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Anna Sterling Johnnie Davis Zane Barnes Kimberly Smith Nolan Bosworth Shaina Weaver Clay Jones
Industry Overview
Fast-food industry includes about 200,000
restaurants Combined annual revenue of about $120 billion Industry is highly fragmented: the top 50 companies hold 25% of sales
Industry Details
The industry is highly labor-intensive: the average
annual revenue per worker is just under $40,000 Most fast-food restaurants specialize in a few main dishes Restaurants include national and regional chains, franchises, and independent operators Most fast-food restaurants use a POS (point of sale) system to take orders from drive-thrus and the register
The Fast Food Industrys Dominant Economic, Political, and Social Features
Full-service Limited-service (NAICS 722211)
1 2 3 4 5
1 McDonalds 2 Burger King (U.S. & Canada) 4 Wendys1 10 Sonic Drive-In 13 Jack in the Box1
$3,608.8
$2,975.0
Economic Factors
How does a Recession affect the limitedservice restaurant industry?
As a general rule, when disposable personal income is tight, fast food restaurants fare better than their casual and high end cousins because people will shift their purchases downward. The best recession survival plan is having a well advertized $Dollar menu and tight cost controls in place .
Political Factors
Economic Stabilization Act of 2008 gives restaurants two helpful benefits during recession. Banks have an injection of capital and are being urged by the government to make loans.
Restaurants must acquire loans form banks to make much need expansions or updates.
Social Factors
The fast food industry pays close attention to what the American society wants and needs. Must add value by being affordable and of consistent quality. Menus with a vast variety of products Healthier options and brand Image needs to be provided Must be convenient and fast to accommodate the fast pace of American lifestyles.
Product Differentiation:
While 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 significant barrier to market entry.
Capital Requirements:
Capital requirements will quell the formation of new, national competitors, but is not a
significant barrier to private startups.
Cost Disadvantages:
These disadvantages stem form the fact that established companies already have
product technology, access to raw materials, favorable sites, advantages in the form of government subsidies, and experience (referenceforbusiness.com). The extreme saturation and similarity in product offering make convenient locations essential for quick service restaurants large and small. This is a significant barrier to entry.
Government Regulation:
Government regulation is more intense for the larger firms which have to deal with
franchising regulations. Smaller establishments are subject to the standard array of government regulations including: zoning, health, safety, sanitation, and building. These are standard for almost any new business and thus do not pose large threat to new comers.
Conclusion:
Due 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.
Conclusion
Threat of New Entrants Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes Rivalry Among Firms High Low Low High High
Price Performance
Price Performance
Strategies
Jack in the Box- We dont make it till you order it. McDonalds- Global.
Misconception
Key success factors are often looked at as
core-competencies, which are sets of skills or systems that create a uniquely high value for customers
Industry Attractiveness
The restaurant industry is highly competitive in terms of
price, service, location, and food quality and is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concerns about the nutritional content of quick-service foods.
Growth
According to Dun and Bradstreet
subsidiary First Research, the output of US food and drinking places, which includes fast food restaurants, is forecast to grow at an annual compounded rate of 4.3% between 2007 and 2012. Quickservice restaurants are projected to post sales of $163.8 billion in 2009.
Growth
According to a leading marketing research company, the NPD
Group, the restaurant industry remained stable for most of 2008, although traffic dipped in the fourth quarter, leading to the industrys slowest traffic and dollar growth since the recession of 2002-2003
The graph shows the total restaurant industry traffic from November
2003 up until November 2008.
Conclusion
Despite the downturn in the economy, the QSR industry
will remain a cornerstone of the economy, representing 4% of the U.S. gross domestic product and employing 9% of the U.S. workforce.
Conclusion
The fast-food industry is becoming more
global and it seems that will continue Fast-food restaurants mostly compete on price, location, and food quality The growth of the fast-food industry is expected to generally stay the same over the next few years