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February 2016

IBISWorld Industry Risk Rating Report

Fast Food Restaurants in the
US

Fast Food Restaurants in the US

February 2016

Risk Overview ............................................................................................................................... 2
Industry Definition & Activities ................................................................................................................... 2
Industry Risk Score.................................................................................................................................... 2
Risk Rating Analysis .................................................................................................................................. 2

Structural Risk .............................................................................................................................. 5
Barriers to Entry ......................................................................................................................................... 5
Basis of Competition .................................................................................................................................. 6
Domestic and International Markets .......................................................................................................... 6
Industry Assistance.................................................................................................................................... 7
Life Cycle ................................................................................................................................................... 7
Industry Volatility........................................................................................................................................ 8

Growth Risk ................................................................................................................................... 9
Growth Analysis ......................................................................................................................................... 9

Sensitivity Risk ........................................................................................................................... 10
Consumer spending................................................................................................................................. 10
Healthy eating index ................................................................................................................................ 12
Consumer Confidence Index ................................................................................................................... 15
Agricultural price index ............................................................................................................................ 17

IBISWorld Industry Risk Scoring Methodology ........................................................................ 21
What is Industry Risk ............................................................................................................................... 21
Methodology ............................................................................................................................................ 21
Risk Levels .............................................................................................................................................. 21

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Fast Food Restaurants in the US

February 2016

Risk Overview
Industry Definition & Activities
This industry comprises restaurants where patrons pay for quick-service food products before eating.
Purchases may be consumed on-site, taken out or delivered. Gross revenue is derived from both franchised
and company-owned stores. Franchise fees (up-front costs associated with opening a franchise) are
accounted for in industry revenue. This industry excludes coffee and snack shops. Most industry
establishments also sell beverages, such as water, juice and sodas, but usually not alcohol.
The primary activities of this industry are:
 Operating drive-thru and take-out facilities
 Operating fast food services
 Operating quick-service restaurants

Industry Risk Score
Forecast Period: December 31, 2016
To calculate the overall risk score, IBISWorld assesses the risks pertaining to industry structure (structural
risk), expected future performance (growth risk) and economic forces (sensitivity risk). Risk scores are
based on a scale of 1 to 9, where 1 represents the lowest risk and 9 the highest. The three types of risk are
scored separately, then weighted and combined to derive the overall risk score.
Risk component

Structural risk
Growth risk
Sensitivity risk
Overall risk

Weight

Score

25%
25%
50%

5.16
4.97
5.05
5.05

Risk Rating Analysis
Risk Score Trend Analysis
Overall risk in the Fast Food Restaurants industry is forecast to be MEDIUM over 2016. The primary
negative factor affecting this industry is high competition, while the primary positive factor is low revenue
volatility. Overall risk will be slightly higher than the previous year, a result of an unfavorable movement in
healthy eating index. However, its impact will be partially offset by a projected fall in growth risk.
Risk Score Context
In 2016, the average risk score for all US industries is expected to be in the MEDIUM-LOW band.
Furthermore, the risk score for the Accommodation and Food Services sector, which includes this industry,
is also at a MEDIUM-LOW level. Therefore, the level of risk in the Fast Food Restaurants industry will be
higher than that of the US economy and the Accommodation and Food Services sector.
Structural Risk Analysis

2

including fast food. which protect against higher competition in the long run by reducing the ability of new players to enter the marketplace. whereas a rise in healthy eating index will cause industry risk to increase. when personal consumption expenditure is high. In comparison. Consumer spending: Industry growth is sensitive to changes in consumer spending. fatty-food intake and food safety issues. The result is a greater likelihood of declining revenue and lower profits. This factor's contribution to risk is expected to decrease in the coming year. When the price of meal ingredients increases. The biggest source of difficulty within the industry is the high level of competition. Healthy eating index: The healthy eating index is expected to increase slowly in 2015. as consumers become increasingly aware of issues related to weight and obesity. during the recession.7% to $229. When customers are optimistic about the economy. Consumer sentiment is expected to increase in 2015. they spend more on these items. existing firms will benefit from increasing barriers to entry. This factor's contribution to risk is expected to increase in the coming year. revenue expanded 2. easing the burden of cash flow management even during broader economic downturns. consumers are more likely to spend money on eating out at industry restaurants.2% per year between 2013 and 2015. Another positive for operators is the low revenue volatility. The two factors with the most significant impacts on the industry are consumer spending and healthy eating index. This factor's contribution to risk is expected to decrease in the coming year. keep prices low to entice demand or both. However. Businesses competing fiercely for market share are forced to incur expenses to differentiate their offerings. However. When there is a rise in consumer spending. Consumer Confidence Index: Changes in consumer sentiment have a significant effect on household expenditure on discretionary items. For example.IBISWORLD. This suggests steady demand. the spike in unemployment led to declines in consumption levels. including the consumption of fast food. 3 . This factor's contribution to risk is expected to remain the same in the coming year.0 billion. IBISWorld forecasts that annual industry revenue will grow 1. up from LOW in 2015. This factor particularly affects the often meaty and greasy fast food industry. Sensitivity Risk Analysis Sensitivity risk is forecast to be MEDIUM over the outlook period. Agricultural price index: The agricultural price index represents nominal prices received by farmers for all US agricultural products (both livestock and crops) and is also a strong indicator of the prices fast food restaurants can expect to pay for the ingredients that go into preparing meals.WWW. Growth Risk Analysis Growth risk is expected to be MEDIUM over the outlook period. it typically results in lower profit margins because operators generally cannot pass on the entire cost to consumers.COM Fast Food Restaurants in the US February 2016 Structural risk will be MEDIUM over the outlook period. risk will fall. The agricultural price index is expected to decline during 2015.

