Embed Size (px)
Citation preview
Date: September 7, 2016 To: Dr. Vic Matta Professor Theo Muir Dr. Andrew Pueschel Dr. Lee Wakeman From: Brian Klembara Brian Lubinsky Alexis Marino Sam Palisano Ellie Pryor Subject: Analysis of Quick Service Restaurant Industry The attached report as requested by Copeland Associates, assigned to us on August 22, 2016, includes the tasks charged of analyzing the quick service restaurant industry. Represented by members of Team 7 Cohort 007, we researched and analyzed the business environment of the quick service restaurant industry. Identifications of three informative key success factors of the quick service restaurant industry help guide the past, current, and future prospects of the industry. The conclusions from our research will be explained throughout the presentation. The key success factors were identified throughout our report with notice of the following criteria:• Wide array of options for the wide range of consumer tastes.• Placing an emphasis on becoming accessible and convenient for more consumers.• Capitalizing on new opportunities in emerging markets.
Throughout our report are multiple different appendices and analysis’ for the purpose of supporting our key success factors. This includes the macro and micro environment, as well as the industry segment and competitor identification. Lastly, are three appendices that provide a PESTLE, Porter’s, and business model canvas analysis. All of these different identifications and analysis help us research and learn about the key success factors the quick service restaurant industry need in order to thrive.
We thank and appreciate you for this opportunity in analyzing the quick service restaurant industry, and acknowledging what the industry’s key success factors are. If there are questions, concerns, or comments with the current information we have provided, please contact us via email at [email protected] Sincerely, Team 7Brian KlembaraBrian LubinskyAlexis Marino Sam Palisano Ellie Pryor
1
Cohort 007, Team 7
Ellie Pryor
Alexis MarinoBrian LubinskyBrian Klembara
Sam Palisano
2
Prepared by: Ohio University College of Business Cohort 007, Team 7
Brian Klembara, Brian Lubinsky, Alexis Marino, Sam Palisano, and Ellie Pryor
Evaluation of the Quick Service
Restaurant Industry
Prepared for: Vic Matta, Theo Muir, Andrew Pueschel, and Lee Wakeman
3
Table of Contents 5
6
7
8
10
11
16
23
List of tables and figures
Executive Summary
Introduction
Macro-Environmental Analysis
Micro-Environmental Analysis
Conclusion
References
Appendix A
4
Key Success Factors
Industry Segments
Conclusion
24
A1
Appendix B B1
Competitor Analysis
12
Appendix C C1
List of Tables and Figures8
10
11
12
13
14
15
Figure 1: Percentage of sales per category
5
Figure 2: Why customers participate in loyalty programs
Figure 3: Market Shares
Figure 4: Consumer satisfaction of new healthy options
Figure 5: Why do people choose to eat fast food?
Figure 6: Comparing GDP
Figure 7: Comparing Interest Coverage Ratio
18
19
21
22
22
Figure 9: Countries with or without McDonald’s
Figure 10: McDonald’s Corporation
Figure 11: Existing markets in the Yum company
Table 1: Key Competitor Scoring Matrix
Figure 12: Competitive stock market performance in dividends
Figure 8: Wendy’s Around the World 16
List of Tables and FiguresA1
A2
A3
A4
A6
Figure 13: What do they make?
6
Figure 14: 2016 ACSI for restaurants
Figure 15: Fast food companies social media rankings
Figure 16: U.S kids watch hundreds of fast food ads per year
Figure 17: Top chain restaurant antibiotic policies and sourcing practices
Executive Summary
In this report we are analyzing the quick service restaurant industry and interpreting the data we collected. This report includes various findings that analyze many segments of the industry. When looking at the many diverse segments of the industry, we found the very important key success factors needed for the quick service restaurant industry. The first key success factor we discussed is wide array of options for the varied range of consumer tastes. This includes healthier menu options. Healthier menu options are one of the major trends that consumers seem to be concerned about in the current quick service restaurant industry. Not only do consumers want healthy options, but they also look into the wide variety of food that is sufficient to their standards of eating. The second key success factor is placing an emphasis on becoming accessible and convenient for more consumers. Quick service restaurant industry succeeds on their multiple locations providing more convenience for customers. If quick service restaurants strategically place their restaurants in high potential markets then profits could soar. Capitalizing on new opportunities in emerging markets is the last key success factor. Expanding into new markets is important for quick service restaurants because they can take advantage of the new market space and monopolize on the new consumers. This reports emphasizes on the different reasons as to why consumers choose quick service restaurants instead of other food industries, and home dining options. It also highlights ways that quick service restaurants need to adapt in order to continue their growth of success.Recommendations for the quick service restaurant industry include:■ Add healthier menu options without taking out already favored menu items■ Strategically place quick service restaurants where there is high consumer traffic■ When branching out to emerging markets make sure that pricing is in the correct
range for consumersThe report acknowledges that there are some limitations within our analysis and identifications. The limitations include:With it only being September, the most recent yearly reports available are from 2015.
7
Introduction A quick service restaurant is one that places an emphasis on fast consumer turnover in every aspect of the business. Quick service restaurants push speedy service through the use of drive thrus, numbered combo menu meal items, and stressing over a target time per consumer. Most quick service restaurants do not provide the in store ambiance as fast casuals because they don’t necessarily want consumers staying there for long periods of time. The quick service restaurant industry is one of the most competitive markets across the world. In the coming years, quick service restaurants are expected to expand rapidly across Asia, specifically India and China. Quick service restaurants are also increasing in popularity in the Americas, while at a more gradual rate. Across the world however, there are a few different criterion by which people choose where their next meal will be. When people are choosing where to eat, they are likely to factor in: the cost and value of the meal, the variety of options and quality of the meal itself. Companies have also been using recent advances in technology like social media and online ordering to develop rewards programs for consumers in order to build a more loyal consumer relationship. Millenials are deciding where the industry is going because they are tech savvy and are drawn towards brands. Another recent trend in the quick service restaurant industry is the increase in desire for convenient meals that can be eaten on the go. The barriers to entry for new competitors is high because the established businesses have returning consumers and have brand recognition. Brand recognition is obtained through strategic marketing in order to get new consumers in the door as well as consistently delivering a quality product to said consumer. The quick service restaurant industry is dominated by a few established players who have been in the industry for a long time. Through the years, dominant companies such as McDonald’s, Wendy’s, and Yum! Brands have continued to be exemplary in providing value as well quality meals to their consumers; while simultaneously expanding into growing markets.
Intr
oduc
tion
| Bu
sines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
8
First Research, 2016
Macro Analysis
Percentage of sales per category
Figure 1
Intro
duct
ion
| Bus
ines
s En
viro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
9
The Quick Service Restaurant is one of the most competitive markets in the world. This is so because of the ease at which one competitor can be substituted for another. Given that there are a few factors that most successful QSR competitors share, it is often based on how well they each exploit these factors that determines who is the industry leader.
The competitive QSR industry relies heavily on the ability to be reached by a lot of different consumers. Gaining consumers from passerby’s that are simply going about their day is an important aspect of location. Because of this, it is important to set up shop in locations that are high in population, traffic and disposable income. According to Table 3, in 2014 QSR’s were chosen over competing industries about twice as often due to the emphasis on convenience in location as well as the meal itself.
One of the biggest challenges faced by quick service restaurants is fulfilling ever changing consumer desires. Most QSR’s stick to a mostly static menu that only changes a few items here and there. They do this in order to keep the consumers coming back for their favorite meals while also offering new items, for those looking for something new. As pointed out in figure 1, about 40% of all sales in quick service restaurants come from hamburgers, with chicken, pizza, sandwiches and Mexican each accounting for about 10% each. If anything, this is a good example of the high demand for the hamburger and related products, while also pointing out that variety is important, given the other food genres competing with hamburgers. One of the largest emerging trends of the past few years, is the increasing desire for healthier options. Consumers have started to pay more attention to whether or not QSR’s are using whole, real, and healthy ingredients than in the past. While this new trend is asking for healthier meals,
the people want their already existing favorite meals to be revamped with whole ingredients, as opposed to scrapping the meal altogether in favor of something healthy and new. Many quick service restaurants have menu items that consist of high sugar, salt, and fat and are generally viewed by the public as unhealthy.. If they do not adapt to the new healthy lifestyle options that the society is pushing for, the fast casual and other restaurants will start taking some of the quick service restaurant consumers away from them. Using different ingredients include more food safety regulations. China and Japan were recently exposed for having a major supplier of the quick service restaurant selling expired meat to their buyers. Food safety needs to be a priority for every quick service restaurant in order for it to succeed (See PESTLE Analysis Legal, Appendix A)
There are currently 250,000 quick service restaurants just in the United States with a combined revenue of $190 billion. Globally the total revenue is equal to approximately $570 billion. In the next five years, there are steady plans of 1500 new restaurants to open in China, South Korea, and Hong Kong. Another market that is expected to improve in the upcoming years is India. The ability to identify high potential locations is a very important aspect to any quick service restaurant. Once a new restaurant is established, it must cater to the desires of the locals around it in order to compete with the local tastes.
Macro Analysis Cont.
10
International businesses do a good job of catering to local food trends, for example rice dishes are offered in McDonald’s chains in China, and veggie burgers made in India make sure to include peas and fried potatoes.
