QUICK-SERVICE INDUSTRY OVERVIEW

1
QUICK-SERVICE INDUSTRY OVERVIEW
SONGKI KIM JEFF OHLMAN NADINE CHAMSEDDINE
DANA WILLIAMS JORGE DIETRICH JOSE GUZMAN
2
Margin Trends 2004Burgers Big Three

• McDonald 10
• Burger King -10.5
• Wendys 3
• McKey Foods Burgers McDonalds sub.
• Sun Valley Chicken TGWU union
• McCain Foods GB Ltd Chips North York
• Sweetheart International Ronald McDonald cups
  and straws Holland

3
Compare 2004 Sales (Mil.)
McDonald
Yum
4
Market Share 2004Burgers Big Three

• McDonald 59
• Burger King 21
• Wendys 20

5
Porters Five Competitive Forces

• Entrants - Low/Moderate- Brand awareness and
  lower cost competitive advantage. Require time
  and large capital Investment
• Rivalry High- Burger King, Wendys, J.B., are
  heavy competitors
• Power of Suppliers Low- Most have the
  purchasing power to negotiate lower prices

6
Porters Five Competitive Forces

• Competitive Force - Threat/Power- Prices and
  product offering are the main sources of
  competition
• Substitutes- Low/Moderate- Trends show consumers
  prefer healthier and more exotic alternatives
• Buying power -Most players have a lower cost
  competitive advantage. Top players also achieve
  economies of scale via this

7
Rivalry among Existing Competitors

• Intense rivalry and competition market share
  among existing fast-food competitors
• Slowing growth rate of sales
• To attract customers.
• - increase advertising
• - price discount
• - offer new product

8
Threat of New Entrants

• Economies of scale force new entrants to enter at
  a cost disadvantage
• Require higher fixed costs to enter existing
  market
• Have strong customer loyalty
• Willing to defend new entrants with price
  discounting and advertising

9
Threat of Substitute Products

• There are.
• - numerous restaurants and other eating
  alternatives
• - a variety of high-quality, reasonably priced
  eating alternatives
• Customer switching costs are low

10
McDonalds Corporation
11
McDonalds History

• In 1955 Milkshake-Machine Salesman Ray Kroc took
  out a franchise on a hamburger store owned by two
  McDonald brothers. Today McDonalds is the
  largest fast food operator in the world.
• 50 Million customers every day, 12000 Restaurants
  in the USA, and 30,000 Worldwide in 119 countries
• The chain has grown by one new outlet every 17
  hours in the last decade.

12
Marketing Strategy

• Global Brand Awareness Golden Arches
• Marketing Alliances
• Global Sponsorship
• Alignment with country-level marketing activities
• Focused on its customers

13
Marketing Budget

• Advertising Costs
• In Millions
• 2004 619.50
• 2003 596.70
• 2002 532.30

14
Subsidiaries

• Boston Market
• Chipotle Mexican Grill
• Donatos Pizzeria Business
• Note in December 2003 McDonalds sold Donatos
  Pizzeria Business

15
Suppliers Europe

• Golden West Foods Buns, Ketchup, Syrup,
  milkshake mix McDonalds subsidiary

16
SWOT Analysis

• Strengths
• Financial Power- McDonalds spends more on
  advertising on a single brand than any other
  organization. In 1986 a colossal 789m, or 6.3
  of system wide sales, went to advertising. It is
  one of the five largest television advertisers in
  the US, with children as its prime target. After
  Santa Claus, Ronald McDonald is the figure best
  known to US Children.
• Recipe for Success- McDonalds revolutionized the
  fast food Industry. They introduced a new
  production process that lowered labor costs.

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SWOT Analysis

• Weaknesses/Opportunities/Threats
• Weakness-It is possible that a company can become
  so large it saturates the market.
• Opportunities- Because of its financial power
  McDonalds could move into to other
  industries/products at any time.
• Threats- Competitors, Suppliers, Workers Unions,
  Attacks of health campaigns, and Environment.

