INDUSTRY REVIEW OCTOBER

2019

FAST FOOD
Syed Humza Imam
 INTRODUCTION
The fast food industry is the 2nd largest in Pakistan and accounts for 27% of its value added production and
16% of the total employment in the manufacturing sector. With an estimated 180 million consumers,
Pakistan holds the world’s eighth largest market when it comes to fast food and food related business. There
are currently more than 1000 large scale food processing enterprises in Pakistan.

Pakistan’s fast food sector is changing significantly with an inclined shift in life styles and traditional eating
habits. According to the survey which was being made on the performance of the fast food business in
Pakistan it was being revealed that an average consumer spends 42% of one’s income on food. Retail sales of
processed foods is expanding by 10% annually. Supermarkets are gaining in popularity as a shopping venue
and now account for about 10% of all retail food sales. In addition, Pakistan now hosts numerous western
style fast food chains reflecting a rising popularity with such eating style.

Pizza Hut was one of the first major brands to come to Pakistan in 1993, followed by KFC in 1997, Subway and
McDonald’s in 1998 and Dunkin’ Donuts in 1999. These brands were the food franchising pioneers in Pakistan
and remain extremely popular. McDonald’s is arguably the most famous, although KFC is the largest in terms
of spread with over 80 restaurants across Pakistan.

Food franchises now range from Domino’s, Nando’s , Burger King , Sarpino’s Pizzeria, Fatburger, Hardee’s,
Johnny Rockets, KFC, McDonald’s, Pizza Hut, Doner Kebab, Sakura, TGI Fridays, Pizza Express, Bombay
Chapati, Subway, Steak Escape, Noodle House etc. In Coffee/Café, Butler’s, Cinnabon, Gloria Jean’s coffees,
Second Cup Coffee, Coffee Planet, Coffee Republic, The bagel Bar coffee House etc are in the run.

The most recent influx of an international food organization in Pakistan was Hardee’s, which had
comparatively a different taste to offer. Against the traditional chicken burgers, which is one of the most
popular fast-food dishes in Pakistan, Hardee’s specializes in a variety of beef burgers.

On an average calculation the fast food business in Pakistan and the trend of eating habits of the locals in the
country is increasing almost 21% annually which means the growth of the fast food business in Pakistan is
more than 20% on annual basis which makes it as one of the fastest growing businesses not only in Pakistan
but even in the entire world as well. Food which is prepared and served within a short span of time is
referred to as Fast Food. The fast food industry in Pakistan is undergoing an escalated boom. Despite fierce
competition, this industry has managed to generate profitability and is well-received by the local masses as
well. probability of exceptional growth in future as well.

Pakistan has the lowest fast food outlet to population ratio among 34 emerging markets with 0.55 outlets for
every 100,000 urban residents. That was the reason, foreign food brands are eager to enter Pakistan because
competition is low, margins are better due to low labor costs, cheap real estate and better profitability. Food
service franchises remain one of the most appealing business concepts for the aspiring entrepreneurs in
Pakistan.

In order to gain useful insight on this industry, a cutting edge technology-oriented market research agency,
named Dynamic Research Consultancy, has recently established the first ever Online Research Panel in
Pakistan, in order to meet the research needs of local and international brands. Recently, in October 2013, it
conducted a survey Survey shows that larger proportion of females is visiting fast food chains than their male
counterparts. The results proved that KFC and Pizza Hut have emerged as the most consumed fast food
chains among both the genders and also, across both the age groups. Another interesting key finding was
that McDonalds was more popular in females than in males. Reportedly, 42% females consume McDonalds as
compare to only 33%of males. Similarly, is the case of Nando’s, 21% of the female respondents agreed to
regularly visit it as compared to 12% male respondents. Chicken Cottage ranks as the least preferred among
both the gender and also across both age groups. In terms of preference of fast food among the two different
age groups, an interesting discovery was unearthed. The survey results demonstrated that the average
frequency of visiting Fast Food chains is almost once per week for both the age groups.

Even though, youngsters are more likely to visit more, still mature adults have demonstrated a higher
proclivity towards fast food consumption. Except Dominos’s and Chicken Cottage, all the other fast food
chains are more popular among the mature division.

Pakistan is a land where various cultures co-exist and this disparity is reflected in the eating habits of the
general population as well. Recently, remarkable transformation has occurred in food consumption of the
Pakistani masses. Fast food consumption has increased radically. This dramatic shift towards fast food
consumption is primarily because people prefer convenience and good taste. Because of the emerging
market trends in this particular industry, the casual taste among the masses is now congregating.

