Analysis of the Fast Food Industry

By: Maggie Sattler

Industry Definition: Fast Food

Establishments that provide food services quickly and at low cost, often through drive through methods

Force Who / What are Analysis of Threat (Use (+) to indicate Level of
they? adds to the threat, (-) indicates decreases Threat (High /
threat – e.g. high capital requirements Medium /
would be a (–) for potential new entrants) Low)
• Locally owned • Low cost to enter, but difficult to compete
new franchise and be successful against established
• New chicken players (-) Low
Potential Entrants
place, new burger • Economies of scale and scope decrease
place, etc. threat (-)
• High brand recognition (-)
• Fast Casual (ex. • Function of these substitutes is still to
Chipotle) provide food quickly (+)
• Healthier (ex. • High availability and substitutes becoming High
Substitutes
Tropical more common (+)
Smoothie Cafe) • Cost is a low threat due to higher prices (-)

• Food suppliers • Wide variety of suppliers (-)

• Kitchen • Highly concentrated (-)
Bargaining Power of equipment • Lower financial power than incumbents (-) Low
Suppliers manufacturers

• Customers • Reasonable substitutes exist and decisions

are made based on convenience (+)
Bargaining Power of • Vast number of choices eases the switch High
Buyers from one to the other (+)
• High brand recognition and loyalty (+)

• McDonald’s • Lots of big players (+)

• Wendy’s • High concentration (+)
• Burger King High
Internal Rivalry
• Chick Fil A
• Zaxby’s

Overall, profitability of incumbents is high. Due to the large name and brand
Overall Profitability recognition many of them take, the industry is strongly dominated and led by these
of the Incumbents players. Their success in commanding the industry indicated their success and
continued profitability.

Overall Overall, the attractiveness for potential entrants is low. Due to several big players and
Attractiveness to well established incumbents, it would be difficult for a new entrant to compete.
Entrants (Barriers to Additionally, the availability of substitutes adds additional barriers to entry.
Entry)