18
Burger King

• Competitive Trend Analysis

19
BK Background

• Founded in 1954
• Second Largest Fast Food Chain Worldwide
• Global operations of the 11.3 billion company
• BURGER KING restaurants serve approximately
  1,072 customers per restaurant, per day, or
  approximately 11.8 million customers daily
  worldwide
• The BURGER KING system employs more than 300,000
  people system wide

20
Fascinating BK Facts

• Today, Burger King operates the 2 hamburger
  chain (behind McDonald's) with more than 11,200
  restaurants across the US and in about 55 other
  countries
• Since its founding in 1955, BURGER KING has sold
  well over 2.1 billion hamburgers annually

21
BK Brand Strategy

• Brand image
• Masculine oriented (Burger King not Burger
  Queen)
• King The larger size than the average burger
• Food
• Great-taste
• High quality
• Fun
• Value
• Portability
• Slogan Have it your way
• Customized
• Customer-oriented
• Differentiation from other fast-food competitors

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BK Marketing Mix Strategy

• Product (Whopper)
• Price (Compare with McDonald, Wendys, Yum! and
  Subway)
• Promotion (Stick with the jumbo size burger the
  opposite force against the recent trend of Low
  Carb)
• Place(Distribution)

23
BK Marketing Mix-Product

• Whopper Sandwich
• Fire Grilled Burgers
• Chicken, Fish Veggies
• Salads
• Breakfast
• Treats
• Sides Beverages
• Kids Menu

24
BK Marketing Mix-Price

• Price Range
• - 4 - 8 for a value meal
• The value meal for breakfast
• - For example, suggested Enormous Omelet
  Sandwich retail price 2.99, or 3.49

25
BK Marketing Mix-Promotion

• Advertising Slogan (2004-present) Have it your
  way
• Star Wars deal
• - The fast-food chain's first global promotion
• Burger King Offering Low Carb
• - Allow substitutions of french fries with
  salads and bottled water for soft drinks
• A Big Breakfast at Burger King- Debuts Enormous
  Omelet Sandwich

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Burger King Target Audience

• Customer with the sophisticated taste but still
  need fast food service
• Middle class household with the discretionary
  income
• Family with kids

27
Financial Picture

• Private company hard to obtain numbers
• 11,200 restaurants
• 2004 sales 13 billion
• 2004 sales growth 18.2

28
Burger King Largest Franchises

• AAFES
• AmeriKing
• Aramark
• CL
• Carrolls Corp 1 franchise
• Cimm's
• Compass
• Deignan-Kauffman

• HMS Host
• Nath
• Quality Dining
• Sodexho-Marriott
• Sydran
• TA Operating Group
• Veterans Canteen
• Westwind

29
Exclusive Supplier

• Restaurant Services, Inc. (RSI)
• Cooperative serving BURGER KING restaurant
  owners in the United States.
• Founded in 1991
• Purchasing agent for U. S. Burger King system.

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SWOT Analysis

• Strengths
• Global Brand Equity
• The second largest fast food chain (18.8 of US
  fast-food hamburger business)
• Successful items WHOPPER Sandwich
• More than 55 Global market operations
• Customized Fast Food service
• Real Estate investment (pursuit of the best
  location in town)
• Financial support from the parent company (Texas
  Pacific Group)

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Strengths

• 2nd Largest burger chain
• Brand recognition and recall
• Over 11,000 locations worldwide
• WHOPPER has highest brand recognition
• Economy of scale provides buying power
• Unique product to differentiate product (flame
  broiled).
• Customization allows customer to have it your
  way

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Weaknesses

• Declining market share
• Self-restricted the diversification of product
  development because of stickiness to strong
  Burger King brand image
• Weak product development
• Slowed revenue and income growth

33
Weakness

• We are in a Burger Slump
• BK has no other business segment
• Ameriking , 2nd largest franchise filed for
  Chapter 11
• Revolving door in corporate board room, 10 CEOs
  in 14 years
• High franchise rate makes BK vulnerable to
  multiple disparate policies
• Failure to introduce new brand lines
• 3 of 10 largest franchises are in chapter 11
• Lackluster marketing

34
Opportunities

• International expansion
• Only serving 1 of the worlds population
  (Potential growth in China India with new
  product development)
• Growing dining-out market

35
Opportunities

• Consumers have positive perception of brand.
• Take advantage of healthy eating trend.
• Consider new brands and franchises.
• Reduce cost of entry for BK franchise
• Expand in Asia market
• Reduce underperforming outlets

36
THREATS

• Mature industry
• Fiercely competitive environment
• With other franchises (McDonald)
• With the local competitor
• Growing health-conscious consumers (Low Carb
  Trend)
• The social issue of McDonalds Supersize me
• Changing demographics (Rapid transition into the
  aging society)
• Vulnerability to the fluctuation of foreign
  exchange rates from expanding global operations
• Unreliability of supplier for the recent
  cow-related disease (i.e. Mad Cow Disease)

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BK Marketing Mix-Place

• AmeriServe Food Distribution
• - It plans an orderly transition of
  distribution services
• - Approximately 5,800 Burger King restaurants
  currently served
• H H Foods
• - Supply South Texas-area Burger King
  restaurants with beef patties
• Restaurant Services, Inc. (RSI)
• - The exclusive purchasing agent for the vast
  majority of products and services used by BURGER
  KING restaurant owners in the United States and
  is manager of the system's supply chain.