IBISWORLD.COM Fast Food Restaurants in the US 4 February 2016 72221a .WWW.Fast Food Restaurants in the US 9 8 7 Risk Rating 6 5 4 3 2 1 2007 Industry Risk 2008 2009 2010 2011 2012 Division Risk: Accommodation and Food Services in the US 2013 2014 2015 2016 Economy Risk: Entire US Economy .

with no individual major player being dominant. Structure component Barriers to Entry Competition Exports Imports Assistance Life Cycle Stage Revenue Volatility Structural Risk Level Trend Weight Score Low High Low Low None Mature Low Increasing 13% 20% 7% 7% 13% 20% 20% 8. and some financial and accounting functions for a proportional share of revenue from their franchisees. Still.00 9. which cuts down the initial capital costs.00 7. furniture and fittings from the franchisor. the barriers are typically low. from health and food service regulations to licensing for liquor sales and general occupational health and safety issues (particularly in relation to safety in kitchen operations). individual franchisees carry much of the day-to-day operational and management risks associated with their own business. given that an operator can lease premises. these issues do not create any insurmountable barriers to either entering or operating in this industry.COM Fast Food Restaurants in the US February 2016 Structural Risk An industry's structural score measures the impact of the fundamental characteristics common to all industries. 5 . These seven components are scored separately.00 1.WWW. These provisions lower operational costs and can also minimize some risks.00 1. with the top four players expected to garner about 36. then weighted and combined to derive the structural risk score.IBISWORLD. Also. Regardless. franchisors provide training. food and beverages.2% of the available market share in 2015.00 2. Industry concentration is low to moderate.16 Steady Steady Steady Barriers to Entry Barriers to entry in this industry are low Barriers to entry in this industry are increasing Given the franchise component of the Fast Food Restaurants industry.00 5. Industry regulation and licensing are significant. it is not extremely difficult for an operator to enter the industry with a new or existing food concept.00 5. This low concentration is an indication of the array of food concepts and styles available in this industry. especially for inexperienced hospitality industry persons entering the industry. Therefore. equipment.

ambience. External competition External competition arises from the broader food service sector. it is important that the operator understands the positioning of the restaurant in the marketplace and the clientele they are attracting or wanting to attract. such as convenience stores and supermarkets. As a result of the high level of competition within the industry. As a result. consumers are more likely to trade-down to cheaper food options. the restaurant must consistently deliver on customers' product expectations. Significantly. putting pressure on fast food restaurants to lower prices. bars and hotels. However. In recent years. When economic conditions are gloomy. Many large operators have established franchised operations internationally.IBISWORLD. as well as other retailers that serve food. Domestic and International Markets Exports Exports in this industry are low Exports in this industry are steady Imports Imports in this industry are low Imports in this industry are steady As a retail industry. Given the mature stage of this industry's life cycle in the domestic market. necessitating stringent cost and quality controls to maintain efficiency and minimize wastage. the large fast food chains. restaurants are selling and marketing a meal experience to potential customers. Operators also face strong competition based on quality. Premium ingredients and well-presented meals are highly regarded and can make the difference to consumers. so international trade is not relevant to the industry. a number of industry players have overseas operations and earn a significant portion of their revenue overseas. Restaurateurs are required to compete against each other and against other industries in the broader food service sector such as full service restaurants (encompassing casual dining and fine dining).WWW. coffee shops. Internal competition Fast food restaurants compete with each other on the basis of price and quality. profit margins are low for most industry operators. many major operators are seeking to increase their growth in revenue and earnings through further global expansion. the Fast Food Restaurants industry is not technically engaged in importing or exporting products. who often judge a fast food restaurant by how it compares with others. including Yum! Brands and McDonald's have earned an increasing amount of their revenue outside of the United States. This includes fast-food restaurants and independent restaurants that offer dining and take-out services. hospitality and service. More than ever. 6 . Restaurants also compete on the basis of location. with changes in customer profiles and tastes.COM Fast Food Restaurants in the US February 2016 Basis of Competition Competition in this industry is high Competition in this industry is increasing The Fast Food Restaurants industry exhibits a high level of competition. style.