Labor Management is a battle for quick service restaurants. Although quick service restaurant tasks include food preparation, cashier, and janitorial duties, the turnover rate is high. Teenagers are the main target as hires because the restaurants ask for part time positions, and the duties of the company require few skills. An increasingly important debate in the quick service restaurant industry is the price of minimum wage. This matters a lot to these companies, as it would aggressively alter the amounts of costs incurred. If these labor costs sky rocket, it could lead to a lot of changes within the industry resulting in automating much of the processes that go into serving the consumer.
Intro
duct
ion
| Bus
ines
s En
viro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
Micro Analysis The restaurant industry is a difficult market to get into. As stated in Porter’s Five Forces model (see Appendix B), it takes a lot of time, money, and effort to get where the top competitors are now. In order to get to that level, new entrants must have low substitution costs to draw consumers away from competitors. Standing out in this saturated industry can be difficult. Because there are so many choices in the quick service restaurant industry, buyer power can be very high. With so many options, consumers can pick and choose where to go, completely avoiding a certain establishment, or being a loyal customer to one specific restaurant. One way that quick service restaurants incentivize being a consistent customer, is through loyalty reward programs. These programs allow consumers to keep track of their item purchases within a given company. Upon reaching the target quantity of purchases, the consumer is rewarded with either a free or discounted menu item and or meal. For example, Taco Bell has a loyalty program that rewards their customers that place orders through their app, as well as providing rewards for the consumers that share their “Live Mas” experiences on social media. These experiences do not even have to relate to Taco Bell, and the consumers are being rewarded for just living their lives and documenting their experiences.Consumers in this market thrive on anything that can be cheaper or even free compared to the original price. There are so many other dining options than fast food, because of these the quick service restaurants must keep up to the standards of the consumers. If the restaurants don’t keep up with the consumer’s preferences, they will take
their business elsewhere. For example, a few of the things consumers look for in QSR’s are convenience, value and quality of the meal.Supplier power is very low. Corporations can seek other suppliers if the one they are using doesn’t appeal to them anymore. (See Appendix B). Since there are so many different quick service restaurants the competitive rivalry is extremely high. Establishments are always trying to be the best, so they often come out with similar deals and new items in order to stay in competition with the big players in the industry.
Intro
duct
ion
| Bus
ines
s En
viro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
11
Figure 2 TechnologyAdvice, 2014
Industry Segment & Competitor Identification
Industry Segments
● Burger● Sandwich● Mexican● Snack● Seafood ● Asian● Chicken
Key Competitors
● Fast Casual● Bakeries● Supermarkets● Delis
(Statista, 2016)Table 1
Intro
duct
ion
| Bus
ines
s En
viro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Con
clusio
n | R
efer
ence
s | A
ppen
dice
s
12
Wide array of options for the wide range of consumer tastes
Healthy food choices are the new option at most quick service restaurants. Restaurants are offering new food options with no preservatives or GMO’s, as well as non-gluten options and breakfast foods. In the future, restaurants will try to start delivery options. In a survey provided by Statista, it shows that 46.8% of Americans are somewhat satisfied with the new healthy food options at quick service restaurants. The reason that people are only somewhat satisfied with the new healthy options is because consumers want healthier versions of the already existing options that they have come to love. Restaurants will continue to introduce new food options as the range of the consumers tastes grow.
(AYTM, 2016).Table 2
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fac
tors
| Co
mpa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s Key Success Factor #1
In recent years quick service restaurants have introduced new trends to fit the consumer's tastes and needs. Trends in the past have included breakfast menus, new cuisines, such as, Chinese and Mexican, and introducing more vegetables as choices on their menus. Restaurants continue to introduce new options on their menus and also new options for the full experience of visiting a quick service restaurant.
13
Across the world, there are many different lifestyles and tradition based diet types. Because of this, many businesses that are functioning at an international level need to cater to their target audience’s specific desires. For example, McDonald’s India serves the Spicy Paneer Wrap, which is a meatless Indian Cheese tortilla. This item appeals to many pallets, as there is a high demand for meatless options in India. Catering to these needs around the world creates a recognition for the local culture.
A new and upcoming experiment is finding a way to create meat without using any animal parts. This new meat is called Cultured Meat. They use the process of stem cell research to extract cells from animals without causing any harm to the animals. The plan is for this new type of meat to have no animal products in the meat but still taste like meat. Right now is much more expensive to purchase because it is so new and recently introduced from the lab. If quick service restaurants plan on using this Cultured Meat in the future, there next task would be figuring out a way to lower the price, to make this meat available as a new option on their menus.
Placing an emphasis on becoming accessible and convenient for more consumers
(AYTM, 2014).Table 3
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fac
tors
| Co
mpa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
Key Success Factor #2
14
What is a Quick Service Restaurant? Well, its in the name, quick. As of August 2014, the most prominent reason for choosing a QSR was the convenience, coming in at 67.2% of votes in Table 3. Convenience is made up of a few different factors including; fast preparation and service, ability to take food on the go and an easily accessible location.
Fast preparation and service is one of the major staples in the QSR industry. Those companies that end up being successful in the competitive QSR market are those that dedicate most of their energy to creating an environment focused on fast service. QSR’s do this through the use of drive thru’s, numbered menus correlating to distinct items, and timing orders. The service chain is also sped up by preparing large amounts of food in advance, which essentially creates a grab and go atmosphere.
The ability to take meals on the go, with no preparation necessary caters to multiple consumer demographics. The idea of taking a breakfast wrap which creates little to no mess and and a coffee to go may appeal to
a businessman or woman in a rush. On the other hand, a few McDonald’s Happy Meals can go a long way with kids, as they generally appeal to the more simplistic tastes of a younger child. Due to the fact that they come in a box, most of the mess is contained.
The physical location of the restaurant is one of the biggest determinants of success. Plenty of research must happen before deciding on a place to settle. Most QRS’s decide on the location of their stores through the use of Geographic Information Systems (GIS). A GIS is a system that factors multiple local criteria into one focused report. Some of the factors that are incorporated are; nearby retail clusters, public transportation routes and stops, and local neighborhood demographics. This is a crucial aspect of the QSR industry, and needs to be heavily studied before any concrete decisions are made.
Capitalizing on new opportunities in emerging markets
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fac
tors
| Co
mpa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s Key Success Factor #3
Quick Service restaurants have needed to continue to seek new ways of both gaining new customers and gaining more revenue. Chains of these quick service restaurants have planned to take advantage of new opportunities over seas in emerging markets to gain new consumers and more locations globally. “The growth rate has slowed over the past couple years in North America. Real gross domestic product increased at an annual rate of 1.1 percent in the second quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis” (Trading Economics). Certain foreign countries have higher GDP than America, and quick service restaurants are paying attention to these countries. One country to focus on is India. India became the fastest growing major economy in 2015. A study from International Monetary Fund data, found that India is now growing at 7.46% (Forbes). As of 2016, there are a limited amount of countries that have higher economic growth rates than India. These countries, however, come nowhere close to the amount of population or size that India has. “By 2020 it is expected that 35% of India's population will be in urban areas.
15
At the city level, a large share of the QSR market rests in metros and mini metros due to higher consumption, heightened consumer awareness, and exposure in key cities such as Delhi, Mumbai, Bangalore and Hyderabad.” (Dna). Quick Service restaurants are taking advantage of these markets in India because of the great opportunity of locations India offers to capture a large number of consumers. India has the opportunity in the next 20-30 years to become a trillion-dollar economy. As of now India is not a part of the large regional trade negotiations involving the U.S. In the future the U.S. and India look forward to expanding there trade relations which will help in providing India with more food for more quick service restaurant locations.
Yum! China is a spinoff of the Yum! Brands that we find in America. Yum! China has approximately 7,200 restaurants in China. And look to gain 500 more locations in 2016 alone. In China there will be more consumers in coming years, with more disposable income to spend at quick service restaurants. China and India are prime locations for quick service restaurants to build new restaurants and invest their money. As we talked about in our micro analysis, buyer power is high in the quick service.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020
-4
-2
0
2
4
6
8
10
12
14
16Comparing India & Chinas GDP Annual Growth Rate with the U.S.
China India U.S.
(World Bank, 2015)Table 4
16
2010 2011 2012 2013 2014 20150
2
4
6
8
10
12
14
16
18
20
Comparing Interest Coverage Ratio
Mcdonalds Wendys Yum!
In 2013, Yum! Brands shares (YUM) declined 5%. And same-store sales declined 6% in the final quarter of 2013. This had a negative effect on the companies revenues in 2013. Information was provided by CNN Money.
Key Success #3 Continued
Another reason why these companies need to take advantage of these new markets is because they have enough brand value and interest coverage for any debt they might gain from expanding and opening new restaurants. McDonald’s Corporation has had the leading trend in interest coverage compared to Wendy’s and Yum! Brands. Interest coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. As of 2015 McDonalds had an interest coverage rate of 11.19. In recent years it has declined slightly. Yum! Brands as of 2015 had an interest coverage rate of 14.34, and has been increasing since 2013. This is one of the reasoning supporting why Yum! China has begun to expand its business in the past couple years.
