Fast-Food Restaurant Industry Analysis
Management 182
Lindsey Hicks
Eva Ho
Joshua Price
Suren Divanyan
May 16, 2002
Fast-Food Restaurant Industry
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Dominant Economic Characteristics
Competition Analysis
Driving Forces
Competitive Position of Major Companies
Competitor Analysis
Key Success Factors
Industry Prospects and Overall Attractiveness
Dominant Economic
Characteristics
Dominant Economic
Characteristics
• Market Size (2002)
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Projected Sales ($Billion ) 407.8
Sales increase of 3.9 %
Locations: 858,000
industry employs 11.6 million people
Revenues ($billion) 131.7
Dominant Economic
Characteristics
Scope of Competitive rivalry
– International : Most companies of the industry
operate stores in many countries and compete
with each other in specific country markets.
Dominant Economic
Characteristics
• Market Growth Rate
– McDonald's: Revenue 2.1 %, Earnings Per Share $1.47,
Operating Income 4%
– Burger King: Revenue (1)%, Earnings Per Share N/A
Operating Income N/A
– Taco Bell: Revenue 6%, Earnings Per Share 41%,
Operating Income 25%
Dominant Economic
Characteristics
Stage in life cycle:
• Mature
– Growth opportunity still exists in new countries
and markets
– Diversification into related businesses attractive
for sustained growth
– Introduction of new line of products and services
to differentiate from rivals is practiced
Dominant Economic
Characteristics
Companies in Industry
• There are 8 main companies that captures 89% of
fast-food Market
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McDonald's 34.7 %
Burger King 15.8%
Taco Bell 9.6%
Wendy's International 9.5%
Subway 5.9%
Hardee's 4.6%
Arby's 3.9%
Dairy Queen 3.8%
Other 11.7%
Dominant Economic
Characteristics
Ease of Entry Globally:
– Relatively hard to enter, because of strong
competition and high capital requirements:
• In order to franchise the entrepreneur should be at
least $1 million worth
• Efficient operations is the key to faster product
delivery and lower costs
• Requires diverse supply materials, which complicates
entry
• Customers are price sensitive and promotion driven
Dominant Economic
Characteristics
Exit of Industry:
– Mergers and Acquisitions are common ways of
exit strategies (Ex. McDonald’s acquired
Boston Market restaurant chain)
– Companies like Taco Bell and KFC were parts
of a diversified company, which in 97 were
spun off as publicly traded companies
Dominant Economic
Characteristics
Technology and Innovation:
– Automated Inventory Ordering System
– Just in Time operations
– Fast order taking systems
• More efficient operations
• Reduces operating costs
• Increases profit margin
Dominant Economic
Characteristics
Processes and Innovation
– Introduction of new order-to-make burger or
sandwich assembly process
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Reduces waists
Increases food freshness
Increases customer satisfaction
Custom orders
Dominant Economic
Characteristics
Product Innovation
– New products are introduced to meet changing
customer needs or to serve new market niches
– Introduction of new sauces and burger
innovation
• Burger King’s introduction of Vegetarian Burgers
• Taco Bell’s new gorditas
Dominant Economic
Characteristics
Distribution Channels
– Supply distribution is managed by the centralized
corporate headquarters because it enforces
standardization of supply materials and gives the
companies greater bargaining power
– The product and services are distributed to customers
by individual stores
Dominant Economic
Characteristics
Products and Services
– Products and Services are differentiated among
the rivals
• Taco Bell is the most differentiated
• McDonald’s and Burger King are weakly
differentiated. They each have their own special
ingredients but offer the same satisfaction
• Speed of delivery and freshness are the main
characteristics of product
Dominant Economic
Characteristics
Economies of Scale
– Big companies have economies of scale in
purchasing, manufacturing, transportation, and
advertising
• Bargaining power in supply purchasing
• Lower per unit cost in mass manufacturing of pre-made
supplies
• Transportation costs are distributed among several restaurants
in the same geographic area
• Advertising aides many restaurants
Dominant Economic
Characteristics
Industry Location
– Fast-food restaurants are strategically located in
most geographic areas with a population that
could sustain business
– The big companies are also growing into other
national markets
• For example, McDonald’s operates in 121 countries
Dominant Economic
Characteristics
Capacity Utilization
– Effective and efficient operations results in
lower burger or sandwich assembly costs, which