technology is also being used to boost profit margins.2% over the same period. Thus. but the rapid increase in internet penetration and smartphone usage over the past five years has presented fast food restaurant operators with the opportunity to engage with customers on a number of new levels. for example. which measures an industry's contribution to US GDP. this comes at a cost in the form of an annual royalty and/or marketing fee. Many small fast food operators have utilized online advertising. 7 . supply-chain management and purchasing.WWW. However.9% per year. For example. is forecast to grow at an average rate of 1. has increased because consumers have become more health conscious in recent years. industry value added. and representation. networking opportunities. For this reason. improve service levels and to help minimize labor costs. Relatively new players like Chipotle and Five Guys that offer customizable. Demand for healthy foods.COM Fast Food Restaurants in the US February 2016 Industry Assistance There is no assistance available for this industry There are no specific tariffs for this industry Although the Fast Food Restaurants industry receives no formal assistance in the form of government aid or monetary compensation. new systems and technology are designed to ensure quality service and reduce customer waiting time such as electronic ordering systems linking the front counter with the kitchen as orders are taken. improving business processes and improving meal experiences. Furthermore. There are also organizations that provide the same services on a more local level. there are industry associations that help the industry as a whole. among other things. Life Cycle The life cycle stage is mature Life Cycle Reasons  The rate of new store openings has slowed  Operators are concentrating on international openings  There is heavy price-based competition The Fast Food Restaurants industry is firmly entrenched in the mature stage of its life cycle. operators like McDonald's have introduced a range of healthy option to their menus. The number of establishments is expected to grow at a nominal average rate of 1. reducing food waste. many chain operators are seeking higher growth in overseas markets. the National Restaurant Association provides industry news. informative and interactive company websites and social media such as Twitter and Facebook to increase their brand recognition and revenue. Furthermore. but provide a higher quality of food and ambiance compared with traditional fast food restaurants. Franchisees receive assistance from the franchise owner in the form of marketing. the industry has exhibited slow and steady long-term growth. have been experiencing particularly strong growth over the past five years. Over the 10 years to 2020. sponsoring events. research. The rate of technological change within the industry is moderate. In an attempt to maintain consumer interest in the fast-food market. compared with estimated annualized GDP growth of 2. at a slightly slower pace than the economy as a whole. Significant shifts in consumer preferences have also had an impact on the industry over the past five years. fast casual restaurants that do not offer table service.IBISWORLD. gourmet meals have stolen market share away from traditional fast food operators such as McDonald's and Burger King.7% per year over the ten years to 2020. For example.

there are a growing number of convenient. 8 . Industry revenue volatility is anticipated to level out over the next five years as the industry continues along a long-term low growth trajectory. Furthermore. there is a very high household penetration rate for quick-service meals as Americans spend a large percentage of their total food budget on restaurant meals. changes in factors affecting incomes. to traditional American restaurants and other ethnic cuisines.IBISWORLD.WWW. from Asian restaurants. The diversity of foods served by the industry helps keep any volatility under control. Over the five-year period. Restaurant spending is highly discretionary and easily substituted for lower cost options such as home cooked meals. The industry depends on consumer tastes and preferences. As a result. as well as levels of disposable income and consumer confidence.COM Fast Food Restaurants in the US February 2016 Industry Volatility The level of volatility is low The Fast Food Restaurants industry has a low-to-moderate level of revenue volatility. meaning that if tastes defer from one type of food towards another. While demand for traditional fast food options high in fat. The industry consists of a range of food products. However. the industry has grown slowly. An expected improvement in the domestic economy will lead to healthy consumer spending. which helps to mitigate any dramatic decline in revenue for the Fast Food industry. such as taxes and unemployment levels. some consumers will downgrade from full-service restaurants to lower-cost fast food during times of economic austerity. much like the broader economy. can directly affect industry revenue. but consistently. benefiting fast food operators. lowering the industry's volatility. the industry still captures the revenue. salt and calories is falling. affordable and healthy fast food options available to consumers.