Table 5 (Gurufocus) (wikinvests), 2015
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fac
tors
| Co
mpa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
Competitor #1: Wendy’s
17
They have to maintain and build on the value that they offer their consumers in order to keep up with their competitors. Wendy’s also has to make sure that their stakeholders are satisfied with the strategy that they have in place, as well as meeting the standards that the stakeholders expect out of the company. Wendy’s has to be careful they meet these outside demands and standards in order to keep up with the industry.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s
We chose Wendy’s as one of our key competitors in the quick service restaurant industry. We created a business model canvas (see appendix C) explaining the key elements of Wendy’s business structure. This model assists in pointing out how Wendy’s differs from the rest of the quick service restaurant industry, as well as the strategy they take to be successful within the industry. Wendy’s partners with organizations such as the U.S. Department of Energy and the Heisman Trophy Trust to initiate a positive influence on their communities. They also utilize key intellectual resources such as patents and trade secrets to differentiate their brand and product line from their competitors. Wendy’s has specific value propositions that they follow to bring the most value to their consumers that they can. These propositions include providing value menu options such as the 4 for $4 and providing nutritious options such as their black bean burger. Wendy’s has been breaking down customer segments and choosing to target Millennials in advertisement since their generation is growing into a larger portion of the quick service restaurant market. Wendy’s also franchise their restaurants in
order to maximize their revenue. These aspects of their business model canvas help to distinguish them from their competitors in the quick service restaurant industry and give them a strategy on how to maximize their success within the industry.
The external environment of the industry has a major effect on how Wendy’s strategizes and operates. Wendy’s knows they must keep up with the quality and service of their competitors, but at the same time keep themselves unique and stand out within the industry. Wendy’s strategic capability has an impact on them because they must utilize their resources to the fullest in order to maximize their success within the industry.
Kraft, 2014
Competitor #1: Wendy’s
18
Wendy’s is also expanding their sights globally and are placing a bigger focus on emerging international markets. Wendy’s has over 6,500 restaurants worldwide in 29 different countries and territories. In the upcoming future, Wendy’s is planning on expanding more into existing markets around the world in order to raise the value of their brand and maintain success in the long run. Wendy’s have been expanding with international franchising opportunities in order to bring the Wendy’s brand into emerging markets around the globe. They provide the franchisees with the tools and skills that they need to succeed in the quick service restaurant industry and to successfully operate a Wendy’s business.
Wendy’s management team has made some recent changes in 2016. They appointed their Chief Financial Officer Todd Penegor to CEO in May to replace Emil Brolick after his retirement. They also hired Gunther Plosch to Chief Financial Officer to fill the void. One of Wendy’s chairmen Nelson Peltz said “Todd’s strong leadership, operational expertise and great passion for Wendy’s will benefit the brand and all of Wendy’s stakeholders.” (Maze, 2016). Wendy’s seem very pleased with the direction that the new leadership is headed and have described this transition as “seamless”. (Maze, 2016). In the end, with the new leaders of the company, Wendy’s seems very optimistic for the future of their business.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s
19
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s Competitor #2:
McDonald’sMcDonald’s is widely accepted as one of the largest and most easily recognizable franchises in the world. The reasoning behind this, is because McDonald’s has turned their company into a well oiled machine. As of 2015, there were 36,525 restaurants and 1.9 million employees under the McDonald’s name across the world.
The creative strategy that McDonald’s has implemented is the use of the franchise and franchisee. Of the 36,525 restaurants and 1.9 million employees, approximately 80% of restaurants and approximately 1.5 million employees belong to franchises. This strategy allows for aspiring entrepreneurs to start up their own McDonald’s franchise. Because of this, the franchisee assumes a majority of the liabilities that come with owning a restaurant, as well as the obligation to turn a profit. This allows the McDonald’s corporation to overlook tens of thousands of restaurants while not having to intervene in a majority of them. McDonald’s however is realistic with their business operations, and will not hesitate to shut down underperforming restaurants. As of 2015, approximately 700 restaurants closed world wide. With that being said, McDonald’s still ended up with 267 more restaurants in 2015 than in 2014. (Adl-Tabatabai 2016)
Of the 36,525 McDonald’s restaurants worldwide, 14,259 were domestic to the US with 22,266 in international markets. With
the US QSR markets already saturated with competition, many have turned towards overseas markets. With the rapid expansion into international business, McDonald’s has had to shape the feel and taste that their restaurant offers in order to better accommodate local traditions and diet trends. McDonald’s changes the appeal of their restaurant to fit local standards in order to create a sense of comfortability with the international chain. This is a very important measure to take in order to beat out the competition in countries that are expected to have an economic explosion of disposable income within the coming years. India and China are two of the markets to look forward to in the near future. A good example of this is McDonald’s recognition of a need for a more vegetarian based menu in India, and their response was the McPaneer, a cheese based sandwich.
The reason that McDonald’s has superior brand recognition across the world in comparison to the competition is its service. McDonald’s service chain is crafted for quick service from top-to-bottom. The use of drive thru’s as well as numbered combo meal menu’s with distinct menu items was implemented with quick service in mind. Due to this, families can feed multiple children easily and businessmen can get breakfast and coffee to go, all while also offering the option to dine in for those that would like to relax.
Countries with or without McDonald’s
Johnson, 2014
Competitor #2: McDonalds
20
McDonald’s had been riding a steady upwards trend for years, until going stagnant during much of 2014 and 2015. On March 31st, 2015 McDonald’s unveiled former British Corporate Executive, Steve Easterbrook as CEO of the company. Since his implementation, Easterbrook has made a point of revamping the company through a variety of ways. First and foremost, Easterbrook has pushed to reshuffle the management team in order to open the door to new ideas. Easterbrook holds newly promoted U.S. Operations president Chris Kempczinski in a high regard, and has claimed he will bring a "new level of convenience and excitement to the restaurant experience." (Watrous 2016).
Aside from changes within the corporate make up of the company,
Easterbrook has played an important role in changing the restaurants and the service they provide. He has done this by listening to the consumers. After years of hearing the public moan for all-day breakfast, Easterbrook made a strong push to make that possible. Since its implementation, same-store sales rose by 5.7% in the U.S. and 5% globally (La Monica 2016). Easterbrook has also identified the need to have value meal options, as about a quarter of McDonald’s consumers are value conscious (La Monica 2016). Because of this trend, McDonald’s has pushed their McPick 2 for $2 menu which allows the consumer to pick 2 items off of the menu for $2. This is almost a necessity for any QSR, given that Wendy’s, Burger King and other competitors are constantly unveiling new value meals in order to keep competition tight.
Google Finance, 2016
Competitor #3:Yum! Brand
21Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s
Yum! Brands Inc. is currently one of the most successful and largest restaurant companies in the world. As of 2015, Yum! has 43,000 restaurants in 140 different countries and a revenue of $13 billion. This success thus far stems from having different restaurant brands in their company that include KFC, Pizza Hut, and Taco Bell. Yum! Brands had 16,500 emerging markets worldwide as of 2015. Since 1997 to 2015, profits from countries outside the U.S. has increased from 20% to 65%. Yum! approximately opens six new restaurants per day globally. Yum! is still trying to advance their global market, considering they have 2.5 restaurants per million people in the top emerging markets compared to 57 restaurants per million in the U.S. They are taking their global perspective to the next level by trying to relate and engage all restaurants to their brands in other countries. This global expansion idea started in China, where there is a subsidiary brand of Yum! called Yum! China. (See Appendix C). On September 2, 2016 it was released that founder of Primavera, Dr. Fred Hu will become Yum China’s new non-executive chairman. Primavera a china-based global private equity firm, and Ant Financial Services Group, a world leading online and mobile financial service will be investing a sum of $460 million in Yum China. This investment is expected to be completed on October 31, 2016. Yum China will trade on the New York Stock Exchange, and as of November 1, 2016 will be under the ticket symbol “YUMC” as an independent company. Dr. Fred Hu, also former chairman of Greater China at Goldman Sachs, is quoted saying, “We have long admired the Yum China business and are looking forward to collaborating with the board and management to realize the company’s full potential.” (Hu, 2016). With the growth of the urban population throughout china, and this new investment from a company that has supported other successful companies throughout their years, Yum! China will only continue to grow and succeed.
Yum! Brand takes pride in their 1.5 million associates worldwide and stand tall to their beliefs they embody throughout their company. Yum! Brands has many different qualities that makes them different from other competitors. They take pride in diversity and trying to help others around the globe. An example of this is Yum! Feed the World initiative. They make it one of their priorities to make sure that countries in need are being fed and their efforts show with the $640 million raised thus far. The Yum! Feed the World is just one of the many initiatives Yum! is associated with. (See Appendix C).
Yum! really focuses on culture and how it can better their success throughout the competitive market. Chief people officer Annie Byerlein is quoted saying “At Yum! our recognition culture is what sets us apart from our competition.” (Byerlein, 2015). Yum! encourages not only a culture that is diverse, but also brings energy, opportunity, and fun. They really believe that anyone of any race, ethnicity, background can bring the right attitude and difference needed, if they have the right credentials for the tasks of the company. They have different ways to reach these goals, for example “How We Win Together”. This goal shows how it is important for everyone to know they are an essential part of the company and also important for making the company thrive. These different goals and strategies are just some of the few that Yum embodies in order to have a copasetic atmosphere.
In order for Yum! to satisfy the different needs of their consumers they have globally, they pay attention to the eating habits that differentiates between cultures. They also make sure to have many different menu options to provide for a whole range of consumers. Nutrition is important to Yum! and they want to make sure that consumers see their nutrition value throughout their menus and they want consumers to make informed decisions when choosing what menu meal items they would possibly want.
Competitor #3 Cont.
22Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s
Yum! provides different programs for those interested in the development of franchisees. One program is the Franchise Association’s MinorityFran program. MinorityFran has many different partnerships with leaders in the community that then help franchise prospects with the access of different opportunities they might be interested in. This first step is just one of many that Yum! takes with their minority organizations to ensure relationships stay strong, and franchisee requests are met.