38
Bibliography
Corporate Information http//proquest.umi.com/pq
dweb?index0did168203801SrchMode1sid1Fmt3
VInstPRODVTypePQDRQT309VNamePQDTS11264764
79clientId30358 Franchise list
http//www.prnewswire.com/cgi-bin/stories.pl?ACCT
105STORY/www/story/11-12-2002/0001839842 Market
ing Strategy http//proquest.umi.com/pqdweb?index
3did818659331SrchMode1sid1Fmt4VInstPROD
VTypePQDRQT309VName PQDTS1126477227clientI
d30358 SWOT http//search.epnet.com/login.aspx?d
irecttruedbbuhan16823714 Corporate Info
- http//www.bk.com/CompanyInfo/index.aspx
Sonics Annual Report (2004) -
http//www.sonicdrivein.com/pdfs/annualReports/04_
12annualReport.pdf Financial Info -
http//www.hoovers.com/burger-king/--ID__54531,tic
ker__--/free-co-fin-factsheet.xhtml
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SONIC DRIVE-IN

• Sonic, Americas drive-in, originally Top Hat
  drive-in,started as a hamburger and root beer
  stand in 1953.
• Sonic is the largest chain of drive-in
  restaurants in the United States and Mexico, with
  more than 1 million customers a day
• Sonic has 3000 drive-ins coast to coast

40
Sonic Marketing strategy

• Multi-layered growth strategy, targeting earnings
  per share of approximately 20 for the year
  ending September 2005.
• Addition of drive-ins
• Increasing media expenditure to boost brand
  awareness
• Accelerating franchise development and ascending
  royalty rate

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Sonic Marketing strategy

• Highly differentiated concept, through
  personalized carhop service, and a variety of
  menu choices.
• Accelerated Expansion program
• Opening 167 new franchises in 2004
• Opening 188 new drive-ins in 2004
• Planning to open 185 drive-ins in 2005

42
Sonic Marketing strategy

• Solid Sales Trends
• Sales increase of 13 in 2004, and 6.5 same
  store sales
• Sales increase of 18 in 2005, and 6.8 same
  store sales

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Sonic Marketing strategy

• Solid Financial performance
• Revenues rose 20 to 536 million 2004 and 18 in
  the first nine months of 2005
• Net income per diluted share rose 19 in 2004 and
  is up to 21 the first nine months of 2005
• ROE has exceeded 20 for five consecutive years.

44
Sonic Subsidiaries

• Sonic Industries
• Sonic Restaurant

45
Sonic Strengths

• Carhop Service many customers enjoy the personal
  carhop who delivers the order to the car with a
  free mint
• Overall Good Company Listed for the 10th
  consecutive year by Forbes magazine to be one of
  the 200 best small companies in America

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Sonic Strengths

• Multi-layered growth strategy
• Listed at number 50 for percentage increase in
  sales on the top 50 Growth chains list(
  Restaurant Business, July 2003)
• Ranked number 80 on the Hot Growth Companies list
  ( Business Week, June 2003)
• Good Franchise Listed in the top 10 on
  Entrepreneur magazines Franchise 500 list
  (January 2003)
• Great Sales Records Increase of 13 in 2004 ,
  and 18 in the first 9 months of 2005.
• Continuously increased revenue ( chart 1)

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SonicStrengths

• Menu
• Unique menu items that include Toaster
  Sandwiches, extra- long cheese coneys, hand
  battered onion rings, and a variety of drinks and
  deserts
• Quality Burgers named one of the top three in
  the Best Overall burger QSR category for seven
  consecutive years( Restaurants Institutions
  Annual Choice in Chains Awards, March 2003)
• Cream pie shake distinguished as most appealing
  and unique beverage in its category and receives
  Best in Class award ( Restaurant Business, May
  2001)

48
Sonic Weaknesses

• International Presence Except for 7 drive-ins in
  Mexico, Sonic Does not have a well established
  international market
• Brand awareness although Sonic has a
  differentiated service that is the carhop, and a
  quality burger, it is still not viewed as the
  leader in the fast food industry.
• Cost of the international franchise To get a
  Sonic international franchise, the investor must
  have 3.5 million in assets and 2.5 million in
  cash which could hinder the development of new
  franchises abroad