in turn results in higher profits margins
– Capacity Utilization is important to spread high
fixed costs over greater number of products and
services produced
Dominant Economic
Characteristics
Profit Margin (1998-2002)
– Moderate profit margins, 8.0 - 8.4%
– Intense competition and price wars reduce profit
margins
– Efficiency and cost reduction is key in sustained
profit margin
Competition Analysis
Competitive Analysis
• Forces of Competitive Analysis
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Rivalry among competing sellers
Potential of new entry into market
Pressures from substitute products
Supplier bargaining power and competitive
pressures
• Pressures from buyer bargaining power
• Other Factors which affect Fast Food Sellers
Competitive Analysis
• Rivalry among competing sellers
• In the fast food industry Competition is high
– Many options for customers
– Low prices/price wars
– Many substitute products easily available
– Customer decisions based on what is available at time
– Advertising
– Promotional incentives
– Products differentiated
Competitive Analysis
• Rivalry among competing sellers
• Companies striving to better market share
– Continuous growth into new markets, with new
products offerings and growth into new geographic
markets.
– Diverse menus and competitors willing to make exactly
what customers want.
– Demand for fast food growing with the fast pace of life
around the world
– Fast food restaurants are worldwide and have relatively
equal resources for growth
Competitive Analysis
• Potential of new entry into market
• Competitors well established
– Brands well known around world
– Customers like restaurants they know
– Economies of Scale, with many world wide companies
entrants can enter small although difficult to establish
name in an already saturated market
Competitive Analysis
• Potential of new entry into market
• Advantages of large food chains
– Lower costs due to buying volume
– Already established name
– Learning curve (they know what customers want and
have perfected speed at which to serve customers)
– Established suppliers for specialized products
– Established in most major metropolitan markets, in
prime locations
Competitive Analysis
• Pressures from substitute products
• In the food market there are many substitutes to any one
restaurant
• Customers who desire more well rounded meals threaten
fast food
• The traditional sit down restaurant is a threat to fast food as
customers are not in a rush
• Then the grocery store with so many meals which can be
prepared in minutes poses threats for the fast food industry
Competitive Analysis
• Pressures from substitute products
• The food and grocery market currently is saturated with
many buyer and sellers making it difficult for any one
vendor to take over all head of market. The health of
vendors in the food industry depend heavily on the
preferences of the consumers in the market. Currently
more and more people are eating out, giving the fast food
industry many chances for advance. With so many
substitutes available sellers must continue to set
themselves apart from the rest to keep ahead of the
changing market conditions.
Competitive Analysis
• Supplier bargaining power and competitive
pressures
• Highly competitive
– Suppliers who support rivals puts them in charge of
prices for commodities which rivals must have to
perform and compete well
– As companies and suppliers work together, they can
benefit both as far as consistent revenue for the supplier
and on time deliveries for companies to cut inventory
costs
Competitive Analysis
• Pressures from buyer bargaining power
– With many fast food restaurants buyers switching costs
are low, which causes companies to lower prices and
increase incentives to keep customers coming back,
giving the customer power in price and product control
– Prices: fast food restaurants are open books to
customers along with products prices so price changes
affect local competitors
– Example the Whopper and Big Mac which are very
comparable hamburgers if the price of one was to go up
the sales of the other can benefit
Competitive Analysis
• Other Forces which affect Fast Food Sellers
– Many fast food chains are operating in many diverse
countries where customs and norms are very different
from one another. Because markets are so diversified
many chains must operate differently depending on the
particular market. For example in China many fast
food restaurants are rethinking the packaging used in
service because many people are beginning to drive and
eat at the same time while still in other markets this is
not seen. There are numerous other forces affecting the
market in particular areas but relatively few which
effect the fast food market as a whole.