Yum! is really listening to what their consumers are saying and are trying to cater to their needs. “As we expand our menus, improving nutritional values, while maintaining the great taste of our food is also important to us.” (Yumcsr, 2015). Different ways Yum! is trying to accomplish these goals is not only offering balanced choices, but eliminating or reducing unhealthy ingredients in their food like trans fats, sodium, and calories. (See Appendix C).
In order for Yum! to be credible for their food they need a reliable, and effective resource(s) to be able to take pride for what they are selling. (See Appendix C). Ultimately food safety is the number one priority for all Yum! restaurants globally. Yum! Brand makes sure to not only avoid future problems, but ensures that employees of their different food safety policies and standards. (See Appendix C). Consumers are imperative to any quick service restaurant industry and Yum! upholds not only the global standards needed for a restaurant industry, but as well for the consumers.
The graph below indicates in blue where all Yum! Brand restaurants are located as of 2015.
Yum!, 2015
Existing markets in the Yum! Company
Key Competitor Scoring Matrix
23
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysi
s | C
oncl
usio
n | R
efer
ence
s | A
ppen
dice
s
Table 5
2011 2012 2013 2014 2015 20160.000.100.200.300.400.500.600.700.800.901.00
Comparative Stock Market Performance in Div-idends
McDonalds Wendys Yum! Brands
The reason that the key success factors are weighted accordingly is because as indicated in Table 3 on page 13, 67.20% of people choose fast food because of the convenience. Wide array of options for a wide range of consumers is weighted at 30% because although new markets are essential, if different menu options aren’t offered for different people’s pallets, then quick service restaurants would not succeed.
Nasdaq, 2016
Conclusion After constructing our research of the quick service restaurant industry, we have collected:
Trends, the industry’s segments, the industry's key competitors, and three key success factors. The quick service restaurant industry is continuously expanding its locations worldwide and gaining new consumers each day. These companies are especially focusing on India and China, with consumers disposable income increasing, they are more likely to go to quick service restaurants. The industry is competitive to other restaurant types because of its convenience, affordable value, and providing a wide array of options to satisfy consumers tastes. We gathered information and presented the information in PESTLE, Porter, and business canvas model analysis’ to further explain our research. These analysis’ can be found starting on page 29. The value meal concept has been one trend that every quick service restaurant business has attempted to bring to their restaurants, in order to increase consumer satisfaction while still making profits. One of the largest threats to the industry we have found has been newer types of food chains that may take away consumers. One of these restaurant types is fast casual. Fast casual restaurants offer healthier menu options which is what the consumers want in this society. In the future, restaurants must connect more with social media which has become one of the most popular trends of the digital era. QSR’s can use social media for promotions and advertisements in order to better expose themselves to those of a younger demographic. Also, quick service restaurants need to stay committed to keeping their customers by providing new variety and value in order to gain customer loyalty.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Re
fere
nces
| Ap
pend
ices
24
References In
trodu
ctio
n | B
usin
ess E
nviro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
25
About the Program. (n.d.). Retrieved September 18, 2016, from https://www.wendyshighschoolheisman.com/about/ Ayres, Alyssa. (2015). Forbes. Economic Growth and India's Global Rise. Retrieved from Forbes website
http://www.forbes.com/sites/alyssaayres/2015/08/17/economic-growth-and-indias-global-rise/#506b24de7af3 AYTM. (2014, August 12). Why do you choose to eat fast food?. In Statista - The Statistics Portal. Retrieved September 1, 2016, from http://www.statista.com/statistics/319106/reasons-for-eating-fast-food-us/ AYTM. (2014, August 12). Are you satisfied with the amount of healthy options available at
fast food restaurants?. In Statista - The Statistics Portal. Retrieved September 6, 2016, fromhttp://www.statista.com/statistics/319108/satisfaction-with-healthy-options-
at-fast-food-restaurants-us/. Bizjournals. (2013, April 23). A little insight into Taco Bell’s social media strategy. Retrieved September 18, 2016, from,
http://www.bizjournals.com/louisville/blog/socialmadness/2013/04/a-little-insight-into-taco-bells.html Bizjournals. (2013, April 24). Yum! Brands wants to be best at social media, Novak says. Retrieved September 18, 2016, from
http://www.bizjournals.com/louisville/blog/socialmadness/2013/04/yum-brands-wants-to-be-best-at-social.html Calderone, J & Mosher, D. (2015, September, 15). This new report paints a troubling picture of America’s fast-food chains. Retrieved September 6, 2016, from,
http://www.techinsider.io/20-fast-food-chains-fail-to-respond-to-antibiotics-crisis- 2015-9 Chiara, Adam. (2013, August 23). Fast Food Companies’ Social Media Rankings. Retrieved September 7, 2016, from
https://adamchiara.com/2013/08/23/fast-food-companies-social-media-rankings/ Cho, K. B. (n.d.). The Business Model Canvas. Retrieved September 18, 2016, from https://kevinbcho.wordpress.com/2015/03/02/the-business-model-canvas/ Dna India. (2015). India's quick service restaurants market to touch Rs 25,000 crore by 2020: Assocham. Retrieved from Dna India’s website
http://www.dnaindia.com/money/report-india-s-quick-service-restaurants-market-to-touch-rs-25000-crore-by-2020-assocham-2137767
References
26
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces
| App
endi
ces
Feloni, Ricahard. (2013, November 15). Here’s How Many Fast Food Ads American Kids See Each Year. Retrieved September 6, 2016, fromhttp://www.businessinsider.com/american-children-see-253-mcdonalds-ads-
every-year-2013-11
First Research. (2016, July 25). Fast-Food & Quick-Service Restaurants. Retrieved August 31, 2016, from
http://mergent.firstresearch- learn.com/industry_detail.aspx?pid=433&chapter=1
Food Empowerment Project. (2016). Pollution (Water, Air, Chemicals). Retrieved from: http://www.foodispower.org/pollution-water-air-chemicals/
Franchise Help. (2016). Fast Food Industry Analysis 2016. Retrieved August 31, 2016, fromhttps://www.franchisehelp.com/industry-reports/fast-food-industry-report/
Fromm, Jeff. (2016). Taco Bell Makes Changes in the Millennial Marketing Strategy. Millennial Marketing. Retrieved September 18, 2016, from
http://www.millennialmarketing.com/2013/07/taco-bell-makes-changes-in-the-millennial-marketing-strategy/
Euromonitor International. (2016). China Country Factfile. Retrieved from Euromonitor International’s website
http://www.euromonitor.com/china/country-factfile
Euromonitor International. (2016). India Country Factfile. Retrieved from Euromonitor International’s website
http://www.euromonitor.com/india/country-factfile
Garlow, Ariel. (2014, June 5th) This is how animal agriculture cause deforestation. Retrieved September 4, 2016 from,
http://www.onegreenplanet.org/animalsandnature/this-is-how-animal- agriculture-causes-
Goldstein, Zachary. (2013, November). The Race for Long-Term Customer Loyalty. Retrieved September 6, 2016, from,
https://www.qsrmagazine.com/outside-insights/race-long-term-customer-loyalty
Graham, Cameron. (2014, July 23). Study: Why Customers Participate in Loyalty Programs. Retrieved September 7, 2016, from
http://technologyadvice.com/blog/marketing/why-customers-participate-loyalty-programs/
Gregory, L. (2015, October 06). McDonald's Five Forces Analysis (Porter's Model). Retrieved September 06, 2016, from
http://panmore.com/mcdonalds-five-forces-analysis-porters-model
References
27
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces
| App
endi
ces
Hanks, Gerald. (2016) FDA regulations on fast food. Retrieved from: http://smallbusiness.chron.com/fda-regulations-fast-food-64834.html
Hanly, Samantha. (2016) Rules for Employees at Restaurants. Retrieved from: http://smallbusiness.chron.com/rules-employees-restaurants-20791.html
Hume, S. (2014, May 12). Wendy's moves to target Millennials. Retrieved September 18, 2016, from http://www.csmonitor.com/Business/The-
Bite/2014/0512/Wendy-s-moves-to-target-Millennials
IbisWorld. (2016). Global Fast Food Restaurants. Retrieved August 31, 2016, fromhttp://www.ibisworld.com/industry/global/global-fast-food-
restaurants.html
IbisWorld(2015). Market share of leading brands in the United States fast food industry in 2015. Retrieved September 06, 2016, fromhttp://www.statista.com/statistics/196611/market-share-of-fast-food-restaurant-corporations-in-the-us/
Johnson & Nazario, (2016.) We tried the new value menus at McDonald's, Burger King, and Wendy's — and the winner is clear. Business Insider Inc. Retrieved from http://www.businessinsider.com/best-value-menu-in-fast-food-2016-1/#in-an-attempt-to-drum-up-sales-and-attention-wendys-tipped-the-fast-food-bargain-battle-in-october-with-a-combination-value-meal-that-includes-four-set-items-for-4-2
Kennedy, Merrit. (2016, February 1). E. Coli Outbreaks at Chipotle Restaurants ‘Appear To Be Over,’ CDC Says. Retrieved September 5.2016, fromhttp://www.npr.org/sections/thetwo-way/2016/02/01/465182718/e-coli-outbreaks-at-chipotle-restaurants-appear-to-be-over-cdc-says
Kim, Y., Hertzman, J., & Hwang, J. (2010). College Students and Quick-Service Restaurants: How Students Perceive Restaurant Food and Services. Journal Of Foodservice Business Research, 13(4), 346-359. doi:10.1080/15378020.2010.524536
Lea, W. (2012, April 5). The New Rules of Customer Engagement. Retrieved September 18, 2016, from http://www.inc.com/wendy-lea/new-rules-of-customer-engagement.html
LexisNexis. (2016, May 24). Global Quick Service Restaurants Market 2016-2020-Rise in Nutritious On-the-Go Breakfasts- Research and Markets. Retrieved August 25, 2016, from http://www.lexisnexis.com/hottopics/lnacademic/
MBA Crystal Ball. (2016). Porter’s Five Forces. Retrieved September 06, 2016, from http://www.mbacrystalball.com/blog/strategy/porters-five-forces/
