Download - MKTG 489 Section 1 -- Fast Food
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THE FAST FOOD INDUSTRY
Part 1: Industry Overview
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“...encompasses companies that operate restaurants where customers order and pay at a counter”
Generated $6 billion in 1970 to
$208 billion in 2015
$47.02 billion in wages, employing over 3.7 million people
(roughly 1% of the entire US population)
SIC Code: 5812NAICS Code: 722513
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INDUSTRY HISTORY
Ancient Greeks and Romans serving food in taverns
1921White Castle was founded
1940First McDonald’s opened
1951First Jack in the Box opened
2004Super Size Me release
2013Demand for
higher wages
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MARKET TRENDS
MOBILE TECHNOLOGY
CHANGING TASTE PREFERENCES
SLIM PROFIT MARGINSQuick service -> fast casualFood quality > speedFresh is the new fast
App-supported loyalty programsApple PayConvenient for customers and useful for companies’ research and data collection
<10% due to 33% increase in costsStrong rivalryIncreasing understanding in choose healthier food products
12
3
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MARKET COMPETITION
BUYERThreat level: High
SUPPLIERThreat level: Low
SUBSTITUTESThreat level: High
NEW ENTRANTSThreat level: Low
RIVALRY BETWEEN COMPETITORSThreat level: High
● Supplier - Threat level low since there are many suppliers in the market with low switching costs (multiple substitutes available)
● Buyer - Threat level is high due to many substitutes and no switching costs
● New Entrants - Threat level low since industry is dominated by global key players with strong brand loyalty, patents & trademarks
● Substitutes - Threat level high as there are many fast-food alternatives. Global chains create value added products
● Competitive Rivalry - Threat level is high due to 232,000 fast food restaurants. High competition
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FINANCIAL PERFORMANCE● Revenue
increases from 2002 to 2018
REVENUE
200
2
$138
$208
201
5
(in Billions)20
18$210
MARKET SHARE
● Hamberger-45%, Pizza-15%● McDonald’s has the largest
market share
● Average profit margin: 2.4%● Net income for each dollar of
sales is low
PROFIT MARGIN
McD
on
ald
’s
5
.5B
McD
onald
’s (
5.5
B)
Yum
! B
ran
d (
1.6
B)
Burger King (118M)
19.8%
11.7%
6%