Fast-Food%20Restaurant%20Industry%20Analysis

1
Fast-Food Restaurant Industry Analysis

• Management 182
• Lindsey Hicks Joshua Price
• Eva Ho Suren Divanyan
• May 16, 2002

2
Fast-Food Restaurant Industry

• Dominant Economic Characteristics
• Competition Analysis
• Driving Forces
• Competitive Position of Major Companies
• Competitor Analysis
• Key Success Factors
• Industry Prospects and Overall Attractiveness

3
Dominant Economic Characteristics
4
Dominant Economic Characteristics

• Market Size (2002)
• Projected Sales (Billion ) 407.8
• Sales increase of 3.9
• Locations 858,000
• industry employs 11.6 million people
• Revenues (billion) 131.7

5
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.

6
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

7
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

8
Dominant Economic Characteristics

• Companies in Industry
• There are 8 main companies that captures 89 of
  fast-food Market
• 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

9
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

10
Dominant Economic Characteristics

• Exit of Industry
• Mergers and Acquisitions are common ways of exit
  strategies (Ex. McDonalds 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

11
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

12
Dominant Economic Characteristics

• Processes and Innovation
• Introduction of new order-to-make burger or
  sandwich assembly process
• Reduces waists
• Increases food freshness
• Increases customer satisfaction
• Custom orders

13
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 Kings introduction of Vegetarian Burgers
• Taco Bells new gorditas

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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

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Dominant Economic Characteristics

• Products and Services
• Products and Services are differentiated among
  the rivals
• Taco Bell is the most differentiated
• McDonalds 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

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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

17
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, McDonalds operates in 121 countries

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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

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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

20
Competition Analysis
21
Competitive Analysis

• Forces of Competitive Analysis
• 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

22
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

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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

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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

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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

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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

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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.

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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

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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

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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.

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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.

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Driving Forces
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Driving Forces

• Factors that effect Driving Forces
• 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

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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

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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

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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

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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

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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
  peoples 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

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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

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Competitive Position of Major Companies
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Fast Food Industrys Major Players

• McDonalds
• Burger King (Diageo)
• Taco Bell (Tricon Global)
• Wendys International
• Subway
• Hardees
• Arbys
• Dairy Queen

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Top Three AnalysisMcDonalds

• Chairman and CEO
• Jack M. Greenberg
• Ticker
• MCD
• 2001 Sales
• 20,051,000,000
• Major Industry
• Food Service

• Sub Industry
• Fast Food
• Country
• United States
• Currency
• U.S. Dollars
• Fiscal Year End
• December 31st

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Top Three Analysis McDonalds (cont.)

• Number of Restaurants
• 13,099
• Number of Employees
• 1,500,000
• Exchange
• NYSE, CSE
• Market Capitalization
• 37,918,000,000

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Top Three AnalysisBurger 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

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Top Three AnalysisBurger King (cont.)

• Number of Restaurants
• 8,248
• Number of Employees
• 360,000
• Exchange
• NYSE
• Market Capitalization
• 43,789,000,000

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Top Three AnalysisTaco 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

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Top Three AnalysisTaco Bell (cont.)

• Number of Restaurants
• 6,444
• Number of Employees
• 320,000
• Exchange
• NYSE
• Market Capitalization
• 9,370,000,000

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Competitor Analysis
49
Competitor Analysis

• Which companies are in the strongest/ weakest
  position?
• Strategic Group Mapping
• A technique for revealing the competitive
  positions of industry participants.

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Competitor AnalysisStrategic Group Mapping
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Competitor AnalysisStrategic Group Mapping

• The positions of each company are represented by
  the circles in the strategic group map.
• The size of the circles represents each companys
  respective share of total industry sales.

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Competitor AnalysisStrategic Group Mapping

• McDonalds
• Growth
• In 2001, McDonalds took actions to streamline
  operations in an effort to realize sales growth
  through improved operations and customer service.
• McDonalds 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

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Competitor AnalysisStrategic 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

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Competitor AnalysisStrategic 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

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Competitor AnalysisConclusions

• The three circles on the strategic map are very
  close together, which suggests strong competitive
  rivalry among the companies.
• McDonalds 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.