References
28
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces
| App
endi
ces
McDonalds. (2016). Corporate McDonald’s Financial Reports. Retrieved from McDonalds’ website
http://corporate.mcdonalds.com/mcd/investors/financial- information/annual-report.html
McGeehan, Patrick. (2016, August 30). Christie Vetoes Minimum Wage Bill, Calling Raise to $15 Really Radical. The New York Times. Retrieved September 7, 2016, from
http://www.nytimes.com/2016/08/31/nyregion/christie-vetoes-minimum-wage-increase-for-new-jersey.html?_r=1
Mick, Jason. (2014, May 27). After McDonald’s Strikes, Corporation Eyes Replacing Workers with Robots. Retrieved September 6, 2016, from,
http://www.dailytech.com/After+McDonalds+Strikes+Corporation+Eyes+Replacing+Workers+With+Robots/article34956.htm
Mintel. (2016, May). Quick Service Restaurants. Retrieved August 24, 2016, from http://academic.mintel.com/homepages/sector_overview/2/?__cc=1
Oches, S. (2011, August). Top 50 Breakdown by Market Segments. Retrieved September 06, 2016, from
https://www.qsrmagazine.com/reports/top-50-breakdown-market-segments
Perkins, Cyndi. (2016). Political Problems Affecting the Restaurant Industry. Retrieved September 5, 2016, from
http://smallbusiness.chron.com/political-problems-affecting-restaurant-industry-62098.html
Pipes, Kerry. Fast Food Franchise Industry Is Rushing to Acquire Technology Tools That Will Help It Stay, Well, Fast. Retrieved from: http://www.franchising.com/articles/fast_food_franchise_industry_is_rushing_to_acquire_technology_tools_that_wi.html
QSR Magazine. (January, 2016). 9 Fast Food Trends for 2016. Retrieved August 31, 2016, from
https://www.qsrmagazine.com/reports/9-fast-food-trends-2016?page=1
Ratcliff, Christopher. (2014, April 16). Pizza Hut Tops the social chart for young audiences, is this a deserved win. Retrieved September 18, 2016, from
https://econsultancy.com/blog/64709-pizza-hut-tops-the-social-chart-for-young-audiences-is-this-a-deserved-win/
Statista. (2015). Statistics and facts about the fast food industry. Retrieved August 31, 2016, from
https://www.statista.com/topics/863/fast-food/
References
29
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces
| App
endi
ces
Technomic. (2014, June). Consumer opinion on the value for money of fast-food and fast casual restaurants in the United States as of June 2014. In Statista - The Statistics Portal. Retrieved September 6, 2016, from
http://www.statista.com/statistics/307121/consumer-opinion-on-fast-food-fast-casual-restaurant-value-for-money-us/
The Fiscal Times. (2012, December 5). KFC’s Bucket List: Figure out who it’s Customers are. Retrieved September 18, 2016, from,http://www.thefiscaltimes.com/Articles/2012/12/05/KFCs-Bucket-List-Figure-Out-Who-Its-Customers-Are
The Wendy's Company Announces Partnership With U.S. Department of Energy's Better Buildings Challenge. (2016, January 29). Retrieved September 18, 2016, from http://ir.wendys.com/phoenix.zhtml?c=67548&p=irol-
newsArticle&ID=2133647
Thompson, Van. (2016) Labor Law Rules in Restaurants. Retrieved from: http://smallbusiness.chron.com/labor-law-rules-restaurants- 62124.html
Tice, Carol. (2014, September 12). 4 Threats That Could Spell the End of Cheap Fast Food. Retrieved September 1, 2016, fromhttp://www.forbes.com/sites/caroltice/2014/09/12/4-threats-spell-the-end-of-cheap-fast-food/#6ff7e235216e
Tice, Carol. (2012, December 7). How Restaurants Are Using Technology to Deliver Better Customer Service. Forbes. Retrieved September 7, 2016, from
http://www.forbes.com/sites/caroltice/2012/12/07/how-restaurants-are-using-technology-to-deliver-better-customer- service/
#50436f6d626d
Trading Economics. (2016). United States GDP Growth Rate. Retrieved from Trading Economics website
http://www.tradingeconomics.com/united-states/gdp-growth
Wendy's Global Growth Vision. (n.d.). Retrieved September 18, 2016, from https://www.wendys.com/en-us/about-wendys/global-growth-vision
Wendy's North America Franchising General Information. (n.d.). Retrieved September 18, 2016, from
https://www.wendys.com/en-us/about-wendys/wendys-north-america-franchising
Wendy's Partners With Dave Thomas Foundation for Adoption for a Sweet Fundraiser. (January 19). Retrieved September 18, 2016, from http://www.wboc.com/story/11846004/wendysr-partners-with-dave-thomas-foundation-for-adoption-for-a-sweet-fundraiser
References
30
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces
| App
endi
ces
Whitehead, Shelly. (2016, June 22). Americans have lots of new-found love for fast food, but still smitten with full-service. Retrieved September 7, 2016, fromhttp://www.qsrweb.com/articles/annual-survey-shows-americans-much-happier-with-fast-food-these-days-with-one-exception/
Yum Brands. (2016). Yum Brands Annual Report. Retrieved from Yum Brands website
http://www.yum.com/annualreport/
A: PoliticalThe upcoming election has caused a rise in concern not only from the business owners of the food service industry, but for consumers as well. Business owners observe candidates throughout the election process in order to better understand which candidate or candidates are more likely to either make legislative changes in favor of the business or, keep the status quo. Some of the factors taken under consideration include health initiatives, minimum wage changes, health care among other types of reform. Restaurant business owners also have to worry about the taxation that can rise, such as credit card swipe fees. When the political candidates start preaching about different budget ideologies for the country, consumers then start becoming fearful for their own personal budgets. This fear then would result in consumers not willing to spend money on the non-necessities, like the quick service restaurant industry. A great example of a benefit of legislative change are menu mandates, which set a certain bar of quality. As a result of this, restaurants are pushing towards healthier menu options, which can include restaurants now using local produce in their recipes as well, which is great for the consumer. Also some candidates exercise their belief in using alternative energy as well as alternative fuel suppliers. The whole restaurant
industry is at risk for major changes to come in this coming election, that can either help or tamper their now comfortable ways of operating.
Social
Legal
Environmental
Technological
Political
Economic
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
One prominent discussion that has been ongoing in current politics, is the debate over whether or not to raise minimum wage jobs, which includes plenty of quick service restaurant jobs. As of April, 2016 New York passed legislation which will implement a $15 minimum wage for New York in 2018. As of August 2016 Chris Christie, New Jersey Governor vetoed a bill to raise the minimum wage stating that it would “would trigger an escalation of wages that will make doing business in New Jersey unaffordable.” (McGeehan 2016). This represents an ongoing political battle that most businesses would like to avoid. An increasingly likely possibility is that when wages are hiked, the industry could move towards automating some positions in the restaurants in order to keep costs low.
A1Figure 4(DailyTech, 2014)
A: EconomicGiven that the competition between players in the quick service restaurant industry is so intense, the economy is always a major factor. Considering the ease at which a consumer can replace one quick service restaurant for the next, companies are always fighting with one another over value. The value meal concept has been a staple in the quick service restaurant industry and has expanded rapidly recently, as consumers are constantly searching for a meal worth more than they are paying. For example, on the fourth of April 2016, Wendy’s revealed a 4 for 4$ value meal, which caused a chain reaction of competitors attempting to offer their best value meals. McDonald’s and Burger King each responded by each offering a 2 for $2 McPick deal and a 5 for $4 value meal respectively (Riggs. Twist on combo Meals). Another example of the rapidly increasing demand in value meals is the amount of increase in sales of value meals between the year ending January 2015 and January 2016. According to an article by Bonnie Riggs published by Stagnate Partners Media, the amount of hamburger based quick service restaurant sales for value meals rose
approximately 110 Million up to 670 Million in the year ending January 2016. It seems like the value meals have attracted more consumers from their value meals they implemented. Stock value has gone up from previous years for quick service restaurants but still have not surpassed the full service restaurant industry
Political
Social
Legal
Environmental
Technological
Economic
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
A2
Whitehead, 2016
A: SocialThe relationship between the quick service restaurant industry and social influence is immense. The main goal of quick service restaurants is to always satisfy the consumer, and one way the companies interpret the wants of the prospective consumer is through identifying social trends. Through studying social trends, quick service restaurants can attract consumers through target marketing and making changes to the menu or even the look of the establishment. Another social aspect that is very important to the growth of the modern day quick service restaurant industry is through social media. Social media allows businesses to have a digital presence, which resonates strongly with those that fall into the younger demographic. Through constant reminder and exposure to a company's digital presence on social media, potential consumers become more likely to consider
trying that brand when they drive past their local franchise the next time. For example, as of August 2016 KFC has unleashed a fried chicken-eating filter on popular social media platform snapchat. Alongside this marketing project, KFC also released 3,000 free bottles of fried chicken scented sunscreen which “sold out” almost instantly. Due to the almost instant sell out of product, KFC did another release of 3,000 bottles a few weeks later, which also were gone within the hour. This scheme is an excellent example of the lengths that companies have to go to in order to attract the next consumer, sometimes going so far out of the food industry that you end up in the sunscreen industry.