heavy competition from other segments in the food-services sector has forced fast food operators to emphasize low prices in a continuing battle to attract consumers. the Fast Food Restaurants industry has struggled with consumer preferences moving away from unhealthy foods and a saturated food-service landscape that has kept prices low. consumer-eating habits have changed as people have become increasingly health conscious and have demanded alternatives to traditional greasy fast food options. industry revenue is expected to grow at an annualized rate of 2.5% to $225. fruit and smoothies. As plenty of opportunities remain for new fast food concepts and products.COM Fast Food Restaurants in the US February 2016 Growth Risk The growth risk score evaluates forecasted industry revenue growth against past performance as well as expected growth for all other industries. In response.7 billion. Fast food restaurants view China in particular as a market that has strong potential for growth and long-term profitability.97 Growth Analysis Over the past five years.1%.1 billion over the five years to 2015. industry revenue is expected to grow at an average annual rate of 2. 9 .0% over the five years to 2020 to $248.99 4. As a result of these trends. However. The industry is expected to be marginally better off over the next five years as the domestic economy improves and consumers continue to seek convenient meal options. fast-food restaurants performed relatively well over the early half of the last five-year period due to their low price points and the extra convenience they offer. due to slow domestic growth. As a result. major chains like McDonald's have expanded their menus to include healthier options such as salads. Over the past five years.2% 1. In comparison with other operators in the hospitality sector. While major fast food retailers have responded by expanding the number of healthy menu items. with an estimated increase of just 2.90 4.IBISWORLD.7% 25% 75% 4. many major chains have invested in their international operations as part of a long-term strategy to focus on emerging economies. Successful operators will need to adapt to changing consumer preferences as the traditional concept of fast food evolves to include a wider variety of options. Furthermore. the general trend toward health awareness has decreased demand for traditional fast food restaurants. While no severe revenue declines are expected. In 2015. as the broader economy continues to work toward a full recovery. growth is expected to be modest.WWW. Growth component 2013-2015 Annualized growth 2015-2016 Forecast Growth Growth risk Revenue Weight Score 2. the industry's long era of growth is far from over. fast food restaurants will continue to operate in a slow-growth environment as many segments of the industry have reached a saturation point. A high industry growth rate is associated with lower risk for operators in that industry.

particularly durable ones. both domestically and abroad.05 Consumer spending Estimated Value in 2015: $11. Sensitivity component Consumer spending Healthy eating index Consumer Confidence Index Agricultural price index Sensitivity risk Weight Score 35% 25% 20% 20% 2. Additionally.6% to $9.09 2.27% Forecasted Value for 2020: $13. since 1980.65 7. then weighted and combined to derive the sensitivity risk score.06% Consumer spending (more formally aggregate consumption) measures the total amount spent by Americans on services and new goods and net purchases of used goods. the hardest hit categories were motor vehicles and parts. However.96 8.29 5. However. Current Performance The financial meltdown and subsequent recession caused a nearly 30-year streak of consecutive growth in aggregate consumption to break. The data for this report is sourced from the Bureau of Economic Analysis and presented in chained 2009 dollars. Meanwhile. even during times of economic hardship such as the bursting of the dot com bubble. These factors are scored separately. there were declines even among service providers. Not all spending categories were impacted in the same way amidst the contraction. durable goods are usable over longer periods of time. the combination of job growth. and thus upgrading or replacing older products such as furniture can be put on hold during times of economic hardship. by 1.23 trillion 2010-2015 Compound Growth: 2. Expenditures on goods.3% in 2008 and fell further in 2009. lower savings and easier access to credit allowed American consumers to spend a greater amount than they had the previous year.IBISWORLD. crippling incomes and preventing consumers from maintaining their spending habits.COM Fast Food Restaurants in the US February 2016 10 Sensitivity Risk IBISWorld has identified and weighted the most significant external factors affecting industry performance.85 trillion. declined more rapidly than spending on services or nondurable goods. expenditures on services generally held their ground or recorded meek growth. with food and accommodation categories slipping in both 2008 and 2009.WWW. This is not surprising given that a significant portion of travel is to or from work. . aggregate consumption slid by 0. As employment fell. gasoline and transportation services.05 trillion 2015-2020 Compound Growth: 3. As a result. the rapid deterioration of housing and financial markets led to a simultaneous tightening of credit and soaring unemployment.