Competitive Analysis
• Key findings
– The fast food industry is very strong with many sellers
and customers. Many competitive forces effect the
already established companies, which keep the prices
down and the quality of food up. All of this will keep
the big players in the game and will make it very
difficult for the new entrants to come in and take over.
Driving Forces
Driving Forces
• Factors that effect Driving Forces
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Globalization of the Fast Food industry
Opportunity for long term growth
Fast Food and differentiation of product
Forces with minor effect
Changing Societal Concerns and lifestyles
Uncertainty and business risk
Driving Forces
• Globalization of the Fast Food industry
– The fast food industry is a labor intensive market
requiring employees at all locations of business, this
does not give them the opportunity to cut costs with
cheap labor in other countries
– Although the large scale of operations gives the
restaurants economies of scale in their purchase of
disposable items made for the particular chain such as
cups and boxes for food prepared
Driving Forces
• Opportunity for long term growth
– The fast food industry is already well established in
many countries across the the world. McDonald's is in
121, while Burger King is only in 57, with many other
sellers competing in varying markets across the world,
majority of sellers only compete locally
– Although many that are already global look for the
industry to continue to expand into new markets as well
as with countries as the population of the world grows
and the demand for fast food increases
Driving Forces
• Fast Food and differentiation of product
– Many fast food restaurants are diversifying their menus
example: Jack in the Box with tacos and rice bowls and
also the traditional hamburger. By differentiating in
this way it give customers more options which will
keep them coming back instead of going to a different
place
– This can be very important with many food restaurants
located close together the buyer preference of
differentiation is what keeps buyers coming back and
not changing restaurants
– Other than different offering the food industry is very
standard
Driving Forces
• Forces with minor effects
– Technological Change
• New technology can increase productivity and reduce costs
– Customer base
• Broad base of customers although some more than others
– Product innovation
• Changes in offerings and extras are very common in the
market, but innovation in food is rare
Driving Forces
• Changing Societal Concerns and lifestyles
– With many American's becoming more aware of their
health the traditional greasy and fatty food of the fast
food industry are changing their offering, with many
places offering veggie burgers and low fat products
– The health conscious customers are also opting to eat at
home
– There is also the opposite of this with many people’s
lifestyles getting so busy they do not have time to eat or
even prepare meals for their children and many fast
food restaurants benefit from this
Driving Forces
• Uncertainty and business risk
– With no agreements with customers this makes for no
predictable revenue
– Although the health of the food industry has been very
strong over the past years
– McDonald's revenue has gone up every year for the
past 10 years and they have no foreseeable reason for it
not to continue
Competitive Position of
Major Companies
Fast Food Industry’s
Major Players
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McDonald’s
Burger King (Diageo)
Taco Bell (Tricon Global)
Wendy’s International
Subway
Hardee’s
Arby’s
Dairy Queen
Top Three Analysis
McDonald’s
• Chairman and CEO
Jack M. Greenberg
• Sub Industry
Fast Food
• Ticker
• Country
MCD
• Currency
• 2001 Sales
$20,051,000,000
• Major Industry
Food Service
United States
U.S. Dollars
• Fiscal Year End
December 31st
Top Three Analysis
McDonald’s (cont.)
• Number of Restaurants
13,099
• Number of Employees
1,500,000
• Exchange
NYSE, CSE
• Market Capitalization
37,918,000,000
Top Three Analysis
Burger King
(Part of Diageo Company)
• Chairman, CEO and
President
John Dasburg
• Ticker
DEO
• 2001 Sales
$8,500,000,000
• Major Industry
Food and Beverages
• Sub Industry
Fast Food
• Country
United States
• Currency
U.S. Dollars
• Fiscal Year End
December 31st
Top Three Analysis
Burger King (cont.)