Political
Economic
Legal
Environmental
Technological
Social
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
A3Chiara, 2014Figure 6
A: Technology Technology is shaping the quick
service restaurant industry, whether it be through online ordering or paying for your meal from a tablet stationed at each table. Integrating technology into the quick service restaurant industry is transforming the way that people eat. Kiosks that take customers orders are cutting down labor costs for restaurants. Companies are also using computers to automatically reorder certain ingredients when the inventory is getting low. Even company executives are receiving information automatically from the restaurants to determine what future moves to make or trends that are arising. Technology has also been a cause for increased brand exposure to younger children who watch television and frequently use the internet through video advertising.
Restaurants are also turning to Facebook to increase sales. Customers can order through
Facebook making their experience that much easier. Sit down restaurants are offering tablets at each table that customers can pay their bill from. This cuts out the need for the waitress to take your card elsewhere. Everything can be done within the reach of your seat. This creates faster service because the customer doesn’t have to wait for the waitress to run their card. Quick service restaurants are adding in digital menu boards to the drive thru, because they can change at an instant with any promotion or special deal that the establishment wants to run for only a short time.
Political
Economic
Social
Legal
Environmental
Technological
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
A4
Table 6
A: Legal
Environmental
Political
Economic
Social
Technological
LegalLegal
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
A5
The U.S. Food and Drug Administration is a federal agency that regulates the quick service restaurant industry. Quick service restaurant workers must complete a course on proper food handling and know how to recognize what causes major foodborne illnesses. Food preparation must be taken seriously as well. Surfaces must be cleaned thoroughly to prevent bacteria from forming and contaminating the food. Leftovers must be refrigerated immediately. Temperature, humidity, and barometric pressure must be monitored closely. With increasing worry about healthy eating, the FDA has made regulations that state that restaurants must display their nutritional information for the public to see.
The FDA also regulates the employees. Employees must wear closed toed shoes to prevent injury if a knife were to fall. The shoes also have to be non-slip because of the hazard of wet floors. Employees are expected to have their hair pulled back to prevent contamination in the food. They are required to wash their hands regularly, between tasks, and after using the bathrooms. Each individual has a unique policies regarding customer service. Restaurant employees also must communicate together to ensure efficient
and stress free service for the customers.
The Fair Labor Standards Act (FLSA) is the primary act that regulates labor laws federally. States may also make labor laws that take precedent over the federal laws, if they are stricter. Restaurants undergo safety and health inspections to ensure the rules are being followed. The FLSA states that there must be a minimum wage. The minimum wage is lower for workers who receive at least $30 in tips a month. Employees cannot work without getting paid.
Employees who earn their salary by the hour can only work 40 hours a week before getting paid overtime. Corporate and executive officials are exempt from this rule because they are typically paid on a salary basis, not by the hour. Children cannot work in restaurants until they are 14, but even at that age, the regulations are extremely strict. The individual can only work for no more than 3 hours a day. At the ages of 15 and 16, the employee can then work no more than eight hours each day during a week in which they also have school. On weeks when they are not attending school, they can work no more than 40 hours a week. Safety is also a big concern in the quick service restaurant industry. Establishments cannot deliberately put their workers or customers in harm's way and are subject to submitting regular safety inspections.
A: Environmental
Environmental
Political
Economic
Social
Technological
Legal
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
The animal farming industry is the raising and slaughtering of commonly consumed animals for their meat products among other uses. Animal farms produce plenty of waste and traditionally farmers have used the waste as fertilizer for their land. However, there is so much excess waste that farmers are having a hard time figuring out what to do with it. Excess waste and synthetic fertilizers that don’t get absorbed into the earth get washed away by rain and pollute nearby streams and waterways. As insects become more immune to the chemicals being used on the crops, scientists are coming up with more toxic chemicals to use. Antibiotics that were administered to the animals are found on bugs. More than half the greenhouse emissions are caused by animal
A6
Tech Insider, 2015agriculture. Methane, which is produced by cows, is depleting the ozone layer. An Irish research group conducted a study that stated that 90% of methane emissions from cows comes from belching. Cows produce between 80kg to 100kg of methane a year.
There is currently 269,000 tons of food and beverage packaging floating around in the ocean. If the United States were to recycle all of the recyclable material instead of throw it away, it would be worth $11.4 billion. The fastest growing type of packaging is plastic packaging, which gets recycled less than 14% of the time. The United States is struggling to catch up to other developed nations and their recycling habits. A major issue behind the united states not recycling as much as the rest of the world is that most establishments don’t have recycling bins system wide. Food companies in Europe are in charge of the packaging that they create. They pay for the collection of their packaging trash in Europe but refuse to do so in the United States.
Table 7
B: Threat of New EntryIn the quick service restaurant industry, there is a moderate threat of new entrants. The emergence of new competition in the market only hurts the already existing restaurants in the industry. New entrants take consumers away from the other restaurants causing a threat to them. The fact that there is a low substitution cost to switch to another restaurant hurts the companies because it gives the consumers many options to pick from. This factor is a strong threat to the quick service restaurants.
However, it is very hard for a brand to get started in this industry. It takes a lot of time and money to be able to build a brand to compete with the likes of McDonalds, Burger King, and Wendy’s, etc. This makes it hard for these new entrants to compete with the already existing brands in the industry. This weakens the threat that new entrants impose on the current industry.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
CompetitiveRivalry
SupplierPower
Buyer Power
Threat of New Entry
Threat of Substi-tution
However, the threat of new entry is still moderate, because of the low cost of substitution that can drive consumers to newer, smaller restaurants in the quick service restaurant industry. Although it is tough to enter the industry, the rising amount of choices given to the consumers poise a threat to the already existing companies in the quick service restaurant industry.
B1
CompetitiveRivalry
SupplierPower Buyer
Power
Threat of New Entry
Threat of Substi-tution
B: Buyer PowerThe power of the consumer in the quick service restaurant industry can be very high. Since the fast food market is highly saturated, consumers can easily choose between various restaurants at just about any time. They can also avoid certain places if they have had bad experiences or if they do not like their menu. This saturation puts a lot of power in the consumer's hands, and quick service restaurants need to come up with ways to combat this power.
Another factor that puts power into the consumer's hands is the large amount of substitutes to the fast food industry. Consumers have options such as fast casual restaurants, better burger spots, local bakeries, and also cooking their own meals as substitutes to fast food. Some ways that quick service restaurants can combat this power is by forming customer loyalty with the consumers and by keeping up with current market trends. Keeping up with the market trends can help keep your customer base from going to other restaurants that offer the same type of item that is trending. The main way that these restaurants can improve customer loyalty is by improving their products and keeping them up to their customers’ standards. These are the factors that contribute to the strong force of buyer power in the quick service restaurant industry.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
B2
B: Threat of SubstitutionThe threat of substitution in the quick service restaurant industry is very strong. The consumer has a lot of different options and can easily switch from one restaurant to another. They also have the option of eating at home or dining at a restaurant outside of the quick service industry. Consumers have so many options outside of fast food and many of them offer similar items that the fast food restaurants offer. This means that the quick service restaurants have to keep their food and service up to par with the consumers’ preferences, or else they will lose their customers to these outside competitors.
The quick service restaurants have to constantly update their menu to meet the consumer's standards, and make sure they’re keeping their product at a quality that the consumers enjoy. By doing this, they keep their customer base loyal and returning as frequent customers. If the company can keep their customers loyal, then the threat of substitution reduces and increases the difficulty for new firms to enter.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
CompetitiveRivalry Buyer
Power
Threat of New Entry
Threat of Substi-tution
SupplierPower
In the end, the threat of substitution is a major threat to the firms in the quick service restaurant industry. Consumers hold a great amount of power to choose where they eat, which creates this threat. The best way these companies can fight this threat is by making sure their customers are satisfied and want to come back.
B3
B: Supplier PowerThe suppliers in the quick service restaurant industry hold a very minimal amount of power. This gives the fast food restaurants a key advantage because the suppliers do not have much room to bargain for a higher price. The quick service restaurants can simply choose a different supplier at a lower price if one supplier is asking too high of a price. The suppliers normally do not have any control over distribution, so the restaurants can choose their suppliers freely. Also, there is a large supply of the main resources and ingredients that these restaurants need, which gives the restaurant another key advantage and reduces the power of the suppliers. In the end, suppliers hold little to no power in the quick service restaurant industry, which benefits these restaurants greatly.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
CompetitiveRivalry
SupplierPower Buyer
Power
Threat of New Entry
Threat of Substi-tution
B: Competitive RivalryCompetitive rivalry is a very strong force in the quick service restaurant industry. Due to the large amount of fast food restaurants, there is a very high amount of competition within the industry. Also, the large amount of substitutes to the fast food industry creates an even stronger force of competition for these restaurants. Since consumers can easily pick and choose where they eat, the restaurants make sure they do their best to keep customers satisfied and coming back as frequent customers. The competitiveness of the industry forces fast food restaurants to advertise and market their brand heavily in order to entice consumers and bring them into their restaurants. This makes the factor of competitive rivalry one of the strongest forces in the quick service restaurant industry.