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Competitor AnalysisConclusions (cont.)

• Although Burger King has over 15 of the market
  share, they do not have much potential for
  growth.
• Burger Kings 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 McDonalds and Wendys International.

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Competitor AnalysisCompetitors Next Moves

• McDonalds
• Currently, McDonalds 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.

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Competitor AnalysisCompetitors 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 Kings new management is focusing on
  strengthening the brand name through improved
  marketing, product pipeline, cooking platform and
  emphasis on service and friendliness.

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Competitor AnalysisCompetitors Next Moves

• Taco Bell
• In order to boost sales, Taco Bells 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 Silvers
  and AW Restaurants.
• With the combined strength of the 5 companies,
  Tricon is focusing its growth on international
  expansion.

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Key Success Factors
61
Key Success Factors

• The Key Success Factors of Fast-Food Restaurant
  Industry are
• Convenient Locations
• Clever Advertisement
• Consistency
• Food Quality
• Food Innovation
• Cost Control
• Favorable Image Good Reputation
• Fast Services

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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.

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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, McDonalds are operated in Wal-Mart.

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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. McDonalds 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.

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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 youd do
  it.

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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.

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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, McDonalds keeps tight control over
  its suppliers shipping frozen prepattied beef to
  its restaurants and drawing strict specifications
  for its potatoes.

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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.

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Key Success Factors

• Food Innovation
• For example, McDonalds 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 customers taste, as well as local
  customs. In U.S., customers now have more
  choices in McDonalds, including Fruit N Yogurt
  Parfaits, McSalad Shakers, and Breakfast Bagel
  sandwiches.

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Key Success Factors

• Cost Control
• Cost control is important to the success of
  fast-food 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.

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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, McDonalds 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. McDonalds 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.

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Key Success Factors

• Fast Services
• Accurate filling customer orders, and short
  delivery times are important to satisfy
  customers 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.

73
Key Success Factors

• Fast Services
• For example, McDonalds enhance the drive-thru
  experience by serving two cars at a time. In
  some locations, McDonalds are using double-lane
  drive-thrus. In other locations, the employees
  of McDonalds use remote order-taking devices to
  take order for the drive-thru customers during
  busy periods.

74
Industry Prospects and Overall Attractiveness
75
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

76
Industry Prospects and Overall Attractiveness

• Factors Making the Fast-Food Restaurant Industry
  Attractive
• Consumer Trend
• Growth Potential
• Healthy Profitability

77
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 .

78
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
  fast-food restaurants put the efforts into
  strategic plans, marketing, product innovation
  etc., there are great opportunities for growth in
  the fast-food restaurant industry.

79
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.

80
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.

81
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
  fast-food 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
  fast-food restaurant industry.

82
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
• Net Profit Margin
• McDonalds 11.0
• Wendys 8.1

83
Industry Prospects and Overall Attractiveness

• Factors Making the Fast-Food Restaurant Industry
  Unattractive
• Rivals from Other Markets
• Fierce Product/Price Competition

84
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.

85
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, McDonalds, Burger King, Wendys
  always use 99 cents of burger promotion
  campaigns to induce customers to patronize them.

86
Industry Prospects and Overall Attractiveness

• Fast-Food Restaurant Industry Issues
• Food Safety Issue
• Health Issue
• Toys Issue
• Staffing Shortage Issue

87
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.

88
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.

89
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.

90
Industry Prospects and Overall Attractiveness

• Health Issue
• As people are concerned about their health, they
  prefer to eat healthy food. As a result, some
  fast-food 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.

91
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.

92
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
  4-month-old boy died when the ball-shaped
  container lodged over his mouth and nose.

93
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.

94
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 .

95
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.

96
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.

97
Industry Prospects and Overall Attractiveness

• Profit Outlook
• The fast-food restaurant industrys overall
  profit prospects are above average therefore, it
  can be considered attractive/favorable even
  though fast-food 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.

98
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