and a sharp decline in gasoline prices. particularly for those who rejoin the work force. Data Volatility According to IBISWorld calculations. which were scaled back during the downturn. IBISWorld expects that the long term historical growth rate will reassert itself.IBISWORLD. With wage growth anticipated to pick up alongside recent employment gains. More specifically. Consumer spending 6 % Change 4 2 0 -2 1981 1986 1991 1996 2001 2006 2011 2016 2021 . aggregate consumption displays a low level of volatility. being unleashed. leading to particularly robust growth within this category. though lending standards will remain tighter than their prerecession levels. displaying slow and steady growth over the last two decades. Continued growth in 2015 (estimated at 3. aggregate consumption growth has fluctuated within a narrow band. The growth was partially driven by pent up demand for durables. The ability to spend is expected to be further strengthened by easier access to credit.COM Fast Food Restaurants in the US 11 February 2016 Consumer spending grew in 2010 and 2011. which will improve per capita disposable income. particularly cutbacks. unemployment and lending activities play an important role in influencing the direction of aggregate consumption. higher employment and improved consumer confidence are expected to boost consumer spending power. Finally. are marginal rather than drastic. This is largely because spending habits are deeply ingrained and fluctuations. the creation of additional jobs will translate into a greater number of dollars in consumer wallets. enabling them to ramp up purchases. Changes in aggregate consumption typically reflect changes in income or access to credit. regaining the ground it lost during 2008 and 2009.2%) has been aided by the falling unemployment rate. Outlook Barring the recent recession. rather than actual changes in underlying habits.WWW. Consequently.

811.672.432.6000 2.170.7000 2.847.13 4.2000 1. The percentage represents the degree that the average American adheres to the consumption guidelines set out by the US Department of Agriculture that are regularly updated every five years.4449 2.263.3836 2.6000 5.4000 3.007.896.9000 5.2 2007 10.88 2015 11.7 1993 6.036.58 1.6000 2.590.101.8000 3.729.6000 0.6000 3.8000 2.2432 2. Current Performance The healthiness of Americans’ diets has increased slowly but steadily since the 1980s.92 1990 5.051.6000 2.183.42 2003 8.26 2006 9.WWW.04 1986 5.041.5% 2015-2020 Growth: 0.35 2019 12. most prominently toward the early 2000s.7000 5.225.108. The last recommended diet was released in 2010.10 percentage points Estimated value in 2020: 69.413.382.3775 4.COM Fast Food Restaurants in the US Year $ billion 1981 4.5222 2.7000 3.867.531.2000 3.400.5000 2.69 1994 6.5000 4.9000 5.6 percentage points IBISWorld calculates a healthy eating index as the percentage of a recommended diet that an average American consumes.65 2001 8.9000 3.53 2000 8.99 2016 11.875.49 2017 12.208. Nevertheless.342.562.0000 -1.755.26 1991 5.3000 1. This decline was a result of dramatic increases in dairy and fat consumption compared with fruit and vegetable 12 .775.598.7 2004 9.59 Healthy eating index Estimated value in 2015: 68.0000 3.34 1988 5.75 1998 7.8975 3.08 2021 13.685.06 2011 10.6745 3 1996 6.84 1984 4.571.47 2014 10.24 1987 5.92 2010 10.8000 1982 4.4000 1983 % Change February 2016 Year $ billion % Change 2002 8.9% 2010-2015 Growth: -.527.6 1989 5.23 2012 10.6000 3.099.71 2013 10.3 2020 13.009.4000 1.2000 -0.384.39 1999 7.7000 5.76 2018 12.5000 3.64 1997 7.IBISWORLD.014. the healthy eating index has experienced its share of declines.338.050.6000 3.0000 4.6000 2.22 1995 6.558.27 2005 9.38 2008 10.46 1992 5.397.821.51 1985 4.6000 5.18 2009 9.1000 2.

However. volatility in the price of red meat encouraged many consumers to trade back down to processed meats over the period. however. As a result. the price drops will decrease the prices of meat products downstream at grocery stores. a changing landscape in which consumers demand healthier products will continue to encourage major food producers and the larger foodservice sector to eliminate artificial sweeteners and other unhealthy ingredients from their product lines. is expected to push up red meat consumption slightly in the next five years. Furthermore. further contributing to unhealthy diet practices. A larger decrease in the consumption of fruits and vegetables over the five years to 2015 has contributed to a slight decline in the healthy eating index. However. While consumers’ disposable incomes have increased over the five-year period. which had a net effect on the healthiness of diets. which is high in saturated fats. low-carb. These crops are largely used as feed for livestock and poultry. as a result. is expected to persist over the next five years. because Americans overconsume all food products except fruits and vegetables. which has helped Americans choose healthier diets. Americans have reduced red meat consumption. the added demand drove up most vegetable prices. and increasing income will push more consumers to eat healthier foods that may come with a higher price tag. a major component of total sugar and sweetener consumption.WWW. increasing consumption of white meats. with the consumption patterns of all measured food categories expected to improve. causing a mixed effect on the overall healthiness of the diet.COM Fast Food Restaurants in the US February 2016 13 consumption. pulling up prices of other foods with them. as red meat consumption experiences relatively flat growth. tempering growth in the healthy eating index overall. Higher yields resulting from record harvests and genetically modified crops will continue to push down prices for these crops. . the healthy eating index is expected to increase over the five years to 2020. At the time. As the economy began recovering in 2010. Both food categories were overconsumed previously. has led diets to improve overall. adverse weather conditions resulted in price volatility for many vegetables and fruits produced in Florida and across the Midwest. Increasing disposable income. high-protein diets became increasingly popular. However. Consequently.IBISWORLD. particularly corn. partially prompted by public efforts. Furthermore. causing consumers to decrease their already-low consumption of fruits and vegetables. decreasing grain consumption and increasing meat consumption. For example. the boom in grain and oilseed crop prices in the past five years is expected to come to an end. and increased consumption of foods with beneficial fatty acids like Omega-3 and Omega-6. including Michelle Obama’s Let’s Move campaign. Outlook In the coming years. fruit and vegetable consumption fell steadily due to rising prices. A growing trend toward plant-based biofuels as high crude oil prices prevailed in the United States boosted food prices over the past five years as grain prices shot up dramatically. coupled with lower meat prices. this overall reduction lowered the total average calories consumed by the average American. increasing health awareness. contributing to healthier diets overall. mitigating these declines somewhat. helped drive down corn syrup consumption. however. adverse conditions leading to price volatility across many food segments caused a drop in overall consumption of measured food products. such as poultry and turkey. Health food stores have become more popular than ever in recent years. The same price increases. In addition. namely elevated rates of obesity and diabetes. the healthiness of Americans’ diets will continue to increase. The decrease in corn syrup consumption has been aided somewhat by the increasing exposure of its negative effects.

