fast food industry

Fast Food Industry Advertising

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Fast Food IndustryEconomics of Advertising Presentation

Aaron WeinerJonathan KligmanCharles Funderburk IIICharles Hartsfield


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Survey Question

Survey Question

Industry Overview McDonald’s Burger King Industry

OverviewAdvertising Strategies Data Analysis Survey Recommenda

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What do you think is the most popular fast food restaurant?! Burger King Subway Taco Bell McDonalds Chipotle Wendy’s


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Industry Overview The first fast food restaurant was

called Automat, located in New York City in 1912

Survey Question Industry Overview McDonald’s Burger King Industry


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Industry Overview The first fast food chains were A&W in

1916 and White Castle in 1921

Survey Question Industry Overview McDonald’s Burger King Industry


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McDonalds Paragon Modern Fast Food Restaurant Began in 1940 by brothers Richard and

Maurice Their first mascot was “Speedie”, which then became Ronald McDonald and the Gold Arches in 1961

Survey Question Industry Overview

McDonalds Burger King Industry


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McDonalds Financials




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McDonalds Brand Equity




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McDonalds Top 10 Brand Equity in 2011




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McDonalds Price Parody Theory Big Mac as Economic Indicator Norway- $7.06 US- $4.30 Hong Kong- $2.13




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Burger King Began in Florida in 1953 as Insta-Burger

King After financial difficulties, David

Edgerton and James McLamore purchased the company and gave it the name we know today, Burger King.

Famous for customization from the 2002 slogan, “Have it your way.”

Survey Question Industry Overview McDonalds Burger

KingIndustry Overview

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Burger King Financials




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Burger King Brand Equity




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Industry Overview

Survey Question Industry Overview McDonalds Burger King Industry


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Industry Overview Organization HHI= 636.4 C4= 42%

McDonalds- 21.2%, Yum!- 9.2%, Subway- 6.3%, Wendy’s- 5.3%

All of the big players are publicly traded, besides Subway which is privately owned

Yum! Brands owns: KFC, Pizza Hut, and Taco BellSurvey Question Industry

Overview McDonalds Burger King Industry Overview


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Industry Overview



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Industry Overview Key External Drivers

Consumer Spending Healthy Eating Index Consumer Sentiment Index Agricultural Price Index



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Industry Overview Consumer Spending & Healthy Eating

Index



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Advertising Strategies Informative

Price of product and discount offerings Combative

Quality and brand differentiation Small Segment Targeting

Health options and seasonal products


OverviewAdvertisin

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Data Analysis Survey Recommendation Stock Pitch


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Advertising Strategies Informative One of the most attractive aspects to the

industry is the low price point Quality is mentioned along with price to

inform the consumers that it is NOT cheap because bad quality


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Advertising Strategies Informative Example

McDonald’s Dollar Menu


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Advertising Strategies Informative Example

Burger King’s Two For Price of One Healthy options at a low price


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Advertising Strategies Combative This has become more popular with

rising regulations due to health concerns Prevalent because market is not growing

in size; thus must attempt to take market share from competitors


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Advertising Strategies Combative Example

Big Mac vs. Whopper


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Advertising Strategies Combative McDonalds

Uses celebrities to attract sports fans and young athletes

http://www.youtube.com/watch?v=PmrTDZy3f2M


OverviewAdvertisin

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Advertising Strategies Combative Burger King

Uses sex appeal http://www.youtube.com/watch?v=sl0b12baPjU


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Advertising Strategies Small Segment Targeting This is often utilized as an attempt to

gain new consumers because the market is decreasing by appealing to small segments (health conscious)

Promotes seasonal products that attract specific target audiences


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Advertising Strategies Small Segment Targeting McDonald’s

McDonald’s Shamrock Shake McDonald’s Grilled Chicken Wrap


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Advertising Strategies Small Segment Targeting Burger King

Targeting children Targeting animated movie fans


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Data Analysis The top 10 cities in the industry by

number of establishments are:

New York Los Angeles Chicago Dallas Atlanta

Houston San Francisco Miami Seattle Phoenix


OverviewAdvertising Strategies

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Data Analysis




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Data Analysis We considered a myriad of variables to

regress with the raw data Obesity Income Ethnicity Cost of Living Total Sales $ Population




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Data Analysis




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Data Analysis

Real Income

Obesity

Race

Number of Establishments

Sales Per Capita

0 0.1 0.2 0.3 0.4 0.5 0.6

Correlation Analysis for Ad $/Capita

Strength of Relationship




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Data Analysis Ethnicities Considered

Black White Hispanic Asian




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Data Analysis




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Data Analysis




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Data Analysis




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Data Analysis




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Data Analysis

Positive and significant relationship between Ad $’s and sales per capita suggests fast food advertising is successful




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Data Analysis

Fast food revenue’s relationship with Ad $/capita is even more strongly correlated when looking at the establishment level data




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Data Analysis




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Data Analysis




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Data Analysis




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Survey

• 7 questions• 100 respondents• Questions aimed toward

establishing preferences and identifying advertising effectiveness



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SurveySurvey Q1



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SurveySurvey Q2



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SurveySurvey Q3



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SurveySurvey Q4



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SurveySurvey Q5



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SurveySurvey Q6



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SurveySurvey Q7



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Data AnalysisTakeaways:• Real Income and racial composition are big factors in

determining Ad $’s spent in a particular area• Fast Food companies do not target obese/overweight

people• There is some correlation between Ad $’s spent and

revenue, but it is similar to the chicken and the egg situation.


OverviewData

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Recommendation Advertisement Strategies

Continue the promotion of healthier options Promote coffee based drinks and smoothies

Higher profit menu item and low cost Growing market segment

Target higher income classes Data proved that fast food is a Normal Good



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Recommendation For instance McDonalds’ McCafe

Variety of coffee options Able to compete with Starbucks and Dunkin

Donuts Larger profit margins than other products



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CMG – Chipotle Quick Metrics

Mkt Cap: $11.3B Mkt Share: 2.15% and growing quickly LTG Forecast: 19.8% vs. 14.6% industry P/E Ratio: 39.15 vs. 31.2 industry Current Price: $362.79 52 week high: $424.41 17% upside



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Stock is trending higher Revenue 2012: $2.8B Revenue 2013 Est. $3.2B, 2014 Est.

$3.7B (32% increase)



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Risks Commodity

exposure Corn has a highly

correlated inverse relationship with stock price

Consumer Spending If the recovery

faces headwinds, the consumer could decrease spending



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Questions?58

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