BK returned to a more functional organization which let to increased central
control and decreased overhead
● BK is more attentive to customer service and costs and less attentive to new
products
Trends
-
● Shift towards having more healthier food options
● Diversifying their product line
● Listing the nutritional facts and caloric intake
● Being locally responsive to international consumer tastes
● Offering wi-fi in select locations
● Having express locations in fast-paced environments
Profitability/Financials
There are 320,099 fast food establishments in 2015, which is a 2.2% increase
from 2014.
(Totals in Millions of $)
You can see a steady growth with increases ranging from ~4-5% from the prev
year
Top Burger Restaurants 2009-2011 by Percentage of Market
Major Players
2009 2010 2011
% % %
McDonald’s 48.2 48.8 49.6
Wendy’s 13 12.6 12.3
Burger King 13.9 13.1 12.2
Sonic 5.9 5.5 5.3
Jack in the Box 4.8 4.5 4.4
Other 14.2 15.5 16.2
2013 Top Fast Food companies (Billions of $) 2012 Top Fast Food companies (Billions of $)
McDonalds 35.86 McDonalds 35.6
Subway 12.74 Subway 12.1
Starbucks 11.72 Starbucks 10.6
Wendy’s 8.79 Wendy’s 8.6
Burger King 8.5 Burger King 8.59
Taco Bell 7.8 Taco Bell 7.48
Dunkin Donuts 6.74 Dunkin Donuts 6.26
Pizza Hut 5.7 Pizza Hut 5.67
Chick-Fil-A 5.05 Chick-Fil-A 4.62
KFC 4.2 KFC 4.46
Panera Bread 4.11 Panera Bread 3.86
Despite continued growth, there are no tangible trends within companies in the fast
_____food industry
Major Players
QUESTIONS

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Fast Food Industry

  • 1. The Fast Food Industry Jason Gross, Firatcan Kutuk, Sohail Paracha, Amanda Reiner, Michael Taglienti, Charles Warkenthien
  • 2. Agenda ● Background ● Segments ● SWOT ● 5 forces ● Individual Positioning ● Maturity ● Trends ● Financials
  • 3. Background ● Fast food industry began after WW2 when a group of men introduced increased mechanization which allowed them to hire low wage unskilled labor ● There are over 300,000 restaurant locations with revenue climbing to $160 billion in 2014, an 8.6% annualized rate since the 1970 mark of $6 billion ● Forecasted to be at $210 billion is 2018 ● Of all restaurants visited in the US, fast food outlets account for 78% of that total ● Highly Fragmented Industry ● In the US, the top 50 companies account for about 25% of the industry revenue
  • 4. Segments ● Burger, Sandwich, Snack, Mexican, Pizza/Pasta, Chicken, Asian & Seafood ○ McDonald’s, Burger King, Wendy’s, Five Guys ● Sandwich ○ Subway, Quiznos, Jimmy John’s ● Snack ○ Starbucks, Dunkin’ Donuts, Cold Stone Creamery ● Mexican ○ Taco Bell, Qdoba ● Pizza/Pasta ○ Pizza Hut, Domino’s Pizza, Sbarro ● Chicken ○ KFC, Chick-fil-A, Popeyes ● Asian & Seafood ○ Panda Express, Long John Silver’s ● Fast and Casual ○ Panera Bread, Chipotle
  • 5. SWOT Strengths ● Attractive to all social classes ● Convenient and offers on-demand service through their drive throughs ● Diversification of products offered ● International presence include both global and multidomestic strategies ● Open 24/7 in many locations Weaknesses ● High-calorie food with inadequate amount of nutrition ● Consumer’s negative perceptions of the quality of the food ● The “mystery meat” phenomena ● Undertone perception of the unsanitary ways of production ● The “obesity” factor which has a negative connotation with food being served
  • 6. SWOT Opportunities ● Adding learning centers within their playhouse so that kids can learn while having a fun time ● Differentiate the atmosphere and offer unique menu items ● Brand and product advertisements ● Cut overhead costs to make the most of your sales ● Mass customization ● Boutique locations ● Inter/intra group mergers Threats ● Fierce competition from similar businesses worldwide ● Laws and regulations within the industry which allow malpractice ● Change in economic conditions ● Change in dietary preferences due to concerns in nutritional facts ● Type and location of competing restaurants ● Promotions by competitors
  • 7. ● Customer loyalty/brand awareness ● Trademarks ● Economies of scale ● Distribution channels ● High overhead costs ○ Rent and labor ● State and federal regulations Threat of New Entrants Low
  • 8. ● Customer switching costs are nearly zero ● Customers supply opinions that influence others ● Large amount of customers ○ Dilutes the effect of a few picky customers Bargaining Power of Buyers Moderate
  • 9. ● Thousands of suppliers to choose from ● Fast food industry makes up a large portion of a supplier’s revenue ● Supplier relations are very important Bargaining Power of Suppliers Moderate
  • 10. ● Many substitutes available ○ Casual restaurants ○ Grocery stores (pre-made sandwich) ○ Cooking at home ● Low switching costs *These take away from fast food companies’ revenues Threat of Substitute Products High
  • 11. ● Red Ocean industry ○ High competition ○ Saturated market ● Customer base is not growing as fast as the industry Intensity of Rivalry within the Industry High
  • 12. 6th Force: Complementors ● Packing industry ○ Paper boxes, plastic wrappers, utensils and paper goods ● Beverage companies ○ Coca cola, Pepsi, Nestle ● Condiments companies ○ Heinz, French’s, Kraft ● Toy/game company ○ Hasbro High
  • 14. How Mature? ● Fast food industry is in the maturity phase of the retail life cycle ● The rlc theory states that all retail institutions pass through 4 life stages: introduction, growth, maturity, and decline ● During the maturity phase there is intense competition as many of the fast food chains are trying to increase their market share ● BK returned to a more functional organization which let to increased central control and decreased overhead ● BK is more attentive to customer service and costs and less attentive to new products
  • 15. Trends - ● Shift towards having more healthier food options ● Diversifying their product line ● Listing the nutritional facts and caloric intake ● Being locally responsive to international consumer tastes ● Offering wi-fi in select locations ● Having express locations in fast-paced environments
  • 16. Profitability/Financials There are 320,099 fast food establishments in 2015, which is a 2.2% increase from 2014. (Totals in Millions of $) You can see a steady growth with increases ranging from ~4-5% from the prev year
  • 17. Top Burger Restaurants 2009-2011 by Percentage of Market Major Players 2009 2010 2011 % % % McDonald’s 48.2 48.8 49.6 Wendy’s 13 12.6 12.3 Burger King 13.9 13.1 12.2 Sonic 5.9 5.5 5.3 Jack in the Box 4.8 4.5 4.4 Other 14.2 15.5 16.2
  • 18. 2013 Top Fast Food companies (Billions of $) 2012 Top Fast Food companies (Billions of $) McDonalds 35.86 McDonalds 35.6 Subway 12.74 Subway 12.1 Starbucks 11.72 Starbucks 10.6 Wendy’s 8.79 Wendy’s 8.6 Burger King 8.5 Burger King 8.59 Taco Bell 7.8 Taco Bell 7.48 Dunkin Donuts 6.74 Dunkin Donuts 6.26 Pizza Hut 5.7 Pizza Hut 5.67 Chick-Fil-A 5.05 Chick-Fil-A 4.62 KFC 4.2 KFC 4.46 Panera Bread 4.11 Panera Bread 3.86 Despite continued growth, there are no tangible trends within companies in the fast _____food industry Major Players