• Number of Restaurants
8,248
• Number of Employees
360,000
• Exchange
NYSE
• Market Capitalization
43,789,000,000
Top Three Analysis
Taco Bell
(Part of Tricon Global Restaurants)
• Chairman and CEO
David Novak
• Ticker
YUM
• 2001 Sales
$4,800,000,000
• Major Industry
Fast Food
• Country
United States
• Currency
U.S. Dollars
• Fiscal Year End
Last Saturday in December
Top Three Analysis
Taco Bell (cont.)
• Number of Restaurants
6,444
• Number of Employees
320,000
• Exchange
NYSE
• Market Capitalization
9,370,000,000
Competitor Analysis
Competitor Analysis
• Which companies are in the strongest/
weakest position?
Strategic Group Mapping
• A technique for revealing the competitive positions
of industry participants.
Competitor Analysis
Strategic Group Mapping
Competitor Analysis
Strategic Group Mapping
• The positions of each company are represented by
the circles in the strategic group map.
• The size of the circles represents each company’s
respective share of total industry sales.
Competitor Analysis
Strategic Group Mapping
McDonald’s
• Growth
– In 2001, McDonald’s took actions to streamline operations in an effort to
realize sales growth through improved operations and customer service.
– McDonald’s plans to add up to 1,400 restaurants in 2002.
• Geographic coverage
– McDonald's serves 46 million people every day in about 30,000
restaurants in 121 countries.
• Share of industry revenues
– Market share: 34.7%
– 2001 Sales revenues: $14.87 billion
Competitor Analysis
Strategic Group Mapping
Burger King
• Growth
– In 2001, Burger King announced it is launching 14 new and improved
menu items.
• Geographic coverage
– Burger King currently operates 11,435 restaurants in 57 countries and
territories worldwide.
• Share of industry revenues
– Market share: 15.8%
– 2001 Sales revenues: $8.5 billion
Competitor Analysis
Strategic Group Mapping
Taco Bell
• Growth
– Taco Bell reported an increase in sales of 12% from the previous year in
December 2001.
– Taco Bell dominated the Mexican QSR Sales with a 64% share as of year
end 2001.
• Geographic coverage
– Taco Bell operates 239 of its total 6,683 restaurants in 14 countries
worldwide.
• Share of industry revenues
– Market share: 9.6%
– 2001 Sales revenues: $4.8 billion
Competitor Analysis
Conclusions
• The three circles on the strategic map are very
close together, which suggests strong competitive
rivalry among the companies.
• McDonald’s is clearly the industry leader.
– They have over one-third of the total market share.
– They have advanced the furthest into the global market.
• Taco Bell has the most growth potential.
– Although they currently have a smaller market share, they have a
lot of potential if they increase their expansion globally.
Competitor Analysis
Conclusions (cont.)
• Although Burger King has over 15% of the market
share, they do not have much potential for growth.
• Burger King’s parent company, Diageo, is
planning to spin off the company in order to focus
more on beverages.
• Burger King is quickly losing market share to both
McDonald’s and Wendy’s International.
Competitor Analysis
Competitors’ Next Moves
McDonald’s
• Currently, McDonald’s strategy is working well for them.
• Being the market leader, they are under no pressure to
change the path they are currently on.
Burger King
• Burger King has recently made some changes in
management and marketing that have hurt their operating
results.
Competitor Analysis
Competitors’ Next Moves
Burger King (cont.)
• In order to improve their position, Burger King
has moved its focus from its current franchises to
seeking potential new franchisees.
• Burger King’s new management is focusing on
strengthening the brand name through improved
marketing, product pipeline, cooking platform and
emphasis on service and friendliness.
Competitor Analysis
Competitors’ Next Moves
Taco Bell
• In order to boost sales, Taco Bell’s parent company, Tricon
Global Restaurants, has been aggressively co-branding its
products.
• Tricon Global consists of Taco Bell, KFC, Pizza Hut, and
has recently acquired Long John Silver’s and A&W
Restaurants.
• With the combined strength of the 5 companies, Tricon is
focusing its growth on international expansion.
