50604393 fast food industry

7/27/2019 50604393 Fast Food Industry

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FAST FOOD INDUSTRY

Introduction:

Fast food is the term given to food that can be prepared and served very quickly.

While any meal with low preparation time can be considered to be fast food, typically

the term refers to food sold in a restaurant or store with low quality preparation and

served to the customer in a packaged form for take-out/take-away.

Outlets may be stands or kiosks, which may provide no shelter or seating, or fast

food restaurants (also known as quick service restaurants). Franchise operations which

are part of restaurant chains have standardized foodstuffs shipped to each restaurant

from central locations.

The capital requirements involved in opening up a fast food restaurant are

relatively low. Restaurants with much higher sit-in ratios, where customers tend to sit

and have their orders brought to them in a seemingly more upscale atmosphere may be

known in some areas as fast casual restaurants.

History

The concept of ready-cooked food for sale is closely connected with urban

development. In Ancient Rome cities had street stands that sold bread and wine. A

fixture of East Asian cities is the noodle shop. Flatbread and falafel are today ubiquitous

in the Middle East. Popular Indian fast food dishes include vada pav, panipuri and dahi

vada. In the French-speaking nations of West Africa, roadside stands in and around the

larger cities continue to sellas they have done for generationsa range of ready-to-

eat, char-grilled meat sticks known locally as brochettes.

The Start of Fast Food Culture

The concept of fast food pops up during 1920s.The 1950s first witnessed their

rapid proliferation. Several factors that contributed to this explosive growth in 50s were:

(1) Americas love affair with the automobiles.


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(2) The construction of a major new highway system.

(3) The development of sub-urban communities.

(4) The baby boom subsequent to world war second.

Fast-food chains initially catered to automobile owners in suburbia.

On the go

Fast food outlets are take-awayortake-outproviders, often with a "drive-through"

service which allows customers to order and pick up food from their cars; but most also

have a seating area in which customers can eat the food on the premises. People eat

there more than five times a week and often, one or more of those five times is at a fast

food restaurant.

Nearly from its inception, fast food has been designed to be eaten "on the go",

often does not require traditional cutlery, and is eaten as a finger food. Common menu

items at fast food outlets include fish and chips, sandwiches, pitas, hamburgers, fried

chicken, French fries, chicken nuggets, tacos, pizza, hot dogs, and ice cream, although

many fast food restaurants offer "slower" foods like chili, mashed potatoes, and salads.

Variants

Although fast food often brings to mind traditional American fast food such as

hamburgers and fries, there are many other forms of fast food that enjoy widespread

popularity in the West.

Chinese takeaways/takeout restaurants are particularly popular. They normally

offer a wide variety of Asian food which has normally been fried. Most options are some

form of noodles, rice, or meat.

Sushi has seen rapidly rising popularity in recent times. A form of fast food

created in Japan. sushi is normally cold sticky rice served with raw fish. Pizza is a

common fast food category in the United States, with chains such as Domino's Pizza,


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Sbarro and Pizza Hut. Menus are more limited and standardized than in traditional

pizzerias, and pizza delivery, often with a time commitment, is offered.

Fish and chip shops are a form of fast food popular in the United Kingdom, Australia

and New Zealand. Fish is battered and then deep fried.The Dutch have their own types

of fast food. A Dutch fast food meal often consists of a portion of French fries .

Business

I n the United States alone, consumers spent about US$110 billion on fast food in

2000 (which increased from US$6 billion in 1970). The National Restaurant Association

forecasted that fast food restaurants in the U.S. would reach US$142 billion in sales in

2006, a 5% increase over 2005. In comparison, the full-service restaurant segment of

the food industry is expected to generate $173 billion in sales.

Jobs and labor issues

Today, more than 10 million workers are employed in the areas of food

preparation and food servicing including fast food in the world.

Employees are the backbone of the fast food industry. Proper training is crucialto the orderly and quick service customers expect. Yet, employee turnover can be as

high as 200% per year. With such a turnover, owner-operators of franchise and non-

franchise restaurants have the daunting task of constantly training an entirely new

workforce. Policies and procedures need to be explained to each new employee.