IBISWORLD.COM Fast Food Restaurants in the US 14 February 2016 Healthy eating index 80 % 60 40 20 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 .WWW.

2 0.7 0.04 1989 66. Bear Stearns and Lehman Brothers. which .15 1988 66.5 0 2010 69.15 1984 64.3 -1.74 2014 68.IBISWORLD.45 66.0 1. The sharp drop was triggered by the collapse of two stalwarts of the financial sector.4 Index value 2015-2020 Compound Growth: 2.5 0 15 Consumer Confidence Index Estimated Value in 2015: 97.97 2004 67.15 1992 67.7 -1.2 -0.04 2016 69.4 0. Current Performance The Consumer Confidence Index (CCI) was in the doldrums ever since the dot com bubble burst.5 1981 63.0 -0.4 -0.6 2017 69.4 0.7% The Consumer Confidence Index is calculated by The Conference Board using a monthly survey.92 1990 66. derived from equally weighted monthly averages.5 1982 % Change February 2016 Year % % Change 2001 66.1 0. The values presented in this report are annual figures.89 1987 65.1 -0.COM Fast Food Restaurants in the US Year % 1980 63.6 2.18 2006 67.09 2003 67.75 2015 68.1 4.8 -0.6 Index value 2010-2015 Compound Growth: 12.5 -0.29 1995 66.4% Forecast Value for 2020: 111.65 1986 65.8 -1.68 2009 67.75 2012 68.62 1985 65.87 1991 66.3 2011 68.7 1.65 1983 64.0 1.5 0.15 1994 67.6 0. the CCI fell further starting in late 2007 before plunging precipitously in 2008.6 -1.14 1998 67.34 2018 69.5 1.15 1993 66. business conditions.4 0.WWW. The survey includes questions related to household finances.93 2005 66.6 0.29 1997 68.6 1.9 -0.45 2020 69.03 2019 69. employment.15 1996 67.3 -0. however.3 0. income and economic outlook.14 1999 67.14 2000 67.7 0.3 2007 67.5 0.0 0.7 1.89 2021 69.0 -0.9 2013 68.4 0 2008 67.3 0 2002 66.8 0.4 -0.9 0.

the high level of volatility inherent in this index makes it likely that individual months and years will vary substantially from projections. with soaring unemployment dampening optimism across the nation. Consumer Confidence Index 60 40 % Change 20 0 -20 -40 -60 1981 1986 1991 1996 2001 2006 2011 2016 2021 . This trend of improving consumer confidence persisted through 2010 as the economy regained traction and companies reported renewed profitability. This relatively low level is partially due to continued economic turmoil in Europe and downward revisions in growth expectations for China. the strength in consumer confidence in recent years has been encouraging. Moreover. Consumer confidence deteriorated as Americans had their retirement accounts and savings crushed by plunging asset values. However.WWW. resulting in a 20. But in the second half of 2009.COM Fast Food Restaurants in the US 16 February 2016 revealed an unexpected weakness in the US economy and a bubble in the housing market.0% higher average in the CCI compared with 2009. IBISWorld expects consumer confidence to recover in stride with the economy and employment. the estimated 2015 average remains below precessionary rates and well below confidence levels prior to the dot com bust. Returning to work and regaining a steady income will make individuals considerably more positive about future prospects and. a stabilizing housing market and stock prices regaining some of the ground lost during the collapse led consumer confidence to turn the corner. Outlook Over the five years to 2020. the depth and magnitude of the downturn will mean that this recovery will take place slowly. thus. While IBISWorld expects this to be the general trend over the outlook period. in the larger historical context.IBISWORLD. amiable to large purchases. Unfortunately. Expectations for the future remained bleak through early 2009.