B4
C1
Wendy’s has a number of key partners that they do business with and carry out relations with. One of these partners is the U.S. Department of Energy. Wendy’s partnered with them to join their Better Buildings Challenge, which is a program set up to reduce their use of energy and help save our environment. Another partner of Wendy’s is the Heisman Trophy Trust. This partnership works to give out the Wendy’s High School Heisman Award with the focus of supporting education and the youth in America. Wendy’s also partners with the Dave Thomas Foundation for Adoption which helps foster kids find permanent homes. All of these partnerships are ways that Wendy's gives back to their communities and assist in helping those in need. Wendy’s participates in various key activities that contribute to the success of the company. These activities include preparing quick and quality meals for the consumers, advertising, providing customer service, and helping out in the community. They must prepare quick and quality meals in order to keep the consumer satisfied. Wendy’s uses advertising to get recognized and to bring consumers into their restaurants. Providing good customer service allows consumers to feel like a priority and gives them a better experience at the restaurant. Lastly, Wendy’s often helps out in their communities in order to make a difference and help youth in education and adoption programs. These are some of the key activities that Wendy’s does in order to be successful. Wendy’s relies on a number of key resources that allow them to serve their product to consumers. These resources include the food ingredients, the Wendy’s employees, the kitchen equipment, and even the buildings that Wendy’s operates in. All of these resources are very important in the process of preparing and serving quality food for the consumers. The employees need the ingredients and equipment in order to prepare the product, so Wendy’s relies on all of these resources heavily. Another type of resource that Wendy’s utilizes is the use of patents, trademarks, and trade secrets. These are intellectual resources that include things like recipes, logos, and business methods that they use to create their product and brand. These are the main key resources that Wendy’s uses in order to create their products.
Wendy’s value propositions are the things that they do to bring value to their consumers. Some of their value propositions include quick service, value menu options, quality food, and nutritious options. Providing quick service for their consumers is a value proposition because it is a convenience for the consumer to be able to order and get their food in a short amount of time. Wendy’s value menu options such as the 4 for $4 are a value proposition because they provide consumers with the option of receiving a good amount of food for a relatively low price. Providing quality food and nutritious options are a value proposition because consumers have different standards for what they expect out of a quick service restaurant experience. Therefore, providing nutritious options gives the consumers with high nutritious standards options that they desire. Also, providing all of their products with quality can assure that the consumers value Wendy’s products. These are some of the value propositions that Wendy’s provides to their consumers.
Wendy’s focuses on keeping good relations with their customers in order to keep consumers loyal to them and to be as successful as possible. It was reported that consumers who engage with a brand spend 20-40 percent more on their products. Some of the ways that Wendy’s works to keep good customer relations are maintaining quick and efficient service, and by utilizing social media and their company’s website. Maintaining quick and efficient service can assist in keeping good customer relationships because consumers can go to a Wendy’s restaurant and know they will get their food quickly and be treated respectfully by the employees. Utilizing their website and social media accounts creates better relationships because consumers can interact with their social media and also go there if they have any questions or concerns about them. Their website is also a great place for consumers to go to if they have questions or are seeking to know more about Wendy’s.
C: Wendy’s AppendixKey Partners
Key Activities
Key Resources
Value Propositions
Customer Relationships
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
C: Wendy’s Appendix Cont.
C2
Customer segments are a very important factor for a company. They serve to show which demographics of people the company should target selling to and to determine where to allocate their resources. Wendy’s sets up their customer segments to span across multiple generations of consumers. It was reported that the baby boomer generation accounted for 33% of quick service restaurant visits and Millennials accounted for 25% of the visits. Wendy’s has responded to this by advertising and targeting these different segments in different ways. They set their sights on targeting Millennials in digital marketing areas such as social media and YouTube advertisements. This focus on Millennials has not had a downward effect on the baby boomers because many of them are already set in their eating habits. Those are some of the ways that Wendy’s utilizes customer segments.
Customer Segments
ChannelsWendy’s has a variety of different channels that they utilize to reach their consumers. Some of the channels that they use include TV and other advertisements, internet and social media presence, and their actual business locations. Wendy’s advertisements are a key channel for them because it lets the consumer know what they offer and entices the consumers into wanting their products. Internet and social media presence is another key channel for them because it allows a more interactive experience for the consumer to get to know the products. The physical Wendy’s locations may be the most important channel. They are where the actual business takes place and ultimately is where the consumers make their personal opinions of Wendy’s products. Those are some of the main channels that Wendy’s uses to reach their consumer market.
Wendy’s has a cost structure to determine their expenses and keep track of what they spend money on. Some of the main expenses in Wendy’s cost structure are the costs of labor, ingredients, equipment, advertisement and marketing expenses, and utilities expenses. Wendy’s must keep these expenses in mind when conducting business. It is important for companies to be aware of the outflows of cash and not just the inflows. Those are some of the main expenses in Wendy’s cost structure.
Cost Structure
Revenue streams are all of the different ways that a company brings in money. Some of Wendy’s main revenue streams are selling food and merchandise, and franchising. Every time Wendy’s makes a sale they bring more revenue into the company. Wendy’s also brings in revenue by franchising their restaurants. Wendy’s receives fees from the owners of the franchise, as well as getting a percentage of the gross sales that the restaurant generates. Those are some of the main revenue streams that Wendy’s has to bring in money.
Revenue Streams
Key TakeawaysAfter completing the business model canvas for Wendy’s I came away with a number of key takeaways. While completing my analysis, I was surprised by how much goes into running a company like Wendy’s. I realized how important it is for companies to worry about their inflow and outflow of capital by utilizing their revenue streams and cost structure. I also learned how important it is for companies to utilize different channels to reach different customer segments and create better customer relationships. Another key takeaway is how important a company’s value proposition is. It is one of the most important aspects for a company because it explains how a company provides value to the consumer. If a company fails to provide sufficient value to the consumers, then all of the other aspects are affected. Those are the main aspects that I took away from completing the business model canvas.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
C3
Customer Segments
Key Resources
Key Activities
Value Propositions
Key Partners
McDonald’s has two major key activities that contribute to their success. The first is their emphasis on marketing towards a wide variety of potential consumers. McDonald’s other main focus is providing a quality meal in a timely fashion to each consumer.
McDonalds has many highly respected partners in various fields. With partners such as the NAACP, AAJC and the Wounded Warrior Project among others, McDonald’s has established itself as a respected organization. Other key partners include: National urban League, National Council of La Raza, Catalyst, OCA (Organization of Chinese Americans), Hispanic Association for Corporate responsibility, Executive Leadership Council, American Indian Scholarship fund, Asian Pacific Islander American Scholarship fund, U.S. Business Leadership Network, LULAC (League of united Latin american Citizens), Asian Pacific, Institute for Congressional Studies (APAICS), Congressional Black Caucus, Congressional Hispanic Caucus
McDonald’s is one of the most resource rich quick service restaurants around the world. McDonald’s physical resources includes 36,525 restaurants and approximately 1.9 M employees worldwide as of 2015. Aside from tangible resources, McDonald’s also has several pieces of intellectual property, which include logo trademarking rights, copyrighting and trade secrets which include secret recipes.
The McDonald’s brand has a few value prepositions that help distinguish it from competitors. First and foremost, McDonald’s offers quick and convenient meals. McDonald’s is also excellent at anticipating consumer desires, and contorting portions of their menu in order to appease these desires. However, McDonald’s also keeps a majority of their menu tried and tested items that are distinct to McDonalds. By keeping a traditional menu while changing a few items in order to keep up with trends, McDonald’s is capable of catering to various types of consumers while not upsetting returning consumers by removing staples of the McDonald’s menu.
Channels
Customer Relationships
Revenue Streams
McDonald’s wide range of menu items allows for a very wide range of consumers. McDonald’s targets children, adults, families and businessmen. The emphasis on convenience is more often than not, the deciding factor for where to get food. For example, a family car full of kids can pull through the drive thru, order the #7 meal and be on their way. Another example, is the businessman/woman type who is always in a rush. The breakfast and coffee options are both very convenient for ‘to-go’ customers who are in a hurry.
McDonald’s distribution channels include the stores themselves, the McDonald’s mobile app and postmates.com which delivers the food for you. The McDonald’s brand itself is marketed through the use of television, computer, and radio advertisement.
McDonald’s revenue streams are composed of food and coffee sales, as well as franchises. Franchising is the allowance of a franchisee to use the McDonald’s brand in exchange for a set portion of the franchise’s revenue. This is a very important aspect to the McDonald’s strategy, as approximately 80% of all McDonald’s are franchised.
International Strategy McDonald’s is commonly accepted as one of the best when it comes to providing the consumer with a product they actually want. This strategy is no different in international settings. While McDonald’s keeps a core part of the menu intact, they also use menu items that fit in with local diet trends. For example, McDonald’s Germany offers beer and rice side dishes in China. McDonald’s India offers a widely vegetarian menu, while not exclusively vegetarian.
C: McDonald’s Appendix In
trodu
ctio
n | B
usin
ess E
nviro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
McDonald’s is focused on using consumer feedback in order to better improve every aspect of the company, whether it be employee service or the quality of the food itself. McDonald’s uses Astute Solutions CRM systems in order to better identify the restaurants satisfaction levels in comparison to competitiors.
C: McDonald’s Appendix Cont.
