The state of the economy plays a large role in the success of the fast food industry as seen from the recession of 2009. The United States market of the fast food industry sits at around $190 billion while four of the major players take most of the market share. McDonald’s is the biggest with 18.6% of the market (IBISWorld).
Consumer spending, healthy eating index, and agricultural price index are three of the key drivers that IBISWorld identifies. Consumer spending is obvious due to the fact that the industry is sensitive. Healthy eating index, which IBISWorld identifies as, “…the percentage of a recommended diet that an average American consumes. The percentage represents the degree that the average American adheres to the consumption guidelines set out by the US Department of Agriculture.” Consumers are now more aware of issues with health but the industry has responded to the change in consumer preferences very well. Most restaurants have the calories of the item on their menus’ and offer healthier options such as grilled chicken and salads. Lastly, the agricultural price index, “represents nominal prices received by farmers for all United States agricultural products and is a strong indicator of prices of fast food restaurants can expect to pay for ingredients that go into prepping meals.” (IBISWorld). With these key drivers acknowledged, the industry has responded quickly to any change with consumer demand and we have seen slow, steady growth after the recession. It may not be a lot of growth, but we have seen and will continue to see the industry to respond very well to any changes.
To analyze more of the current state of the industry, I used Porter’s 5 Forces model to help gain a better understanding. Power of Suppl...
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...when they are in prime locations. You can take a great business and place it where no one comes around and it will go bankrupt. Location is a key success factor because fast food chains are of easy access and convenience, usually right off highways for hungry travelers.
Conclusion
With ease of access, new products, and continual growth combined with the continued emergence from an economic recession, there is no arguing the success of the fast food industry. From the key success factors to the breakdown of strengths, weaknesses, opportunities, and threats and Porter’s 5 forces model, I believe the fast food industry is attractive. It is attractive because of the amount of money involved in but the downside is the brand saturation of the market which makes it unattractive. But if the right things are down and you hit a niche within the industry, you are golden.
The fast food restaurant industry, which includes quick-service and fast-casual restaurants, is highly segmented with the top 50 companies accounting for only 25% of the industry’s sales. The $120 billion industry includes over 200,000 restaurants with 50% of those specializing in hamburger entrees. (hoovers.com 2008) The major competitors in the industry include McDonald’s, Burger King, Taco Bell, Subway, and KFC – Chick-fil-A’s major competitor in chicken sales. Chick-fil-A’s unique position in the market, specializing in chicken-based entrées, has lead to a competitive advantage which the company has been able to capitalize on. Recently, many competitors have added chicken entrees in order to compete in the market segment. Through marketing strategies and company initiatives, Chick-fil-A has tried to stay distant from competitors, offering a fresh alternative to the ordinary fast food restaurant.
In today’s world even with the economy suffering and individual income declining, the food industry is still up and running. Chain restaurants, mom and pop establishments, and fast food restaurants that are learning to market their products cheaper and more reasonable to the consumer are still going strong in the United States. They are offering healthier meals due to the consumer wanting to become healthier. They have their ups and downs like any business but are learning to give the consumer what they need and desire. That is the way restaurants keep their customer happy, by buying products from company like Sysco, Gordon’s Food Service, (GFS), and other restaurant suppliers. However; Sysco is the number one supplier to restaurants and hospitals, making them the most profitable company in the world (Sysco.com, 2011).
Section 1: Typically, we need a well-balanced meal to give us the energy to do day-to-day tasks and sometimes we aren’t able to get home cooked meals that are healthy and nutritious on a daily basis, due to the reasons of perhaps low income or your mom not being able to have the time to cook. People rely on fast food, because it’s quicker and always very convenient for full-time workers or anyone in general who just want a quick meal. Eric Schlosser, author of Fast Food Nation argues that Americans should change their nutritional behaviors. In his book, Schlosser inspects the social and economic penalties of the processes of one specific section of the American food system: the fast food industry. Schlosser details the stages of the fast food production process, like the farms, the slaughterhouse and processing plant, and the fast food franchise itself. Schlosser uses his skill as a journalist to bring together appropriate historical developments and trends, illustrative statistics, and telling stories about the lives of industry participants. Schlosser is troubled by our nation’s fast-food habit and the reasons Schlosser sees fast food as a national plague have more to do with the pure presence of the stuff — the way it has penetrated almost every feature of our culture, altering “not only the American food, but also our landscape, economy, staff, and popular culture. This book is about fast food, the values it represents, and the world it has made," writes Eric Schlosser in the introduction of his book. His argument against fast food is based on the evidence that "the real price never appears on the menu." The "real price," according to Schlosser, varieties from destroying small business, scattering pathogenic germs, abusing wor...
The central argument of fast food nation by Eric Schlosser is that the large restaurant chains and corporations and their demand for unification have given these chains too much power over America’s food supply, economy, and society. Also the way that these corporations operate is now the framework for today’s retail economy. Small businesses are going bankrupt because of the franchising that the large companies are pursuing.
