Fast Food Industry Analysis
Prepared By Elizabeth Minder Theshin Angulugaha Matthew Miller Andrew Newman
March 7th, 2011
Elasticities & Supply and Demand conditions- Presented by Andrew Newman Porters 5 Forces Analysis Presented by Matthew Miller Market Structure - Presented by Elizabeth Minder Industry Performance, Market forecast and Global Industry Analysis
Presented by Theshin Angulugaha
Caterers and industrial and institutional food service establishments are also included in this business. Racecourses..Introduction
Fast Food industry also known as the QSR (Quick service Industry) comprises establishments primarily engaged in the retail sale of prepared food and drinks for on-premise or immediate consumption.etc)
Quick Service Restaurants Takeaways Mobile & Street Vendors Leisure Locations (Cinemas.
Saturated Market Output increases as price remains steady (Supply curve shift to the right) Franchised Store Give owners the control to run the restaurant best suited to the location
Industry Make Up
Monopolistic Competition to Oligopoly Does McDonalds run the show? Industry Subset Why did the chicken cross the road? To show the cheeseburger who s boss.
simply minimum wage. to a higher percentage of workers than any other industry.5 Million Employees Pays lower wages.Market Conditions
Horizontal Marketing System McDonalds and Walmart Starbucks and Target Hires 3.
. 90% of workers receive no benefits.
Price elasticity is HIGH
High availability of substitutes Consumer tastes & preferences vary one day to next Low proportion of overall budget
Income elasticity is LOW to MODERATE
Latest study showed elasticity as 0.e.386 Overall market is income inelastic and normal goods Premium fast food chains may be more income elastic (i.)
. Five Guys. Chipotle. etc.
health awareness) Negative publicity (i.Supply & Demand Determinants
Advertising and promotion Consumer tastes & preferences (i.) Government regulations (food and labor laws) Supplier relationships Costs & technology
. food scandals) Seasonality Prices of related products
Environmental conditions (weather.e. seasonality. etc.e.
Cost-intensive industry High cost of labor (25-30% costs) Rising commodity and energy prices Lower operating margins Solutions Technology innovation Economies of scale/scope
) Suppliers service many other markets Minimum wage laws and healthcare reform strengthens employees (supplier of labor)
Intensity of Rivalry (HIGH)
Large number of competitors Dominated by Oligopoly of players Key Success Factors include location and cost advantages Advertising budgets. McDonald¶s spent $650.Porters Five Forces
Buyer Power (MODERATE)
Financial crisis strengthens Power No switching costs High price elasticity of demand Consumer tastes can very day to day
Supplier Power (HIGH)
Vital to maintain reliable product Supplier market is consolidated (Sysco and US Food Services. 2009. Inc.8 million Globally
Porters Five Forces
Threat Of Substitutes (MODERATE)
Frozen meals. Healthier options America¶s Health reform bill requires fast food chains to post calorie content on menu Main substitute is home cooking where the only switching cost is the opportunity cost of the time spent in the kitchen Main driver of fast food is convenience
Threat Of New Entrants (HIGH)
Does not require large capital Expansion using Franchise model No switching costs for consumers They do face barriers such as price wars from competitions Optimistic growth rates predicted for the industry Low consumer loyalty
.. etc. home cooking.
in comparison Europe 4.Industry Performance .3
Compound annual growth rate of the Market Value (2005-2009) 3.7 68.1%
Market Value $ 71billion -2009
Year 2005 2006 2007 2008 2009 $ Billion 61.8 64.6 71.4 71. Asia 6.7%.7%.
3 billion transactions in 2009
Year 2005 2006 2007 2008 2009 Billion transactions 36.0 40.United States
Market Volume 40.1 40.Industry Performance .5 39.1 37.8% Industry production -12% of the GDP
Compound annual growth rate of the Market Volume (2005-2009) 2.
Year 2007 2008 2009 2010 2011 Year 2007 2008 2009 2010 2011
Industry Performance .0% % change % change
.4% 2.7% -0.United States
Sales in Millions $ 156694 160909 159415 166238 174611 Sales $ per Employee 32569 32536 32145 32576 33349 -0.3% 5.3% 2.7% -0.9% 4.7% 1.
Fast food in United States
.9 billion increase by 6. Market Volume (# of transactions) is forecasted to be $42.Market Forecast
In 2014.5 billion increase by 8.9% (2009 In 2014. Market Value is forecasted to
Taco Bell) 14.28.Worldwide Fast Food Industry Analysis
States and the Asia Pacific accounts for 70% of the global food market (35% each)
McDonalds. 110 countries
.000 stores outside US in 119 countries. close to 50% of the total revenue from global operations Yum Brands (KFC.000 stores outside US. Pizza Hut.
700e 900 860 800e 455 350e 305 Turnover 5660 Outlets 6400 1880 1. McDonalds major US players McDonalds currently 800 restaurants.800e 900e 400 1368 820 440 743 360 17 12 3 2 16 4 7 4 Countries 40
1. Quick Greggs. and # of restaurants) US companies
TOP Fast Food Chains in Europe Turnover 2007 in million Rank 1 2 Operator McDonald s Yum! Burger King Autogrill Quick Greggs Telepizza Le Duff Starbucks Nordsee Brand Banner McDonald s KFC.5 potential 10. a.000 to 15.Global Markets
United States dominates the global fast food industry
Top ten fast food chains are (sales. BK.000 stores 6 Drive through a brand new concept McDonalds signed a contract with 7 Chinese oil company 8
.o.3 billion population 4 KFC. Pizza Hut Burger King Autogrill. Bakers Oven Telepizza Brioche Doree Starbucks Nordsee 1.
Recession and Fast food industry. Why they have not yet successful in the Chinese market compared to other markets.(MATT) The fast food industry is recession proof.Reflection Analysis
Surprised by how easy it is for new firms to enter the market and how large firms like McDonald s create brand awareness through large marketing campaigns . industry s impact in US economy (GDP)
. There will always be a need for a quick convenient dinner. There may be subsets in both the US and international markets but the cheeseburger will always be king (Elizabeth) Methods and ways in which the different companies differentiate their product vary across the board (Andrew) Surprised by how US companies dominates the global fast food industry. how massive the industry. US impact in other cultures.
2009 Tough Economic Times Demand Tighter Spending. Practical Nutrition. 2. Barnes & Co The Economics of the Fast Food Industry. August 30th. 8.com. Fast food Nation by Eric Schlosser 2001 www. James. Fast Food. Health. and Fitness Trends.com
. Bead.mcdonalds. 3. Mark. Eales. 2010 The Future of Fast Foods. Fast Food in the United States. 6. May 23. September 2010 Worldwide Fastfood Restaurants Industry. 4. © C. Social Alternatives Publications Jekanowski.yum.Sources
1. Binkley. www. 7.com Economist. James. 5. Arizona Times. Healthy Habits. and the Demand for Fast Food. 12. (NAICS 72221) Barnes Report. (2001). 2010. 2010 edition. 10. B. 11. March 19th. 2001. 9. DataMonitor. Convenience. Journal of Agricultural and Resource Economics.com Wikiinvest. Industry Analysis. Assessibility.