Change February 2016 Year Index Abs.9399 1.4833 9.44 1994 90.4186 2.53 1987 102. wheat and soybeans operate as substitutes on the animal feed market.0500 8.57 2009 45. and any overall .3167 3.97 2001 106.9667 16.37 2007 103.95 -18.28 2011 58.04 1990 91.8000 1.9 Index value 2015-2020 Compound Growth: -2.1833 12.0% The agricultural price index represents nominal prices received by farmers for all US agricultural products (both livestock and crops) with a base year of 2011.0250 -2.59 1993 65.3 2006 105.8500 -45.3833 1982 59.0333 1983 Abs.07 1999 135.6417 6.3931 0.3 1985 100.6667 26.65 2005 100.3 2014 87.41 1984 102.2667 4.6167 -9.6830 -0.WWW.56 2018 108.0333 9.5250 -25.61 1991 68.55 2019 108.5667 24.35 2003 79.COM Fast Food Restaurants in the US Year Index 1981 77.96 1992 61. which is the endpoint for a majority of each crop.94 1997 125.0917 3.8826 5.0833 13.4417 -12.7494 3.64 2021 112. Change 2002 96.63 2020 111. The movement of the price of one product often cancels out any idiosyncratic movement of the price of another product. Data is sourced from the US Department of Agriculture (USDA) and forecasts are based on their figures combined with IBISWorld analysis.5833 4.39 17 Agricultural price index Estimated Value in 2015: 116.46 2016 98. Corn.3167 16.31 1996 104.41 1989 116.6300 10.83 2013 73.87 1998 131.5583 -17.51 1988 115.06 85.9167 4.9583 3.IBISWORLD. Current Performance Since the agricultural price index represents the prices of all agricultural products.96 2008 57.74 2000 138.6917 6.64 2004 95.62 2010 54.55 2017 104.6083 7.07 2012 67.6167 -6.55 1995 100.62 1986 94.3583 -2.3% Forecasted Value for 2020: 104.6500 -5.65 2015 97.8917 5.5667 -32.1417 20.3 Index value 2010-2015 Compound Growth: 6.4500 -23. it closely mirrors the performance of the US economy as a whole.

In 2012.COM Fast Food Restaurants in the US February 2016 18 feed price increase is counteracted in the index by a drop in the meat price as livestock farmers are forced to slaughter unsupportable animals. The supply of meat grew significantly due to accelerated slaughtering rates. agricultural production has normalized as adverse weather conditions subsided. Price volatility could result from fluctuating oil prices. These factors led to an agriculture price dip of 13. according to the USDA. the value of foreign currencies versus the dollar and overall demand to drop significantly. Upward pressure on crop prices driven by booming biofuel production will be relieved as biofuel production is expected to remain flat in the next five years. Furthermore.7%. and foreign demand expands when the dollar is weak versus other currencies. The United States is a major exporter for most agricultural products.9 in the five years to 2020. which increases the price of corn and soybeans. leading to a 16. food. demand for wheat as an animal feed substitute increased.3% to 116. . The inflation of the price of oil from 2006 to 2008 greatly expanded the production of corn-based ethanol and soybean-based biodiesel. supply constraints will ease. Furthermore. Oil prices contribute to the price of agricultural goods because they form a part of transportation costs and biofuels compete with petroleum products as an energy source.8% increase over the year. the prices of agricultural products increase to recoup the higher transportation costs.0% per year on average to 104. As a result. The other key driver of agricultural prices is the strength of the US dollar. when oil prices rise. transportation is a major cost for all agricultural products.WWW. which further ties the price of biofuels and biofuel crops to oil prices. plus adverse weather conditions in farming areas around the world. a large decline in the price of oil and the strengthening US dollar is also expected to drag down the index.8 in 2008. but the resulting price drop for cattle and hogs was tempered by larger transportation costs. significantly drove up the price of all major agricultural products. High oil prices over 2011. breaking the precedent that ethanol and other biofuel production would increase each year. over the five years to 2015. Increasing meat prices in 2014 due to low cattle herd numbers and a drought in the West pushing up vegetable prices led the agricultural production index to rise further in 2014. high oil prices. Both corn and soybeans have progressively been used more in fuel substitutes in the past five years. the Environmental Protection Agency did not set an increased Renewable Fuel Standard for 2014. corn in ethanol and soybeans in biodiesel. Indeed. As demand and prices increased for corn and soybeans. the agricultural price index is expected to increase at an annualized rate of 6. rising consumption of agricultural products and a drought in the Midwest and Plains Regions of the United States caused the agricultural price index to rise 2.3. Additionally. meat prices that have spiked due to low cattle herd numbers will fall as livestock production increases and cattle farmers replenish their herds. As a result. Additionally.1% in 2010 once oil prices and demand recovered. Outlook After the rapid price growth of most agricultural products over the past five years. seed and industrial uses account for one-third of domestic corn use. leading prices to fall over the year. The agricultural price index is forecast to fall 2.6% in 2009. The main outside driver of agricultural prices is the price of oil. High oil prices boost demand for alternative fuel. Nonetheless. This all contributed to the sharp rise in the index from 72.IBISWORLD. raising its price as well.9 in 2006 to 86. the agricultural price index is expected to decline in the next five years. The global financial crisis in 2008 caused oil prices. Since then. before a rebound of 14. The flat demand from biofuel producers has alleviated upward pressure on corn and soybean prices. As production of both crops and livestock products increase in 2015. in late 2013. the index only moves when prices of all goods move due to outside drivers.