The 5-Force Industry Analysis first introduced by Michel Porter, Harvard Business School professor, a quarter-century ago. This theory examines the suppliers, buyers, product substitutes, existing firms’ rivalry and new entrants in a firm’s product market.
From a study completed by Chicago-based Research International USA completed a study called “Fast Food Nation 2008. The panel consisted of 1,000 respondents of ages 16-65 who provided their inputs with an online survey which was conducted between March 13 through 2008. Which was based on results on fast food restaurants like McDonald’s, Burger King, and Wendy’s are gaining popularity even through the economic hardship and recession. Marketing strategy has become more of influence on kids and young American’s. As population grows and the demand increases of fast food restaurants are expanding their stores to capturing more consumers. Fast food chains are also willing to change their menus to continue to gain and retain repeating customers. With each generation that passes, brings fast food chains into more homes and continues impacting lives.
The fast food industry is a direct example of pure competition. Organizations such as Burger King, McDonalds, Jack in the Box and Carl’s JR. etc., all produce uniform products, such as fries, burgers and shakes. Most fast food restaurants place careful focus on pricing. These leading chains are competing in an unpredictable market. Smart pricing tactics are used, such as the 0.99 cent and dollar menus; and most popular, the supersizing of value meals. The fast food industry is always looking for ways to attract budget conscious consumers. “People buy fast food because it's cheap, easy to prepare, and heavily promoted” (Warsi & Nisa, 2005). Now with the growing trend of the health food market, most fast food restaurants, such as McDonald’s are coming up with new strategies on upgrading their menus to accommodate healthier selections, such as salads, gourmet yogurts and fresh fruits. The fast food industry is reliant on its consumers to spread their trends. The law of demand compliments this industries pricing strategy.
Fast food has changed the face of the world. Major chains like McDonalds span all over the world. Fast food chains are continuing to grow despite numerous facts of their unhealthiness. Fast food has been proven to be a dangerous food source, yet people continue to purchase it. The more people buy fast food the more it allows the big corporations to grow. People continue to eat fast food because there are no other convenient options.
Over the last three decades, fast food has infiltrated every nook and cranny of American society and has become nothing less than a revolutionary force in American life. Fast food has gained a great popularity among different age groups in different parts of the globe, becoming a favorite delicacy of both adults and children.
The fast-food industry is changing everyday. There are new products being introduced in the market and new slogans being created. The companies in the fast-food industry will do their best to make the greater burger, and to make bigger and better fries.
Fast food outlets actually have been existed from millennia in China, India and ancient Europe. In the past, many people cannot afford to have a kitchen and this becomes the main reason they buy their food in fast food outlets (Reverse Your Age, 2013). The perception of fast food started to change in twentieth century. The first company that change the culture and perception of fast food was McDonald’s, followed by their future competitors such as KFC, Burger King, Wendy’s, Taco Bell, Pizza Hut and Subway. As they get a good appreciation from the customers followed by the impact of the globalisation, almost all of the fast food companies have been expanded their restaurant chain in many nations (Wojtek, 2013). Nowadays, with our busy life schedule and the increasing trend where women entering workforce promote an opportunity for the fast food industry to grow bigger. We can see the significant growth from the fast food industry as the industry itself has been generated over $160 billion in 2012 compared to their revenue in 1970 which only around $6 billion (Franchise Help, n.d.). With this significant growth, it does not mean that every company in this industry are successful. Some company has to closed some of their stores due to the lack of environmental research and preparation in entering a new country which commonly lead to the poor selling rate. The deeper explanation and points that is mention below will be also represent as the industry current state.
It is not a surprise that fast food has become a way of life in America. Every day about a quarter of the adult population n United States visits the fast food restaurant. Every month about 90 percent of children aged 3-9 visit McDonald's. According to Schlosser, Americans spent more than $110 billion a year on the fast food. In his book "Fast Food Nation" Eric Schlosser is not chiefly interested in the consumption of fast food, but his primary objective is to explore manufacturing starting with the unemployment. His book deals with United States politics and raises many social issues.
Consumption habits are very important factors for international marketing strategy for fast food chains. Culture is also involved in here again, though these days’ customers are always looking forward to something new in the service and products. Then again, taste of customers is changing as they are transforming towards dining in if the image of fast food is not healthy. Health conscious customer are quick to abandon fast food, they find the fast food very harmful for lungs, heart and blood conditions.
First, fast food and home-cooked meals differ in the time. The people choose fast food because they do not have time to prepare a proper meal and it can be prepared very quickly. Jekanowski, Binkley, and Eales (2001) claimed that fast food outlets’ main sales point is convenience. The fast food companies open a lot of branches in the different area so that the customers just need a few minutes to buy a set of fast food even it is complete with a drink.
Fierce and growing competition – big fast food companies like Burger King and Kentucky Fried Chicken are constantly competing with McDonalds for customers and trying to take the spot as the top fast food chain.