Key Success Factors
Key Success Factors
The Key Success Factors of Fast-Food
Restaurant Industry are:
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Convenient Locations
Clever Advertisement
Consistency
Food Quality
Food Innovation
Cost Control
Favorable Image & Good Reputation
Fast Services
Key Success Factors
Convenient Locations
• Fast-food restaurants must be easily visible and
accessible for quick entry by the customers. An
establishment which is on the wrong side of the
street and does not take advantage of traffic flow
could be doomed to failure unless the unit is a well
established chain.
• As competition gets tougher, the fast-food
restaurants strive to make their outlets more
convenient.
Key Success Factors
Convenient Locations
• There are fast-food restaurants in shopping malls,
in hospitals, on military bases, and on college
campus, airports etc.
• Some fast-food restaurants are operated in
convenience stores; therefore, they can be
accessed for quick entry by customers. For
example, McDonald’s are operated in Wal-Mart.
Key Success Factors
Clever Advertisement
• Advertising is an important element of the success
of fast-food restaurant industry. It can induce
customers to patronize the fast-food restaurant in
order to increase sales. For example:
• The 1990 Super Bowl was a key advertisement
year for McDonald's. McDonald’s promised to cut
prices of its bacon, lettuce, and tomato sandwiches
if the 49ers won or cut the price of the BigMac if
the Denver Bronco's won.
Key Success Factors
Clever Advertisement
• Wendy's earned national recognition with their
"Where's the Beef?" campaign.
• Burger King has used memorable campaign such
as “Have it your way” and “We do it like you’d do
it.”
Key Success Factors
Consistency
• Consistency of food is particularly important to
fast-food patrons. It is a quality that attracts many
customers.
• According to National Restaurant Association,
92.2 % of the respondents strongly agreed or
agreed that they expect consistency from one visit
to the next when they patronize fast-food
restaurants. Therefore, the one of the key to a
successful franchise of fast-food restaurant chains
is to offer exactly the same product or service at
numerous locations.
Key Success Factors
Food Quality
• Many fast-food restaurants enact stricter quality
control guidelines for their food. It is because
stricter quality control can ensure food safety.
• For example, McDonald’s keeps tight control over
its suppliers shipping frozen prepattied beef to its
restaurants and drawing strict specifications for its
potatoes.
Key Success Factors
Food Innovation
• The fast-food restaurant industry requires a
product innovation capability because of the
changing tastes of consumers. In order to succeed
today, fast-food restaurants must cater the tastes of
consumers.
• Many fast-food restaurants offers signature items,
and diversified menus in order to meet customers’
needs. Many new products are always under
development in food lab kitchen for evaluation in
selected markets.
Key Success Factors
Food Innovation
• For example, McDonald’s menu is often enhanced
with promotional products to add variety on
limited time basis. The menus are constantly
examined around the world in the light of
changing customer’s taste, as well as local
customs. In U.S., customers now have more
choices in McDonald’s, including Fruit ‘N Yogurt
Parfaits, McSalad Shakers, and Breakfast Bagel
sandwiches.
Key Success Factors
Cost Control
• Cost control is important to the success of fastfood restaurants because their revenues are based
on smaller average checks compared to the
cafeterias, theme restaurants, and fine-dining
restaurants.
• Low cost enables fast-food restaurants to make
higher profits and compete with rivals. For
example, minimum wage labor which has been
traditional routes this phase of fast-food restaurant
industry has taken to build up profit margins.
Key Success Factors
Favorable Image & Good Reputation
• Fast-food restaurant which has a favorable image
and good reputation can bring confidence to the
customers.
• For example, McDonald’s is one of the most
powerful brands in the world. It has earned the
trust and confidence of people the world over
because of its favorable image and good
reputation. McDonald’s is known as a great place
for kids and families; for convenient, hand-held
meals; for World Famous Fries and Big Macs; and
for outstanding value.
Key Success Factors
Fast Services
• Accurate filling customer orders, and short
delivery times are important to satisfy customer’s
immediate needs of the “fresh” food.
