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Anna Sterling Johnnie Davis Zane Barnes Kimberly Smith Nolan Bosworth Shaina Weaver Clay Jones
History of Industry Competitors
First store opened in 1940 by the McDonald brothers Headquarters- Oak Brook, IL Sonic First store opened in 1945 Headquarters- Oklahoma City Jack-In-The-Box Founded in 1951 Headquarters in San Diego, CA Burger King
Founded in 1954 Headquarters in Miami, Florida
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
000 Most fast-food restaurants specialize in a few main dishes Restaurants include national and regional chains. and independent operators Most fast-food restaurants use a POS (point of sale) system to take orders from drive-thrus and the register .Industry Details The industry is highly labor-intensive: the average annual revenue per worker is just under $40. franchises.
and Social Features • Full-service • Limited-service (NAICS 722211) . Political. The Fast Food Industry‟s Dominant Economic. Industry break down Restaurant Industry • • • • • • Burger Segment Sandwiches Pizza/pasta Chicken Mexican Etc.
0 $7.781.975.0 $3.S. & Canada) 4 Wendy’s1 10 Sonic Drive-In 13 Jack in the Box1 $28.608.phtml) Rank QSR 50 Chain Sales ($Mil) 1 2 3 4 5 1 McDonald’s 2 Burger King (U.2008 Burger segment Annual Sales (http://www.666 $8.956.com/reports/qsr50/2008/burgers.qsrmagazine.8 $2.0 .
when disposable personal income is tight. The best recession survival plan is having a well advertized $Dollar menu and tight cost controls in place .Economic Factors How does a Recession affect the limitedservice restaurant industry? As a general rule. fast food restaurants fare better than their casual and high end cousins because people will shift their purchases downward. .
Old depreciation schedule was 39 ½ years. Restaurants must acquire loans form banks to make much need expansions or updates.Political Factors Economic Stabilization Act of 2008 gives restaurants two helpful benefits during recession.000 project it would save $7. Accelerated 15 year depreciation schedule for new construction on restaurants saves money. Banks have an injection of capital and are being urged by the government to make loans. Ex: on a $700.000 a year versus the 39 ½ year schedule. .
Social Factors The fast food industry pays close attention to what the American society wants and needs. . 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. Must add value by being affordable and of consistent quality.
com). This is a significant barrier to entry. national competitors. The saturation of the industry is also a huge limiter of how much an advantage can be attained by economies of scale. favorable sites. but is not a significant barrier to private startups. advantages in the form of government subsidies. The extreme saturation and similarity in product offering make convenient locations essential for quick service restaurants large and small. Product Differentiation: While differentiation is a large and necessary expense for the large fast food chains in the industry. Cost Disadvantages: These disadvantages stem form the fact that “established companies already have product technology. but these advantages are undermined by the ease of creating a quick service restaurant. access to raw materials. it is not difficult for private startups to overcome and thus not a significant barrier to market entry. and experience” (referenceforbusiness.The Five Forces Model Threat of New Entrants Economies of Scale: The firms in the limited-service restaurant class do see some advantages to economies of scale. . Capital Requirements: Capital requirements will quell the formation of new.
they are not necessarily difficult for new comers to attain. we feel the threat of new entrants is high. Distribution Channels: Speedy and reliable channels are essential among all firms in the industry. Also the economies of scale enjoyed by large firms are not so great as to shut out smaller competitors. Smaller establishments are subject to the standard array of government regulations including: zoning. Threat of New Entrants Cont. Conclusion: Due to the lack of any of the barriers to entry being so significant as to thwart the majority of private startups. These are standard for almost any new business and thus do not pose large threat to new comers.The Five Forces Model Cont. however. sanitation. Government Regulation: Government regulation is more intense for the larger firms which have to deal with franchising regulations. safety. and building. health. .
Bargaining Power of Customers Even though customer switching costs are nearly zero. They can switch suppliers easily and tend to make up a large portion of the supplier‟s revenue. the fast food industry does not worry about loyalty because “On average. one-fifth of the population of the USA eats in a fast-food restaurant each day” (Oxford University Press).The Five Forces Model Cont. Bargaining Power of Suppliers Large fast food chains thousands of suppliers to choose from and select theirs through a competitive bid process. . This severely limits the bargaining power of suppliers. It is this volume that keeps customer bargaining power low by diluting the effect of a few picky customers.