Globalization

In 2006, the global fast food market grew by 4.8% and reached a value of 102.4billion and a volume of 80.3 billion transactions. In India alone the fast food industry is

growing by 40% a year. McDonald's is located in 120 countries and on 6 continents and

operates over 31,000 restaurants worldwide.


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KFC is located in 25 countries. Subway has 29,186 restaurants located in 86 countries,

Pizza Hut is located in 26 countries, Taco Bell has 278 restaurants located in 12

countries besides the United States.

Health issue

Trans fats which are commonly found in fast food have been shown in many

tests to have a negative health effect on the body.

The fast food consumption has been shown to increase calorie intake, promote

weight gain, and elevate risk for diabetes. The Centers for Disease Control andPrevention ranked obesity as the number one health threat for Americans in 2004. It is

the second leading cause of preventable death in the United States and results in

400,000 deaths each year.

FAST FOOD INDUSTRY IN INDIA :

INDIA EMERGING MARKET FOR GLOBAL PLAYERS

The percentage share held by foodservice of total consumer expenditure on foodhas increased from a very low base to stand at 2.6% in 2001. Eating at home remains

very much ingrained in Indian culture and changes in eating habits are very slow

moving with barriers to eating out entrenched in certain sectors of Indian society.. The

growth in nuclear families, particularly in urban India, exposure to global media and

Western cuisine and an increasing number of women joining the workforce have had an

impact on eating out trends.

FACTS AND FIGURES

Fast food is one of the worlds largest growing food type. Indias fast food

industry is growing by 40% a year and is expected to generate a billion dollars in sales

by 2005.The multinational segment of Indian fast food industry is up to Rs. 6 billion, a

figure expected to zoom to Rs.70 billion by 2005. By 2005, the value of Indian dairy

products is expected to be Rs.1, 00,000 million. In last 6 years, foreign investment in


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this sector stood at Rs. 3600 million which is about one-fourth of total investment made

in this sector. Because of the availability of raw material for fast food, Global chains are

flooding into the country.

MARKET SIZE & MAJOR PLAYERS

a) Dominated by McDonalds having as many as 75 outlets.

b) Dominos pizza is present in around 100 locations.

c) Pizza hut is also catching up and it has planned to establish 125 outlets at the

end of 2005.

d) Subways have established around 40 outlets.

e) Nirulas is established at Delhi and Noida only. However, it claims to cater

50,000 guests every day.

Major players in fast food are:

y MCDONALDS

y KFC

y PIZZA HUT

y DOMINOS PIZZA.

y COFFEE DAYy BARISTA.

The main reason behind the success of the multinational chains is their expertise in

product development, sourcing practices, quality standards, service levels and

standardized operating procedures in their restaurants, a strength that they have

developed over years of experience around the world. The home grown chains have in

the past few years of competition with the MNCs, learnt a few things but there is still a

lot of scope for improvement.


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REASON FOR EMERGENCE :

Gender Roles: gender roles are now changing. Females have started working outside.

So, they have no time for their home and cooking food. Fast food is an easy way out

because these can be prepared easily.

Customer Sophistication and Confidence: consumers are becoming more

sophisticated now. They do not want to prepare food and spend their time and energy in

house hold works. They are building their confidence more on ready to eat and easy to

serve kind of foods

Paucity of Time: people have no time for cooking. Because of emergence of working

women and also number of other entertainment items. Most of the time either people

work or want to enjoy with their family.

Double Income Group: emergence of double income group leads to increase in

disposable income. Now people have more disposable income so they can spend easily

in fast food and other activities.

Working Women: working women have no time for cooking, and if they have then also

they dont want to cook. Because they want to come out of the traditionally defined

gender roles. They do not want to confine themselves to household work and

upbringing of childrens.

Large population: India being a second largest country in terms of population

possesses large potential market for all the products/services. This results into entry of

large number of fast food players in the country.

Relaxation in rules and regulations: with the economic liberalization of 1991, most of

the tariff and non tariff barriers from the Indian boundaries are either removed or

minimized. This helped significantly the MNCs to enter in the country.

Menu diversification: increase in consumption of pizzas, burgers and other type of

fast foods.