49
SonicOpportunities

• International market growth
• National market more than half of the 3000
  drive-ins are located in 9 states, the rest are
  developing markets

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Sonic Threats

• Obesity awareness this will push sonic to
  include light meals
• Gas prices the rise of gas prices will increase
  the prices of sonic
• Hurricane Katrina will have negative impact on
  the Sonic Franchises since Louisiana and
  Mississippi are two core markets for Sonic. 60
  restaurants in Louisiana, Mississippi and Alabama
  were damaged by Katrina.
• Mad Cow disease This may eventually lead to
  customers shifting to other fast foods
  alternatives

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SonicRevenue

• Revenue for the fiscal year ended August 31,2004
• Revenue for the nine months ended May 31,2005
• Projected revenue for the year ended August 31,
  2005

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SonicDrive-in Sales

• Sales for the fiscal year ended August 31,2004
• Sales for the nine months ended May 31,2005
• Projected sales for the year ended August 31, 2005

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SonicPorters Analysis

• High rivalry among competitors
• Little product differentiation
• Low customer loyalty which leads customers to
  shift easily to another fast food chain.
• High number of fast food restaurants.

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SonicPorters Analysis

• Low threat of new entrants
• Economies of scale. Sonic alone has 3000 drive
  ins which makes the cost of manufacturing low,
  and thus giving it a competitive advantage
• High Capital requirement ( equipment and
  training)
• Service differentiation through carhops

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SonicPorters Analysis

• Low bargaining power of supplier
• Cost of shifting suppliers is low
• Substitute products are not an option because
  beef is part of the burger

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SonicPorters Analysis

• Threat of substitutes
• People can shift to a different fast food
• Low bargaining power of buyer
• No buyer concentration

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Sonic References

• http//www.fastfoodfacts.info/blog/
• http//www.entrepreneur.com/franzone/details/0,588
  5,12-12---282811-,00.html
• www.Sonicdrivein.com

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JACK THE BOX

• COMPETITIVE ANALYSIS

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IMPORTANT DATES

• Born in San Diego California 1.951 as a Pioneers
  in the Drive-Thru serving system
• Major expansion to 1000 restaurants in the
  Western and Southwestern markets
• They become a private owned company in 1988
• 1.992 went public with 17.2 million shares
• 1995 Great advertising campaign with expansion to
  Southeastern markets until 2001
• With a long-term goal of becoming a national
  restaurant company, Jack in the Box entered the
  fast-casual restaurant category in 2003

60
STRATEGY

• Jack in the Box Inc., founded in 1951, is a
  restaurant company that operates and franchises
  Jack in the Box restaurants and, through a
  wholly owned subsidiary, Qdoba Mexican Grill.
• The company also operates approximately 40
  proprietary convenience stores called Quick
  Stuff, which is a major-branded fuel station and
  is usually developed adjacent to a full-size Jack
  in the Box restaurant.

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COMPANY STRATEGY

• Jack in the Box is among the nation's leading
  fast-food hamburger chains, with more than 2,000
  quick-serve restaurants in 17 states. As the
  first major hamburger chain to develop and expand
  the concept of drive-thru dining.
• Jack in the Box has always emphasized on-the-go
  convenience, with approximately 85 percent of the
  half-billion guests served annually buying food
  at the drive-thru or for take-out. In addition to
  drive-thru windows, most restaurants have indoor
  dining areas and are open 18-24 hours a day.

62
COMPANY STRATEGY

• Jack in the Box offers a broad selection of
  distinctive, innovative products targeted at the
  adult fast-food consumer, including hamburgers,
  specialty sandwiches, salads and ice cream
  shakes. Hamburgers represent the core of the
  menu, including the signature Jumbo Jack,
  Sourdough Jack and Ultimate Cheeseburger. And,
  because value is important to fast-food
  customers, the company also offers value-priced
  products on "Jack's Value Menu," including tacos,
  a chicken sandwich and Breakfast Jack.

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SUBSIDIARIES

• Qdoba Mexican Grill, which was acquired by Jack
  in the Box Inc. in January 2003, is an emerging
  leader in fast-casual dining
• Operates more than 230 restaurants in 35 states.
• Qdoba is renowned for offering nouveau Mexican
  cuisine

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SWOT ANALYSIS

• Strengths
• The revenues of the company for the last four
  years are continually growing
• The company is also showing good profits
• The company is remodeling 200 stores per year
• Offers higher quality customer service

65
Weakness

• The company has to spend an a higher percentage
  of money in advertising, assets, and strategic
  planning.
• They do not have much presence in the Southeast
  region which is a profitable market.

