Fast Food Industry Trends and Analysis

Over the last 10 years, the fast food industry in the United States has seen significant changes in
consumer preferences and market share between major brands. Key trends include:

- The rise of healthier fast food options. Chains like Subway, Chipotle, and Panera have gained
market share by positioning as fresher and healthier than traditional burger-and-fries fast food.
Their growth has come partly at the expense of brands like McDonald's and Burger King.

- More focus on customization and specialty menu items. Chains are allowing for greater
customization and limited-time offerings to attract customers. Brands like Taco Bell and
Starbucks have seen success with constantly changing menus.

- The growth of convenient off-premise dining. Mobile apps and drive-thrus are increasingly
popular for fast food customers wanting to dine elsewhere. Revenue from drive-thru and
delivery is growing faster than dine-in.

- Continued expansion of non-burger chains. Pizza and chicken chains like Domino's, Pizza Hut,
KFC, and Chick-fil-A continue expanding their footprint and gaining market share from burger
brands.

- Consolidation among top brands. Mergers like Burger King/Tim Hortons have created larger
fast food conglomerates. Independent brands are struggling to compete. The top 5 chains now
make up nearly 50% of the market.

A PESTEL analysis shows key external factors:

- Political: Local nutritional and labeling regulations on fast food.

- Economic: Rising food costs. Lower disposable income during recessions.
- Social: Increased demand for sustainability, natural ingredients, and transparency.
- Technological: Ordering kiosks, mobile apps, and loyalty programs gaining adoption.
- Environmental: Pressure to reduce packaging waste and carbon emissions.
- Legal: Food safety and labor regulations.

Porter's Five Forces reveals high rivalry, the bargaining power of buyers, and threats of new
entrants and substitutes:

- Competition is fierce based on price, convenience, brand loyalty, and product differentiation.
- Consumers have low switching costs and a wide variety of dining options.
- New chains can enter local markets in niche segments like healthier or ethnic foods.
- Fast casual and meal kit delivery eat into fast food market share.
Key Opportunities and Threats

Major opportunities in the fast food sector include:

- Expanding into higher-margin segments like specialty coffee, breakfast, and alternative
proteins to boost revenue.
- Using technology and data analytics to optimize operations and marketing.
- Opening smaller footprint stores in urban areas, colleges, airports, etc.
- Introducing more ethnic menu items to attract changing demographics.
- Partnering with third-party delivery services to boost off-premise sales.

Key threats revolve around changing consumer preferences:

- Health and sustainability concerns leading customers to eat less fast food or choose non-
burger options.
- Labor shortages and cost pressures making it harder to staff and operate stores.
- Delivery apps and meal kits providing more convenience food options.
- Market saturation limiting growth opportunities in developed markets.

Leveraging Resources for Competitive Advantage

New entrants like plant-based burger chains and ghost kitchen delivery brands are using unique
resources to disrupt the sector:

- Innovative product development and food science to create healthy, environmentally

sustainable menu options.
- Agile supply chains and lean operations to control costs.
- Strong branding and marketing focused on quality, transparency, and technology.
- Use of consumer data and digital platforms to optimize customer acquisition and retention.

Legacy brands can leverage their scale, supply chain infrastructure, brand awareness, and
customer loyalty programs to maintain market position. But they need to accelerate their
transition to digital capabilities, new store formats, and modernized menus to keep up with
changing consumer preferences. Those that fail to adapt their resource base risk further losing
share to new competitors.

Technologies and Innovations

Major technological innovations disrupting the fast food industry include:

- Self-order kiosks (e.g. McDonalds) - reduces labor costs, improves order accuracy, and speeds
up service.
- Mobile apps (e.g. Starbucks, Chick-fil-A) - facilitate remote ordering and payment,
personalized offers/rewards, earning customer loyalty.

- Digital menu boards (e.g. Burger King) - allows for dynamic changing of menus and pricing,
guiding customers to higher-margin or up-selling items.

- Voice assistant ordering (e.g. Domino's) - allows ordering through platforms like Alexa or
Google Home for added convenience.

- GPS driver tracking (e.g. Pizza Hut) - provides real-time delivery status to customers and
optimizes driver routing.

- Supply chain analytics (e.g. McDonald's) - leverages data analysis to predict demand patterns
and reduce food waste.

- Automated robotic food prep (e.g. CaliBurger) - robot arms can precisely slice, grill, assemble
burgers to reduce labor and increase volume.

VRIO Analysis

Below is a VRIO framework analysis evaluating competitive resources:

- Brand reputation- Valuable and Rare among customers, but competitors can Imitate with time
and marketing investment. Not a source of Competitive Advantage.

- Drive-through infrastructure- Valuable and Rare due to high fixed costs, but others can
eventually copy. Slight barrier to competition but not lasting Competitive Advantage.

- Supply chain scale- Valuable and Rare due to volume and reach, somewhat difficult to Imitate
due to time and capital required. Can be a source of temporary Competitive Advantage.

- Customer data & analytics- Valuable and Rare, difficult for new entrants to obtain volume of
data needed for insights. Also challenging to Imitate algorithms and modeling expertise. A
source of lasting Competitive Advantage.

- Automation technology - Valuable but not Rare yet, as it diffuses across chains. However,
firms that build proprietary systems can gain Cost Advantage.

- Food science R&D- Valuable and Rare expertise needed to develop alternative proteins and
other menu innovations. Hard for competitors to Imitate. A source of lasting Competitive
Advantage.