CHALLENGES FOR THE INDUSTRY

Social and cultural implications of Indians switching to western breakfast food:

Generally, Hindus avoid all foods that are believed to inhibit physical and spiritual


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development. Eating meat is not explicitly prohibited, but many Hindus are vegetarian

because they adhere to the concept of ahimsa. Those seeking spiritual unity may avoid

garlic and onions. The concept of purity influences Hindu food practices. Products from

cows (e.g., milk, yogurt, ghee-clarified butter) are considered pure. Pure foods can

improve the purity of impure foods when they are prepared together. Some foods, such

as beef or alcohol, are innately polluted and can never be made pure. But now, Indians

are switching to fast food that contain all those things that are considered impure or

against there beliefs. Some traditional and fundamentalist are against this

transformation of food habit and number of times they provoke their counterparts to

revolt against such foods. And that is what happened when McDonalds decided to

enter the complexity of Indian business landscape, counting only on its fastfood global

formula, without any apparent previous cultural training.

Emphasis on the usage of bio-degradable products: Glasses, silverware, plates and

cloth napkins are never provided with fast food. Instead, paper plates and napkins,

polyurethane containers, plastic cups and tableware, drinking cartons or PET

(polyethylene terephthalate) bottles are used, and these are all disposable. Many of

these items are tossed in the garbage instead of being recycled, or even worse, merely

thrown on the ground. This burdens nature unnecessarily and squanders raw materials.

In order to reduce soil and water pollution, government now emphasis more on the

usage of bio-degradable products.

Retrenchment of employees: Most of new industries will be capital intensive and may

drive local competitors, which have more workers, out of business.

Profit repatriation: Repatriation of profits is another area of concern for Indian

economy. As when multinational enters the any countries, people and government hope

that it will increase the employment rate and result in economic growth. However, with

the multinational operation, host country experiences these benefits for a short time

period. In long run neither employment increases (because of capital intensive nature of

MNCs) nor it increases the GDP or GNP because whatever MNCs earn they repatriate

that profit back to their home country.


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PROBLEMS OF INDUSTRY

Environmental friendly products cost high: government is legislating laws in order to

keep check on the fast food industry and it is emphasizing more on the usage of bio-

degradable and environment friendly products. But associated with this issue is the

problem that fast food player faces - the cost associated with the environment friendly

product. They cost much higher than the normal products that companies uses for

packaging or wrapping their products.

Balance between societal expectation and companies economic objectives: To

balance a societys expectation regarding environment with the economic burden of

protecting the environment. Thus, one can see that one side pushes for higher

standards and other side tries to beat the standard back, thereby making it a arm

wrestling and mind boggling exercise.

Health related issues: obesity:

I. Studies have shown that a typical fast food has very high density and food with

high density causes people to eat more then they usually need. \

II. Low calories food: Emphasis is now more on low calorie food. In this line

McDonald has a plan to introduce all white meat chicken Mcnuugget with less fat

and fewer calories.

TRENDS IN INDIAN MARKET

Marketing to children's: fast food outlets in India target childrens as their major

customers. They introduce varieties of things that will attract the childrens attention and

by targeting childrens they automatically target their parents because Childrens are

always accompanied by their parents.

Low level customer commitment: Because of the large number of food retail outlets

and also because of the tendency of customer to switch from one product to other, this

industry faces low level customer commitment.

Value added technology services: There is continuous improvement in the

technology as far as fast food market in India is considered. The reason behind that is

food is a perishable item and in order to ensure that it remain fresh for a longer period of


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time. Earlier, Indian people prefer eating at home but now with the change in trend there

is also need for improvement and up gradation of technology in food sector.

Attracting different segments of the market: Fast food outlets are introducing

varieties of products in order to cater the demands of each and every segment of the

market. They are introducing all categories of product so that people of all age, sex,

class, income group etc can come and become a customer of their food line.

The success of fast foods arose from the changes in our living conditions:

1. Many women or both parents now work

2. There are increased numbers of single-parent households

3. Long distances to school and work are common

4. Usually, lunch times are short

5. There's often not enough time or opportunity to shop carefully for groceries, or

to cook and eat with one's family. Especially on weekdays, fast food outside

the home is the only solution.

50604393 fast food industry

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