• Many fast-food restaurants have drive-thru service
because many people tend to be pressed for time.
Therefore, fast-food restaurants should continue
focus on improving the speed of drive-thru
service.
Key Success Factors
Fast Services
• For example, McDonald’s enhance the drive-thru
experience by serving two cars at a time. In some
locations, McDonald’s are using double-lane
drive-thrus. In other locations, the employees of
McDonald’s use remote order-taking devices to
take order for the drive-thru customers during
busy periods.
Industry Prospects and
Overall Attractiveness
Industry Prospects and Overall
Attractiveness
• Factors Making Fast-Food Restaurant
Industry Attractive
• Factors Making Fast-Food Restaurant
industry Unattractive
• Special Fast-Food Restaurant Industry
Issues
• Profit Outlook
Industry Prospects and Overall
Attractiveness
Factors Making the Fast-Food Restaurant
Industry Attractive
• Consumer Trend
• Growth Potential
• Healthy Profitability
Industry Prospects and Overall
Attractiveness
Consumer Trend
• Nowadays, people are eating out more than ever
before. More people are cooking fewer meals at
home. According to National Restaurant
Association, more than 40 % of consumers say
that they are cooking fewer meals at home. In
1955, 25 % of household food expenditures was
spent at restaurants. In 2001, this figure grew to
46 %. In 2010, this figure is projected to increase
to 53 %.
Industry Prospects and Overall
Attractiveness
Growth Potential
• Although fast-food restaurant industry is a mature
industry in U.S, there is room for it to grow
locally and globally.
• Therefore, as long as the participants of the fastfood restaurants put the efforts into strategic plans,
marketing, product innovation etc., there are great
opportunities for growth in the fast-food restaurant
industry.
Industry Prospects and Overall
Attractiveness
Growth Potential
• According to National Restaurant Association
(NRA), in 2002, the sales of fast-food restaurants
are expected to grow at a slower 3.7 percent rate,
adjusted for inflation to 1.3 percent and resulting
in sales of $115.2 billion, a $4.1 billion increase.
Industry Prospects and Overall
Attractiveness
Growth Potential
• Even though the projected growth rate in 2002
will be low, a number of factors will combine to
generate additional sales this year. The factors
include an expected economic upturn later in the
year, the growing strength of major fast-food
restaurant brands and the continuing impact of
industry-favorable demographic changes.
Industry Prospects and Overall
Attractiveness
Growth Potential
• Fast-food restaurant industry has tremendous
potential growth in other countries.
• For example, the number and diversity of fastfood restaurants across east China has
mushroomed in the past several years with no end
in sight. In China, there is enormous short-term
and long-term growth opportunities of the fastfood restaurant industry.
Industry Prospects and Overall
Attractiveness
Healthy Profitability
• Fast-food restaurant industry has a healthy profit
margin. The 2001 net profit margins of the market
leaders in fast-food restaurant industry are listed
as follows:
McDonald’s
Wendy’s
Net Profit Margin
11.0%
8.1%
Industry Prospects and Overall
Attractiveness
Factors Making the Fast-Food Restaurant
Industry Unattractive
• Rivals from Other Markets
• Fierce Product/Price Competition
Industry Prospects and Overall
Attractiveness
Rivals from Other Markets
• The competitive force will become stronger. The
fast-food restaurant industry has begun to suffer
increasing loss of market share to convenience
stores, prepared food offerings at grocery stores,
microwave preparation at home. Although not
large in absolute sense, these competitors are
capturing a large portion of growth experienced in
food service.
Industry Prospects and Overall
Attractiveness
Fierce Product/Price Competition
• Competitions among rivals drive the prices
of fast-food items down; as a result,
industry profitability will be affected.
• For example, McDonald’s, Burger King,
Wendy’s always use “99 cents” of burger
promotion campaigns to induce customers
to patronize them.
