Fast Food Industry Analysis 1tj3l

FAST FOOD INDUSTRY ANALYSIS NAICS NUMBER AND DESCRIPTION Its NAICS code is 722211, officially known as “Limited-Service Restaurants.” The SIC code is 5812. This U.S. industry comprises establishments primarily engaged in providing food services where patrons generally order or select items and pay before eating. Food and drink may be consumed on premises, taken out, or delivered to the customer's location. Some establishments in this industry may provide these food services in combination with selling alcoholic beverages. INDUSTRY SIZE OVER TIME Competition between restaurants is intense, since dining options abound. And, while there are certainly dominant players in this industry (especially among fast-food purveyors), no one company has the market cornered. Fast-food industry includes about 200,000 restaurants. The industry has combined annual revenue of about $120 billion. Industry is highly fragmented: the top 50 companies hold 25% of sales. The industry is highly labor-intensive: the average annual revenue per worker is just under $40,000. Most fast-food restaurants specialize in a few main dishes Restaurants include national and regional chains, franchises, and independent operators Most fast-food restaurants use a POS (point of sale) system to take orders from drive-throughs and the

PROFITABILITY

Looking at the most successful fast food chains, we can conclude that expanding in global markets is the best strategy. However, they have to adapt to local cultures and tastes (glocalization) in order to be successful. The increasing presence of McDonald’s restaurants worldwide is an example of globalization, while the restaurant chain's menu changes in an attempt to appeal to local palates (sells beer in , lamb in India, and chili in Mexico) are an example of glocalization (“Glocalization”, 2003). Jack in the Box- sales were 2.54 billion, income was 118.21 million, sales growth was up 1%, and income growth was down 23%. McDonald- sales were 23.52 billion, income was 4.31 billion, sales growth was up 3.2%, and income growth was down 22.6%. Burger King- sales were 2.55 billion, income was 186 million, sales growth was up 9.9%, and income growth was down 10.2%. Sonic- sales were 798.6 million, income was 53.87 million, sales growth was up 4.4%, and income growth was down 47.5%. HOW PROFITS ARE MADE 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

The restaurant industry is highly competitive in of price, service, location, and food quality and is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concerns about the nutritional content of quick service foods (“US Fast Food Franchise Industry Report”, 2010). Fast food industry or Quick Service Restaurant (QSR) is characterized by its fast food cuisine and minimal table service. It offers limited menu, cooked in bulk in advance, kept hot, finished, packaged to order, and available to take-out, drive-thru, and dine-in. It is usually a part of a chain or franchise operation, which provisions standardized ingredients and/or partially prepared foods and supplies to each restaurant through controlled supply channels (“US Fast Food Franchise Industry Report”, 2010).

TARGET MARKET COMPETITOR CONCENTRATION The restaurant industry is highly competitive in of price, service, location, and food quality and is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concerns about the nutritional content of quick service foods (“US Fast Food Franchise Industry Report”, 2010). Fast food industry or Quick Service Restaurant (QSR) is characterized by its fast food cuisine and minimal table service. It offers limited menu, cooked in bulk in advance, kept hot, finished, packaged to order, and available to take-out, drive-thru, and dine-in. It is usually a part of a chain or franchise operation, which provisions standardized ingredients and/or partially prepared foods and supplies to each restaurant through controlled supply channels (“US Fast Food Franchise Industry Report”, 2010).

Top-line growth is typically generated in two ways, opening locations and boosting same-store sales. Opening new doors is a straightforward strategy, and usually the main driver of revenue when a company is in its early stages. As a chain grows in size, however, it becomes increasingly difficult to capture benefits. The best, most profitable locations are established first, and then managers must be careful not to place restaurants too close together, lest they cannibalize each other's sales. Comparable-store sales, or "comps", is a valuable metric to examine when analyzing restaurants. Comps are particularly important once a company reaches maturity, since they become the primary driver of growth. Product innovations and menu-price increases are two of the most common ways to increase same-store sales. Remodeling existing locations is another way to boost guest traffic. Furthermore, promotions and limited-time offers are widely used to attract diners. Investors should also pay attention to trends in the dollar value of the average guest check, as this can shed additional light on what exactly is driving sales The environment in which the restaurant operates helps to determine its success or failure. Some attributes of the competitive environment that can influence a restaurant’s failure are the business’s physical location, its speed of growth, and how it differentiates itself from other restaurants in the market. In addition to the problem of having less cash to handle ANALYSIS The restaurant industry employs an estimated 13.1 million people, making it the nation’s second largest employer outside of government. This is very important for the American people since

jobs are now on the decline. Eating-and-drinking places are extremely labor-intensive. Sales per full-time-equivalent employee were $61,344 in 2006, notably lower than other industries. The restaurant industry provides work for more than 9 percent of those employed in the United States. The restaurant industry is expected to add 2 million jobs over the next decade, for total employment of 15.1 million in 2018. $1.5 billion — Restaurant-industry sales on a typical day in 2008. 83 Percent of adults who said there are more healthy options available at quickservice restaurants than there were two years ago. 70 Percent of adults who said their favorite restaurant foods provide flavor and taste sensations which cannot be easily duplicated in their home kitchens. 64 Percent of adults who said there are more restaurants they enjoy going to now than there were two years ago. 62 Percent of adults who said they are likely to make a restaurant choice based on how environmentally friendly a restaurant is. Since late 2006, the fast food industry's growth has been slowed by soaring food and energy prices. The high prices of commodities, combined with the housing slump and a weakening job market are taking a toll on restaurant spending in the U.S. (the world's largest fast food market, by far). The same food and energy inflation that is corroding consumer spending is also taking a bite out of company margins. REFERENCES Adamy, J. (2009). McDonald's seeks way to keep sizzling. The Wall Street Journal. Retrieved April 26, 2011, from http://online.wsj.com/article/SB123664077802177333.html Burger King Holdings, Inc. (2010). 2010 10-K SEC Filing. Retrieved April 8, 2011, from http://services.corporate-ir.net/SEC.Enhanced/SecCapsule.aspx?c=87140&fid=7105569

Clark, A. (2010). Burger King sales fall again. Retrieved April 8, 2011, from http://www.guardian.co.uk/business/2010/feb/04/burger-king-sales-fall Did You Know - McDonald’s and Burger King? (2007). Retrieved April 23, 2011, from http://chucks-fun.blogspot.com/2007/04/did-you-know-McDonald’s-and-burger-king.html Fast food restaurant. (n.d.) In Wikipedia Online. Retrieved April 21, 2011, from http://en.wikipedia.org/wiki/Fast_food_restaurant Mifflin, H. (2000). The New York Times: Books. Retrieved April 8, 2011, from http://www.nytimes.com/books/first/s/schlosser-fast.html Monopolistic competition. (n.d.). AmosWEB Encyclonomic. Retrieved April 7, 2011, from http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic%20competition US fast food franchise industry report. (2010). Retrieved April 7, 2011, from http://www.franchisedirect.com/foodfranchises/fastfoodfranchiseindustrystudy/14/262