The changing consumer preferences, shifting lifestyles and presence of multinational chains have further
facilitated and triggered fast food consumption in Pakistan. The aforementioned survey results also indicate
the dominance of multinationals, this is because these chains have resorted to market led approaches and
transformed their menus in order to satisfy consumer needs.

Recent statistics also demonstrate that growth in fast food in augmenting 20% annually, which implies that
this is one the fastest growing businesses in Pakistan. Also, this signifies a hefty untapped market which can
be exploited by local as well as international brands.

Although Pakistan is considered to be a dawdler in technology and various other sectors, but one cannot
deny the exceptional growth and the potential that fast food industry inherits in Pakistan. Not only its
development can contribute towards macroeconomic stability but also, latent needs of the consumers can be
met.
 FBL’S EXPOSURE
Amounts in PKR Mn

S# Client ORR FBL’s Exposure

Funded Non-funded Total Limit Total O/S
Limit O/S Limit O/S

Total
SECTOR EXPOSURE ANALYSIS

CORPORATE COMMERCIAL SME & AGRI TOTAL

Number of accounts
Approved Exposure
Total Outstanding
Low Risk Exposure [ORR 1-3]
Medium Risk Exposure [ ORR 4-7]
High Risk Exposures [ORR 8-9]
% of High Risk Exposures
Non Performing Loans [ORR 10-12]
NPL Ratio (as % to approved exposure)
Held Provision
 MAJOR PLAYERS IN THE
INDUSTRY
Fast Food restaurants Fast Food restaurants are becoming increasingly popular in Pakistan, as is the
case worldwide. Convenience of eating on the go, better accessibility and economical prices have contributed
significantly to the growth of fast food restaurants in Pakistan especially restaurants representing the well-
known international chains like McDonalds, KFC, Pizza Hut etc.

Fast Food restaurants normally cater to food like burgers, pizzas, fried chicken, sandwiches, rolls and
nuggets. The best term to describe the menu of these restaurants is ‘Meat-Sweet Diet’ which is mostly not
very healthy but tasty none the less. Some of fast food restaurants in Pakistan only provide take away and
home delivery service.

There are thousands of fast food restaurants currently operational in Pakistan, which are distributed
in all the major cities. The more popular names like McDonalds and KFC have branches in almost all the
bigger cities in Pakistan and their network is expanding each year. There are also some new names (new in
Pakistan) like Hardees, Fat Burger and Burger King which have opened recently. Details of some most popular
fast food restaurants in Pakistan are below:

McDonald’s: McDonald’s is one of most popular fast food restaurants in the country with existence
in almost all the major cities. It is well known for its great taste, excellent quality of service and economical
prices. It is also the biggest fast food chain in the world.

KFC: Among the leading and oldest fast food restaurants in Pakistan, KFC is symbol of quality and
taste. It has country-wide existence and great menu. It is also the second biggest fast food chain in the world.

Pizza Hut: Pizza Hut is the biggest pizza restaurant in Pakistan which is very popular for its great taste
and attractive deals. It offers a great menu with variety of meals and excellent dining areas. It is also one of
the biggest pizza chains in the world. Hardee’s: Hardees are another popular fast food restaurant in Pakistan
with good taste and great menu. It has existence in Karachi, Lahore, Islamabad, Faisalabad and Multan.

Domino’s: Dominos is a leading pizza place in Pakistan with growing popularity. It has existence in
Karachi, Lahore, Islamabad and Rawalpindi.