65 2004 78.64 1993 65.0659 -1.55 1995 60.8830 -4.8807 -1.75 19 .0915 5.8823 5 2012 102.28 2000 63.69 2017 111.77 1994 62.37 2015 116.0541 -11.73 1997 64.0724 0.94 2010 85.35 2018 109.68 2005 77.03 2001 68.5 1999 62.1970 -1.5248 8.IBISWORLD.39 1996 65.32 -3.37 1998 63.7 2021 104.5014 -1.38 2020 104.11 2019 106.1363 -0.3827 -2.8946 -1.97 2013 108.94 2016 112.COM Fast Food Restaurants in the US February 2016 Agricultural price index 140 120 100 Index 80 60 40 20 0 1990 1992 1994 Year Index 1990 68.6008 10.2761 1991 64.1827 12.8996 11.85 2003 67.5351 1992 1996 1998 2000 Abs.21 2002 59.98 2009 75.7229 2.1321 -1.5 2011 99.2839 -4.3248 1.WWW. Change 2006 72. Change 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Year Index Abs.9071 -0.3105 -9.8190 1.74 2007 85.2170 -1.4126 -9.3431 -1.9923 14.5663 -2.7620 5.3 63.2 2008 86.5945 17.41 2014 125.

COM Fast Food Restaurants in the US February 2016 20 .IBISWORLD.WWW.

then weighted and combined to derive the overall risk score.3 . Industry Risk is assumed to be "the difficulty or otherwise of the operating environment".3 Medium >5.9 Very High Fast Food Restaurants in the US . which would enable a more sophisticated assessment of risk spread and pricing to risk. Examples include input costs.Low >4. The methodology is based on industry classifications and is designed to identify and quantify risks inherent in specific industries both now and into the 12 month forecast.IBISWORLD. Growth Score: The growth risk score evaluates forecasted industry revenue growth against past performance as well as expected growth for all other industries. Sensitivity Score: IBISWorld has identified and weighted the most significant external factors affecting industry performance. These seven components are scored separately.WWW. The Industry Risk score is forward looking. The three types of risk are scored separately.COM Fast Food Restaurants in the US February 2016 21 IBISWorld Industry Risk Scoring Methodology What is Industry Risk IBISWorld Industry Risk evaluates the inherent risks associated with hundreds of different industries in the United States. IBISWorld assesses the risks pertaining to industry structure (structural risk). These factors are scored separately. Methodology To calculate the overall risk score. for example. then weighted and combined to derive the sensitivity risk score.7 Medium .7 High >7 . etc. and the score looks at expected Industry Risk over the next 1218 months.High >5. Risk Levels Risk Score Level of Risk 1-3 Very Low >3 .1 Low >4. Alternatively. This approach is new in that it analyses non-financial information surrounding each industry. where 1 represents the lowest risk and 9 the highest.9 Medium .9 . A high industry growth rate is associated with lower risk for operators in that industry.4.5. number of housing starts.4.1 . Industry-based information would. This component contributes 25% of the overall score. This component contributes 25% of the overall score. then weighted and combined to derive the structural risk score.7 . Risk scores are on a scale of 1 to 9. This component contributes 50% of the overall score. expected performance (growth risk) and economic forces (sensitivity risk).5. individual exposures can be better evaluated using an assessment of structure and key drivers of change in the industry of the exposure. commodity prices. enable the examination of a loan book (portfolio) with regards to risk. Structure Score: An industry's structural score measures the impact of the fundamental characteristics common to all industries.

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