The Five Forces Model Cont. and healthier options. the threat of substitutes is very high. low switching costs. Firms compete for market share in a saturated market. similar products. Threat of Substitutes With so many firms in the quick service/burger industry. Conclusion Threat of New Entrants Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes Rivalry Among Firms High Low Low High High Rivalry Among Existing Firms The limited-service industry defines a red ocean industry. is very slow so the customer base is not growing as fast as the industry. . This leads to high rivalry among firms. particularly in hamburger chains. Growth.
Price Performance .
Price Performance .
Companies Answers New Competition .Changes in Social Norms Changing American attitudes toward food.
Industry Risks Factors Events Reported by Media Competition of Industry Changes in Economic and Market Conditions .
Industry Risks Factors Earnings Dependant on Franchise Litigation Affects all Members of Chain .
McDonalds.The first mover.American values. .Competing with McDonalds. Burger King.Universally accepted name.Positions Within the Industry Jack in the Box. Sonic.
” • McDonalds. • Burger King.“Have it your way.“We don‟t make it „till you order it.Global.“America‟s Drive-In” and “Your ultimate drink stop!” .Strategies • Jack in the Box.” • Sonic.
McDonald.sales were 23. sales growth was up 9.Financial Performance: Last 12 Months Jack in the Box.6 million.sales were 2.4%. and income growth was down 47. sales growth was up 4. and income growth was down 22. income was 186 million. sales growth was up 3.55 billion. sales growth was up 1%. Burger King.87 million.9%. income was 53. income was 118.5%.2%. income was 4.54 billion.sales were 798.2%. and income growth was down 23%.21 million. .sales were 2. and income growth was down 10. Sonic.52 billion.31 billion.6%.
Stock Price History .
Key Success Factors What are key success factors? -Things that a company must do to be successful in an industry .
which are sets of skills or systems that create a uniquely high value for customers .Misconception Key success factors are often looked at as core-competencies.
Key Success Factors Differentiation -The fast-food burger industry is difficult to differentiate on a single product. such as the burger -Differentiation in this industry can be focused more towards your atmosphere and unique menu items -Brand and product advertisement can also be major players in becoming a household name and bringing customers in to your industry .
Key Success Factors Answer Agree Neither Agree/Disagree Disagree Strongly Agree Strongly Disagree Total Percentage 41% 29% 18% 10% 3% .
Key Success Factors Competing on Low Cost -In a synonymous industry. consumers can find a good burger at a comparable price from just about any of the competitors -It is important to cut down on overhead cost of your firm in order to make the most off of your sales .
Quick-Service Restaurant Segment (QSR) In the United States QSR is the largest segment of the restaurant industry Growth in sales include… -Rising population -increases in real disposable income -busier lifestyles Fast food chains provide consumers with food at reasonable prices which offers an alternative to cooking at home .
service. demographics. and food quality and is often affected by changes in consumer trends.Industry Attractiveness The restaurant industry is highly competitive in terms of price. and concerns about the nutritional content of quick-service foods. . economic conditions. traffic patterns. location.
Factors that could affect the quickservice restaurant industry Changing dietary preferences among consumers in favor of alternative foods Changes in economic conditions. changes in customer visits. consumer tastes and preferences. and the type and location of competing restaurants Sales promotions by competitors. and changes in things such as energy costs .
8 billion in 2009. Quickservice restaurants are projected to post sales of $163. is forecast to grow at an annual compounded rate of 4.3% between 2007 and 2012. . which includes fast food restaurants. the output of US food and drinking places.Growth According to Dun and Bradstreet subsidiary First Research.
the NPD Group. . the restaurant industry remained stable for most of 2008. although traffic dipped in the fourth quarter. leading to the industry‟s 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.Growth According to a leading marketing research company.
although the economy may adversely impact QSR chains. The following information in the graph is done by First Research and forecasts the estimated growth of the food industry in relation to the economy… .Prospects for long-term profitability The QSR segment is generally less vulnerable to economic downturns and increases in energy prices than the casual dining segment is.
take-out and delivery places makes it easier for families with children to manage their day-to-day lives. “Nearly 7 in 10 adults agreed in a recent National Restaurant Association survey that purchasing meals from restaurants.” . and nearly eight in ten agreed that it is a better way for them to make use of their leisure time rather than cooking at home.National Restaurant Association According to QSR Magazine.
the QSR industry will remain a cornerstone of the economy. Future growth in the fast-food restaurant industry depends on how well retailers are able to innovate.S.S. . and keep up and surpass competitors. representing 4% of the U.Conclusion Despite the downturn in the economy. workforce. gross domestic product and employing 9% of the U. provide value for money.
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 .
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