66
OPPORTUNITIES

• Since Jack in the Box is a very well known
  company in the Southwest they can always use this
  good-will in order to attack other markets now
  that the company is growing .

67
THREATS

• The late increase in the meat and oil prices
• Changing consumer tastes preferences
• Large investments required to stay competitive
  are eating away at profit margin

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TRENDS
69
TRENDS
70
TRENDS
71
Yum! Brands, inc.

• Yum! Brands inc. is the largest restaurant
  company with more than 34,000 company, franchise,
  license, and joint ventures, in more than 100
  counties.
• .

72
Yum! Brands, inc.

• Oct 1997 Pepsi co. owner of KFC, pizza hut, and
  Taco bell formed a publicly owned and independent
  company Tricon Global restaurants inc.( Yum!
  Brands former name)
• May 2002 the company acquired Yorkshire Global
  restaurants, Inc. and changed the name to Yum!
  Brands, inc.

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Yum! Brands, inc. Growth Strategies

• Build dominant China brands
• China is the number one market for new company
  development
• China division operating profits were more than
  200 million in 2004
• Run great restaurants
• 100 CHAMPS culture restaurants (Cleanliness,
  hospitality, Accuracy, Maintenance, Product
  Quality and Speed)

74
Yum! Brands, inc.Growth Dtrategies

• Multi-brand great brands
• Yum! Is the world leader in multi-branding,
  offering consumers more choice by combining two
  brands under one roof
• Yum! Owns 2900 multi-brand restaurants Worldwide.

75
Yum! Brands, inc. Growth strategies

• Drive profitable international growth
• Yum! Restaurants International (YRI) owns more
  than 11,000 restaurants outside the US
• YRI opened 700 restaurants every year for the
  past 5 years. And in 2004 YRI opened 3 new
  restaurants each day of the year.
• In 2004 YRI revenues totaled 2.1 billion, and
  operating profit reached 337 million

76
Yum! Brands, inc.A W Restaurants, inc.

• Is based in Louisville, KY
• Founded in 1919, serving all American pure beef
  hamburger and hot dogs.
• Owns 600 food outlets in 13 countries and
  territories around the world and 600 points of
  distribution at Yum! Multibramds restaurants.

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Yum! Brands, inc.KFC Corporation

• Is the most popular chicken restaurants chain
• Is based in Louisville, KY
• Was founded in 1953 and specializing in Original
  recipe, Extra Crispy, and Colonels Crispy Strips
  with home style sides, BBQ Wings, and Chicken
  sandwiches.
• Owns 13000 outlets in more than 80 countries

78
Yum! Brands, inc.Long John Silvers, inc.

• Is the worlds largest quick-service seafood
  chain.
• Is based in Louisville, KY
• Was founded in 1969and specializing in
  batter-dipped fish, chicken, shrimp, and
  hush-puppies.
• Owns 1200 restaurants worldwide, and 200
  additional points of distribution in multi-brand
  restaurants

79
Yum! Brands, incPizza Hut Inc.

• Is the Worlds largest pizza restaurant company
• Is based in Dallas, TX
• Specializes in pan pizza, thin n crispy pizza,
  hand tossed style pizza, and stuffed crust pizza
• Owns 7500 restaurants in the USA, and more than
  4500 restaurants in over 80 countries

80
Yum! Brands, incTaco Bell Corp.

• Is the nations leading Mexican-style quick
  service restaurant
• Specializes in Tacos, burritos, quesadillas,
  border bowls, and nachos
• Owns 6000 restaurants in the USA and serves 35
  million people.

81
Yum! Brands, inc. Corporate Responsibility

• Community involvement
• Yum! Brands foundation corporate sponsor of dare
  to care program to end hunger
• YUMeals program to end hunger in the USA
• Pizza Hut book it program to help develop reading
  interest for children
• KFC colonel kids charity to provide nationwide
  access to childcare
• Taco bell teen programs

82
Yum! Brands, inc. Corporate Responsibility

• Diversity
• For the past two years, Yum! Has been recognized
  in Fortune magazines top 50 Best Companies for
  Minorities
• Yum! Has been recognized in Black Enterprise
  magazine as one of the 30 best companies in
  diversity