Burger King: Burger King is one of the leading and most popular fast food restaurants in the world.
But it is relatively new in Pakistan. It has existence in Karachi, Lahore, Islamabad and Multan. Fat Burger is
another popular yet new fast food restaurant in Pakistan. It has existence in Karachi, Lahore and Islamabad.
 4.1 FRI-CHICKS Fri-Chicks are basically a foreign fast food restaurant and it started its services from
Kentish town, London. Now they are working in Lahore from 2003 and they are running their business
through six branches in Lahore in the areas of Iqbal Town, Sabzazar, Faisal Town (Akbar Chowk), Johar Town
(Near G1 Market), Sadar (Cantt) and Fortress Stadium. Fri-chicks are offering take away facility, dine in and
home delivery service. They have several deals with the normal price rate. The current deals which they are
offering are mainly with the price range from Rs 25 to 1195. The names of the Deals are mentioned below in
which sub deals are also available, Mazedar deals, Special deals, Family meal, super family meal, Chicken
nuggets, Burgers, Pizza and chicken finger also known as chicken tenders or chicken strips, this is one of the
most common forms of fried chicken, generally pieces of chicken breast (sometimes with rib meat) cut into
long strips, breaded or battered dipped, and deep fried. Hot chicken - a pan-fried variant of fried chicken
coated with lard and cayenne pepper paste, Popcorn chicken — occasionally known as chicken balls. 4.2 AFC
According to khan in (2007) the time was mid 90's when fast food companies were booming in Pakistan.
Quality fast food in Pakistan was outrageously expensive and on a handful of families could afford to go
there. No middle class family could think of taking their children to such big food chains. This was the time
when AFC (Al-Najam Fried Chicken) opened its first restaurant at Saman Abad, Main Market in Lahore. AFC’s
goal and aim was very simple. To make the quality fast food available to all those people who liked the fast
food but couldn't dare to afford. They did so without compromising the highest standards of food industry.
AFC, not only use the best raw materials available but they also provide the best of food at a very reasonable
and competitive price. All their foods are processed and prepared using of the art machines and equipments.
AFC became the fastest growing fast food chain in Pakistan. At present time, AFC has more than twenty
branches Nationwide including Mall Road, Railway Station, Allama Iqbal Town, Twonship, Mughal Pura,
Defence, Thokar Niaz Baig, G.T Road, Wapda Town. It has also opened in Faisalabad, SGD, Abbotabad,
Karachi, Gujranwala, Rawalpindi, Gujrat whereas Sahiwal Branch is ready to start business. At least three
more branches including Murree and Multan are in the wings. 4.3 KFC (KENTUCKY FRIED CHICKEN) According
to Ayesha ans Munazza in (2012) KFC has come a long way, perfecting its herbs and spices; they opened their
first franchise in Lahore in 1997 in Gulshan-e-Iqbal and wore the market leader’s title in fast food industry.
Delicious food in a relaxing environment had made KFC everyone’s favorite. Presently KFC is branched out in
eighteen major cities of Pakistan (Karachi, Lahore, Gujranwala, Sukkur & Muree) with more than 60 outlets
nation-wide. KFC has also contributed a lot in the economic development of Pakistan as well as providing
entertainment to its customers in a friendly environment. Presently KFC has provided to over 1200 Pakistanis,
which adds up to 6000 individuals directly dependent in KFC Pakistan. The Government of Pakistan receives
over Rs.10 million per month from KFC Pakistan as direct taxes. 95% of all food and packing material used in
KFC Pakistan is procured locally, which sums up to a purchase of over Rs.35 million per month. Each new
outlet developed by KFC Pakistan costs approximately Rs.40 million, which is a huge amount for our
construction industry. 4.4 MC-DONALD’S McDonald's Corporation is the world's largest chain of fast food
restaurants. In 1940, the first McDonald's was built by the McDonald brothers (Dick and Mac). In 1953, it
became the standard for the fast food franchises across the country. Later in 1955, the McDonald's
Corporation was created which is the ninth most valuable brand in the world in USA (Sipahi, 2010). In
Pakistan, McDonald started its business in September 1998 at Lahore. The Lakson Group Companies has
taken over McDonalds Corporation, USA and a local partner making it a 100% owned and operated Pakistani
company. Presently, it is operating in seven major cities with a network of 20 restaurants. The cities in with
McDonald is operating are Lahore, Karachi, Islamabad, Sialkot, Rawalpindi, Hyderabad and Faisalabad. Food
Science and Quality Management www.iiste.org ISSN 2224-6088 (Paper) ISSN 2225-0557 (Online) Vol.43,
2015 39 4.5 PIZZA HUT Pizza hut came into being by two brothers named Frank and Dan Carney who lived in
Wichita, Kansas. They wanted to open a pizza parlor which they started by the name of Pizza Hut in 1959 by
borrowing $600 from their mother initially in Topeka, Kansas. After just 10 years they were catering one
million customers a week in 310 locations and it was put into New York stock exchange in 1970. Over the
years Pizza Hut captured the market worldwide and its sales increased gradually globally. They introduced
Pizza Hut delivery service in 1986. Their market share was 46.6% in 1996, when they launched their campaign
“The Best Pizzas under One Roof” which battered slowly over the years due to tough market competitors
(Ragavan, 2003).
 RECENT INDUSTRY UPDATE

Capacity Utilization

Sales

Outlook

Around 75% of rural based food manufacturers are in the so called ‘informal’ sector, where there is
difficulty in accessing raw material as well as a significant lack of finance, knowledge and management
skills.
CRITICAL SUCCESS FACTORS
 RISKS AND MITIGANTS