C4
Cost Structure McDonalds has a cost structure that is primarily composed of 4 main groups. These groups consist of: Food and paper products, payroll, fixed assets and advertising. Food and paper products compose of the largest group of expenses, as they are all food products as well as napkins, cups, straws, etc. Payroll is the payment of wages to all employees. The money that goes towards fixed assets is made up of property, buildings, equipment, rent and depreciation towards these things. Advertising is a major expense for McDonald’s, as one of the largest brands in the world.
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
C: Yum! Brand Appendix
C5
Key ActivitiesYum! emphasizes the quick service they offer and the quality of their food as to why they succeed. What Yum! really takes pride in is their Feed the World initiative and their creation of World Hunger Relief. World Hunger Relief is a global program tackles the growing hunger problem by using fundraising and volunteerism. On average the World Hunger Relief program on average 80 million people in 150 different countries. How the Yum! restaurants take part in this program is by using their restaurants as a platform for awareness. They use print and online advertisements, public service announcements, and broadcasting to just name a few. Not only did Yum! start the World Hunger Relief program for global hunger relief, but also Harvest Food donation program for the U.S. The Harvest Food donation program contributes annually seven million pounds of food to 3,000 different non-profit organizations. Solving world hunger as much as they can be just one of the charitable activities that Yum! partakes in.
Key PartnersYum! Has many different associated partnerships throughout it’s company. One for example is the foodservice forum (WFF), which promotes personal and professional growth in the foodservice industry. They also have many partnerships with wide ranges of colleges and other institutions, including the National Hispanic and Black MBA Association, and Consortium for Graduate Study in Management. Yum! also supports the Human Rights Campaign, which helps LGBTQ people ensure that their rights are not violated. Key Resources Yum! uses many different sources to receive their products needed in their restaurants. One partnership that helps with their U.S sourcing of products is Restaurant Supply Chain Solutions. They manage more than $6 billion for Yum! on not just food but also packaging, equipment, and other non-food items They also have a set supplier code of conduct made for their different restaurants. This supplier code of conduct has different expectations made for their suppliers and subcontractors. These expectations include proper working hours and conditions, non- discrimination, child labor, and forced or indentured labor. There are also unannounced assessments of inspections to ensure that their expectations of the company are being met at all times. Yum! also makes sure to have reliable sources but also make sure they use ethical ways when dealing with their food. For example, when dealing with animals Yum! works closely with the Animal Welfare Advisory Council and follows their guidelines. Yum! suppliers are expected to handle their animals in a humane manner. Yum! is very knowledgeable with the standards needed when dealing with animals, but they also go out of their way to receive external consultation just to make sure that they have all information needed. Yum! also makes sure to use care with their produce. The produce suppliers have to be approved before they are sent out and also have to meet the Yum! Brands audit standards. Keeping up to date with these food standards is essential and Yum! makes it their priority to not only meet these standards but exceed them.
Value PropositionsPromotions has been one of the many ways quick service restaurants try to bring in different consumers. Yum!’s different restaurants are included in this type of marketing. They have their restaurants offer different menu items in a bundle, for a cheaper price then buying the items individually. Having three different brands within Yum! gives them different opportunities to try different tactics. Each brand offers different combo meals. For example, KFC has a $20 Fill Me Up Bucket, that offers different menu items for $20. Pizza Hut offers the Big Fall bundle which includes two large toppings pizza and breadsticks. Lastly, Taco Bell offers a quesarito box for five dollars that includes a medium drink, a quesarito, nacho cheese Doritos locos tacos, and a crunchy taco. These are just some of the different examples of combo meals being offered at the different brands. Yum! is also an advocate for using healthier ingredients throughout all of their different restaurants. They are so committed to improving their nutrition that they hired a Chief Global Nutrition Officer in 2012. The appointed officer reports directly to the CEO, informing them the different strategies that can be used to improve their menu items any way they can. Reducing sodium started in 2007 throughout the three different restaurants. Not only does Yum! want to expand their menu items but also promotes to their consumers to use daily exercise in their lifestyles. Yum! tries to provide healthier options, without removing the ingredients that make consumers coming back for more. Yum! strives to do what is best for their consumers and for their employees. Their current strategies are showing to be successful. In
trodu
ctio
n | B
usin
ess E
nviro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
C6
International Strategy As of 2015 Yum! Brand recently expanded in a global perspective and decided to start up Yum! China. They decided to expand because Yum! Brands is the leading retail developer in China, with about 7,200 restaurants in 1,100 different cities. Yum! China makes a point to serve the local taste preferences of the Chinese culture. For resourcing purposes, in China they have their own supply chain system called The China Division which provides Yum! Restaurants China over 500 different suppliers of products and services. Yum! China is no different from Yum! when dealing with their management styles, and only wanting what’s best for their consumers.
Cost Structure In order for Yum! to receive money, they need to be willing to spend money. Like many other quick service restaurants, Yum! spends money on ingredients, different products needed in the restaurants, equipment, and the labor in order for the restaurants to run successfully. They also spend money on different advertisements. Every year Yum! brand restaurants make commercials that they believe will help bring in more consumers. KFC always mentions “It’s finger licking good”, Taco Bell’s motto is “Live Mas”, and Pizza Hut has their own Flavor of Now menu. Yum! has been effective with their spending habits ensuring that their revenue is more than the money they spend.
Customer SegmentsTaco Bell’s target market is millennial in their 20s and early 30s. Taco Bell recently took the kids menu out of their stores because they realized that families were not their #1 demographic. By combining popular tastes together, such as Doritos and their already loved tacos, it creates a new favorite among young adults. Pizza Hut also targets younger markets with its extensive use of social media. Some platforms that Pizza Hut is active on are Facebook and Twitter. KFC targets both young people with their Famous Bowls but they also target families with items such as the Bucket Meals.
Channels Yum! goes down many avenues to reach its consumers. Social media is a big way in which they reach their fans. They also advertise on TV, especially during the Super Bowl. Taco Bell released their commercial on Facebook and it received over 10 million shares. They also take advantage of online ordering to make eating out more convenient and less of a hassle in everyday life.
Revenue Streams Yum! has been very successful throughout their years. Their different menu items have brought in their revenue. Their marketing strategies have seemed to work, as their still is a significant amount of inflow cash from their consumers. They also receive a portion of the sales received at the different franchisee across the world. Yum! sells their brand rights to different owners of their different franchisee’s and then receive money from the different fees to run those franchisees. Yum! would have to do something drastic in order for them to lose their current revenue stream they are now getting. Customer RelationshipsYum! Brands want more of a relationship with their consumers than just handling their food. Each restaurant brand has different programs they offer that makes them connect with more consumers. These programs include the Live Mas scholarship offered from Taco Bell, the KFC Family Fund, and Pizza Hut’s U.S. BookIt Program. These are just some of the programs offered throughout the different Yum! Brand restaurants. Consumers are very important to Yum! and they like to start these different programs in hope of gaining loyalty from more consumers.
C: Yum! Brand Appendix In
trodu
ctio
n | B
usin
ess E
nviro
nmen
t | K
ey S
ucce
ss Fa
ctor
s | C
ompa
ny A
naly
sis |
Conc
lusio
n | R
efer
ence
s | A
ppen
dice
s
McDonald’s vs. Yum! Ratios
C7
McDonald’sRatios (Year Ended December 2015):*In Millions*
Current Ratio: *9,643 / 2,950.4* = 3.27Quick Ratio: *(9,643 - 100.1) / 2,950.4* = 3.23Cash Ratio: *7,685.5 / 2,950.4* = 2.60Equity Multiplier: *37,938.7 / 7,087.9* = 5.35ROA: 4,529.3 / 37,938.7 = 0.12ROE: 4,529.3 / 7,087.9 = 0.64
Dupont system: (4,529.3 / 25,413) .178 X (25,413 / 37,938.7) .669 X (37,938.7 / 7,087.9) 5.35 = .637
Ratios(Year ended December 2012) *In Millions*
CR: 4,922.1 / 3,403.1 = 1.45QR: 4,922.1 - 121.7 / 3,403.1 = 1.41Cash Ratio: 2,336.1 / 3,403.1 = .69Equity multiplier: 35,386.5 / 15,293.6 = 2.31ROA: 5,464.8 / 35,386.5 = .15ROE: 5,464.8 / 15,293.6 = .36
Dupont System: (5,464.8 / 27,567) .198 x (27,567 / 35,386.5) .779 x (35,386.5 / 15,293.6) 2.31 = .356
Yum!Ratios (Year Ended December 2015) *In Millions*
Current ratio=*1688/3088*= .55Quick ratio =*(1688-229)*/3088*= .47Cash ratio- *737/3088*= .24Equity Multiplier- *8075/969*= 8.33ROA- *1293/8057*= 16ROE- *1293/969*= 1.33
Dupont system: (1293/11,145) * (11,145/8075) * (8075/964)=1.33
Ratios(Year Ended December 2012) *In Millions*
Current ratio- *1909/2188*= .87Quick Ratio- (1909-313)*/2188*= .73Cash ratio- *776/2188*= .35Equity multiplier- *9011/2253*= 3.99ROA= *1597/9011*= .17ROE- *1597/11,833*= .71
Dupont System: (1597/11,833) * (11,833/9,013) * (9013/2253)=.71
Intro
duct
ion
| Bus
ines
s Env
ironm
ent |
Key
Suc
cess
Fact
ors |
Com
pany
Ana
lysis
| Co
nclu
sion
| Ref
eren
ces |
App
endi
ces
