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Industry Analysis PP
Industry Analysis PP
Industry Overview
Fast-food industry includes about 200,000
restaurants
Combined annual revenue of about $120
billion
Industry is highly fragmented: the top 50
companies hold 25% of sales
Industry Details
The industry is highly labor-intensive: the average
annual revenue per worker is just under $40,000
Most fast-food restaurants specialize in a few main
dishes
Restaurants include national and regional chains,
franchises, and independent operators
Most fast-food restaurants use a POS (point of sale)
system to take orders from drive-thrus and the
register
Restaurant Industry
Full-service
Limited-service (NAICS 722211)
Burger Segment
Sandwiches
Pizza/pasta
Chicken
Mexican
Etc.
Sales ($Mil)
1 McDonalds
$28,666
$8,781.0
4 Wendys1
$7,956.0
Sonic Drive-In
10
$3,608.8
$2,975.0
Economic Factors
How does a Recession affect the limitedservice restaurant industry?
Political Factors
Economic Stabilization Act of 2008 gives
restaurants two helpful benefits during
recession.
Banks have an injection of capital and are being
urged by the government to make loans.
Restaurants must acquire loans form banks to make much
need expansions or updates.
Social Factors
The fast food industry pays close attention to
what the American society wants and needs.
Must add value by being affordable and of
consistent quality.
Menus with a vast variety of products
Healthier options and brand Image needs to be
provided
Must be convenient and fast to accommodate
the fast pace of American lifestyles.
Product Differentiation:
While differentiation is a large and necessary expense for the large fast food chains in
the industry, it is not difficult for private startups to overcome and thus not a significant
barrier to market entry.
Capital Requirements:
Capital requirements will quell the formation of new, national competitors, but is not a
significant barrier to private startups.
Cost Disadvantages:
These disadvantages stem form the fact that established companies already have
product technology, access to raw materials, favorable sites, advantages in the form of
government subsidies, and experience (referenceforbusiness.com). The extreme
saturation and similarity in product offering make convenient locations essential for
quick service restaurants large and small. This is a significant barrier to entry.
Government Regulation:
Government regulation is more intense for the larger firms which have to deal with
franchising regulations. Smaller establishments are subject to the standard array of
government regulations including: zoning, health, safety, sanitation, and building.
These are standard for almost any new business and thus do not pose large threat to
new comers.
Conclusion:
Due to the lack of any of the barriers to entry being so significant as to thwart the
majority of private startups, we feel the threat of new entrants is high.
Conclusion
Threat of New
Entrants
High
Bargaining Power of
Customers
Low
Bargaining Power of
Suppliers
Low
Threat of Substitutes
High
High
Price Performance
Price Performance
Strategies
Jack in the Box- We dont make it till you order it.
McDonalds- Global.
Misconception
Key success factors are often looked at as
core-competencies, which are sets of
skills or systems that create a uniquely
high value for customers
Total
Percentage
41%
29%
18%
10%
3%
Industry Attractiveness
The restaurant industry is highly competitive in terms 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.
Growth
According to Dun and Bradstreet
subsidiary First Research, the output of
US food and drinking places, which
includes fast food restaurants, is forecast
to grow at an annual compounded rate of
4.3% between 2007 and 2012. Quickservice restaurants are projected to post
sales of $163.8 billion in 2009.
Growth
According to a leading marketing research company, the NPD
Group, the restaurant industry remained stable for most of 2008,
although traffic dipped in the fourth quarter, leading to the industrys
slowest traffic and dollar growth since the recession of 2002-2003
The graph shows the total restaurant industry traffic from November
2003 up until November 2008.
Conclusion
Despite the downturn in the economy, the QSR industry
will remain a cornerstone of the economy, representing
4% of the U.S. gross domestic product and employing
9% of the U.S. workforce.
Conclusion
The fast-food industry is becoming more
global and it seems that will continue
Fast-food restaurants mostly compete on
price, location, and food quality
The growth of the fast-food industry is
expected to generally stay the same over
the next few years