Problems Nowadays in the World problems of fast food is widespread all over the world. Fast food
restaurants are situated almost in every country. The most popular of them are McDonald’s, Burger King’s,
KFC restaurants. With the efficient service, low prices, and casual atmosphere, fast food seems like the ideal
"all-American" choice. In fact, over 25% of Americans consume fast food every day. There are many debates
about the pluses and minuses of fast food, but in spite of them, that industry is prospering. Proponents of
fast foods ensure that these foods are safe for human consumption, but critics argue that their effects are
bad for health. So, the most serious drawback of fast food is that it badly effects on health and well-being.
Firstly, fast food contains a lot of calories, which can make you overweight, and this is one the most
important problems in the United States of America, because, as we can see, fast food is mostly popular
there. According to the recent study one out of four Americans eats fast food every day, due to the fast food
culture, about 60% of Americans are overweight. Fast food does not have to be unhealthy, but most of the
time it is; consumers often order foods with more fat, calories, sugar, sodium, and less nutrition and vitamins
than is necessary. Keep reading to find out some more about what makes fast food so common in America
and how to pick healthier options. Americans and other Western countries tend to eat more processed and
fast food than Eastern areas, and scientists have found that when Eastern populations eat fast food in a
similar pattern to the West, heart disease risk increases. According to this Google map, there are close to
50,000 fast food chains across the United States, with McDonalds being the largest restaurant chain. In the
world, there are more than 500,000 fast food places. Kids between the ages of 6 and 14 eat fast food
157,000,000 times every month. 96% of kids in school could recognize an image of Ronald McDonald, the
face of McDonalds. The only recognizable figure that ranked higher was Santa Claus. To top it off, Americans
spend nearly $100 billion on fast food every year. The most common vegetable served at fast food places is
the potato in the form of French fries. There is no problem with eating fast food occasionally, but if you are
eating it more than once a week, consider ordering some healthier options that are more nutritional. This
problem concerns not only USA. Furthermore, overweight, in the most cases, leads to problems such as
diabetes and heart diseases. What is more scary, is that it can also receive sleep apnoea, impotence, high
blood pressure, most types of cancer, headache, gallstones, osteoarthritis, depression, asthma, and lower
back pain. One more disadvantage of fast food, which is not less important than the previous ones, is that it
almost doesn’t contain vitamins, due to these entire disadvantages one should think before choosing fast
food. On the other hand, the greatest advantage of fast food is that it saves time. When a person does not
have enough time for cooking it is very convenient to buy it already made. Moreover, buying fast food is
handier while travelling. It is interesting to note, that most people believe that calories are harmful for our
health, but this is not true, because human organism needs them for metabolism. We can see, that “one
meal at a fast food restaurant contains all the calories you need for an entire day”. So, fast food can be
healthy when you eat it rarely. You can also find dishes in menu those are not so unhealthy. For instance,
there you can always find salads and juices. Besides, fast food restaurants are cheaper than the others and
this is one more reason why people choose them. To sum it up, I am convinced that fast food is more harmful
than healthy, but if we eat it not very often, it will not damage your health
 RECOMMENDATION
Although Pakistan is considered to be a dawdler in technology and various other sectors, but one cannot
deny the exceptional growth and the potential that fast food industry inherits in Pakistan. Not only its
development can contribute towards macroeconomic stability but also, latent needs of the consumers can be
met. It is recommended that for success and rapid growth the Formats of fast food restaurants these days
must consider: • Prime Locations in residential areas • Restaurants which can be maintained with ease •
Separate counters for each kind of Fast food • Not much of waiting time • Home delivery options • Wash
basin and Drinking water facilities • Cash counters which give away coupons to the customers • Quick Service
• Sufficient in quantity Fast food has become a trend among various consumers, but a proportion of them
still do not appreciate it. Health considerations of these abstainers can be handled by adding more healthy
choices in the menu or adding a nutritional touch to the items that are perceived unhealthy. Offering detailed
menu, rather than restricting the offerings to few menu options, might help the QSRs to divert the attention
of the seekers of other formats of restaurants. At the same time, the restaurants need to tackle with the view
that fast food as a fad which would tarnish the public image of its patrons. Taste is a strong force that attracts
the consumers. Concentrating on this aspect would make the new entrants into the business successful, as
the advantage of brand image seems to be a mirage in Pakistan, as per the findings of the present study.
Consumers also go by their favorite dish. So, it is important to collect feedback from the consumers regarding
this, so that the cravings of majority of the consumers are kept satisfied. Change is the factor that the
consumers look forward to, when they visit a fast food restaurant. So, boring them with the same old menu
would be a bad option. The joints should keep their menu novel and dynamic; so that the tastes of
consumers are satisfied mother would be on nutritious options..