Industry Prospects and Overall
Attractiveness
Fast-Food Restaurant Industry Issues
• Food Safety Issue
• Health Issue
• Toys Issue
• Staffing Shortage Issue
Industry Prospects and Overall
Attractiveness
Food Safety Issue
• Hamburger has become U.S. national food. U.S.
people eat more meat than any other people in the
world. The mad cow disease abroad (in Europe
and Japan) made people fear and concerned about
the food safety. As a result, the “beef” problem
brought some decline of the sales of fast-food
restaurants.
Industry Prospects and Overall
Attractiveness
Food Safety Issue
• In U.S, since 1998 due to suspected bacterial
contamination, more than 100 million pounds of
meat has been recalled.
• High-volume meat production makes it easy for
virulent strains of bacteria to travel far and wide.
Therefore, fast-food restaurant operators have to
ensure food safety control in order to give
sufficient confidence to customers.
Industry Prospects and Overall
Attractiveness
Health Issue
• Nowadays, a growing number of people deeply
concern about the quality of their own diets and
their kid diets. Nutrition experts point out that fast
food is often high in calories, sodium, fat and
cholesterol. On the other hand, people with food
allergies or other health concerns often ask
specific questions about preservatives, artificial
colorings, and other additives.
Industry Prospects and Overall
Attractiveness
Health Issue
• As people are concerned about their health, they
prefer to eat healthy food. As a result, some fastfood restaurants provide healthful offerings, for
example, vegetarian, and non-fried food.
Therefore, fast-food restaurants have to adjust
their menus and offer new products in order to
cater the changing tastes of consumers.
Industry Prospects and Overall
Attractiveness
Toys Issue
• Many fast-food restaurants distributed toys with
the purchase of Happy/Kid Meals to induce
purchases. However, reports showed that some
toys have potential choking hazard to young
children. As a result, the fast-food restaurants had
to recall the toys that have problems. Customers
can return the toys for for free fries or drinks.
Industry Prospects and Overall
Attractiveness
Toys Issue
• The largest fast-food toy recall came in December
1999 when Burger King recalled more than 25
million Pokemon balls that had been distributed
with kids meals. The U.S. Consumer Products
Safety Commission (CPSC) and Burger King said
the balls posed a suffocation risk to small children.
A 13-month-old girl suffocated on the toy and a 4month-old boy died when the ball-shaped
container lodged over his mouth and nose.
Industry Prospects and Overall
Attractiveness
Toys Issue
• Problems with the safety of fast-food toy
promotions have affected the sales of fast-food
restaurant chains. Therefore, fast-food restaurants
should ensure high-quality and safety standards of
toys from the toy suppliers.
Industry Prospects and Overall
Attractiveness
Staffing Shortage Issue
• Fast-food restaurants had a high employee
turnover rate because the compensation is
usually paid at minimum-labor wage.
According to the 1998 survey by the
National Restaurant Association, fast-food
restaurants had the highest employee
turnover on average with 117 %.
Industry Prospects and Overall
Attractiveness
Staffing Shortage Issue
• Costs to find, fill, and train employee
replacements can bring high costs to businesses.
• Therefore, fast-food restaurant operators have to
respond this problem. They should offer rewards
and incentives, e.g., health insurance, to retain
qualified and motivated employees.
Industry Prospects and Overall
Attractiveness
Profit Outlook
• Much of the success of the fast-food restaurant
industry is dependent on the state of the overall
economy. Because of the current economic
downturn, fast-food restaurant industry has slow
growth rate.
• An improving economy and continued growth in
disposable personal income will be the catalysts to
propel the fast-food restaurant industry into
another year of real growth.
Industry Prospects and Overall
Attractiveness
Profit Outlook
• The fast-food restaurant industry’s overall profit
prospects are above average; therefore, it can be
considered attractive/favorable even though fastfood restaurant industry is highly competitive
business.
• If the industry participants continue to strengthen
their long-term competitiveness positions in the
fast-food restaurant industry, expand sales effort,
and look for ways to protect their competitiveness,
they can earn good profits.
~END~