THE FAST FOOD INDUSTRY

Part 1: Industry Overview

“...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

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

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

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

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%