quick-service industry overview songki kim jeff ohlman nadine chamseddine dana williams jorge...
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QUICK-SERVICE INDUSTRY OVERVIEW
SONGKI KIM
JEFF OHLMAN
NADINE CHAMSEDDINE
DANA WILLIAMS
JORGE DIETRICH
JOSE GUZMAN
Margin Trends 2004Burger’s Big Three
McDonald % 10 Burger King % -10.5 Wendy’s % 3 McKey Foods: Burgers [McDonalds sub.] Sun Valley: Chicken [TGWU union] McCain Foods GB Ltd: Chips [North York] Sweetheart International: Ronald McDonald cups
and straws [Holland]
Compare 2004 Sales (Mil.)
Burger King,$1,300
$19,065
Wendy's,$3,636Sonics,
$536
$9,170
$-
$5,000
$10,000
$15,000
$20,000
Annual Sales
Yum
McDonald
Market Share 2004Burger’s Big Three
McDonald % 59
Burger King % 21
Wendy’s % 20
Porter’s Five Competitive Forces
Entrants - Low/Moderate- Brand awareness and lower cost competitive advantage. Require time and large capital Investment
Rivalry – High- Burger King, Wendy’s, J.B., are heavy competitors
Power of Suppliers – Low- Most have the purchasing power to negotiate lower prices
Porter’s Five Competitive Forces
Competitive Force - Threat/Power- Prices and product offering are the main sources of competition
Substitutes- Low/Moderate- Trends show consumers prefer healthier and more exotic alternatives
Buying power -Most players have a lower cost competitive advantage. Top players also achieve economies of scale via this
Rivalry among Existing Competitors
Intense rivalry and competition market share among existing fast-food competitors
Slowing growth rate of sales To attract customers….
- increase advertising
- price discount
- offer new product
Threat of New Entrants
Economies of scale force new entrants to enter at a cost disadvantage
Require higher fixed costs to enter existing market
Have strong customer loyalty Willing to defend new entrants with price
discounting and advertising
Threat of Substitute Products
There are….
- numerous restaurants and other eating alternatives
- a variety of high-quality, reasonably priced eating alternatives
Customer switching costs are low
McDonalds Corporation
McDonald’s History In 1955 Milkshake-Machine Salesman Ray
Kroc took out a franchise on a hamburger store owned by two McDonald brothers. Today McDonald’s is the largest fast food operator in the world.
50 Million customers every day, 12000 Restaurants in the USA, and 30,000 Worldwide in 119 countries
The chain has grown by one new outlet every 17 hours in the last decade.
Marketing Strategy
Global Brand Awareness ‘Golden Arches”
Marketing Alliances Global Sponsorship Alignment with country-level marketing
activities Focused on its customers
Marketing Budget
Advertising Costs:• [In Millions]
2004 $ 619.50 2003 $ 596.70 2002 $ 532.30
Subsidiaries
Boston Market Chipotle Mexican Grill Donatos Pizzeria Business Note: in December 2003 McDonalds sold
Donatos Pizzeria Business
Suppliers Europe
Golden West Foods: Buns, Ketchup, Syrup, milkshake mix [McDonald’s subsidiary]
SWOT Analysis
Strengths
Financial Power- McDonald’s spends more on advertising on a single brand than any other organization. In 1986 a colossal $789m, or 6.3% of system wide sales, went to advertising. It is one of the five largest television advertisers in the US, with children as its prime target. After Santa Claus, Ronald McDonald is the figure best known to US Children.
Recipe for Success- McDonalds revolutionized the fast food Industry. They introduced a new production process that lowered labor costs.
SWOT Analysis
Weaknesses/Opportunities/Threats
Weakness-It is possible that a company can become so large it saturates the market.
Opportunities- Because of its financial power McDonalds could move into to other industries/products at any time.
Threats- Competitors, Suppliers, Workers Unions, Attacks of health campaigns, and Environment.
Competitive Trend Analysis
Burger King
BK Background
Founded in 1954
Second Largest Fast Food Chain Worldwide
Global operations of the $11.3 billion company
BURGER KING® restaurants serve approximately 1,072
customers per restaurant, per day, or approximately 11.8
million customers daily worldwide
The BURGER KING® system employs more than 300,000
people system wide
Fascinating BK Facts
Today, Burger King operates the #2 hamburger chain
(behind McDonald's) with more than 11,200
restaurants across the US and in about 55 other
countries
Since its founding in 1955, BURGER KING® has sold
well over 2.1 billion hamburgers annually
BK Brand Strategy
Brand image• Masculine oriented (Burger ‘King’ – not Burger Queen)• ‘‘King’: The larger size than the average burger
Food• Great-taste• High quality• Fun• Value • Portability
Slogan: ‘Have it your way’• Customized• Customer-oriented• Differentiation from other fast-food competitors
BK Marketing Mix Strategy
Product (Whopper) Price (Compare with McDonald,
Wendy’s, Yum! and Subway) Promotion (Stick with the jumbo size
burger – the opposite force against the recent trend of Low Carb)
Place(Distribution)
BK Marketing Mix-Product Whopper Sandwich Fire Grilled Burgers Chicken, Fish & Veggies Salads Breakfast Treats Sides & Beverages Kids Menu
BK Marketing Mix-Price
Price Range
- $4 - $8 for a value meal
The value meal for breakfast
- For example, suggested Enormous Omelet Sandwich retail price: $2.99, or $3.49
BK Marketing Mix-Promotion
Advertising Slogan (2004-present) “Have it your way” Star Wars deal - The fast-food chain's first global promotion
Burger King Offering Low Carb- Allow substitutions of french fries with salads and bottled water for soft drinks
A Big Breakfast at Burger King- Debuts Enormous Omelet Sandwich
Burger King Target Audience
Customer with the sophisticated taste but still need fast food service
Middle class household with the discretionary income
Family with kids
Financial Picture
Private company – hard to obtain numbers
11,200 restaurants 2004 sales 13 billion 2004 sales growth 18.2
Burger King Largest Franchises
AAFES AmeriKing Aramark C&L Carrolls Corp #1
franchise Cimm's Compass Deignan-Kauffman
HMS Host Nath Quality Dining Sodexho-Marriott Sydran TA Operating Group Veterans Canteen Westwind
Exclusive Supplier
Restaurant Services, Inc. (RSI) Cooperative serving BURGER KING®
restaurant owners in the United States. Founded in 1991 Purchasing agent for U. S. Burger King
system.
SWOT Analysis
Strengths
Global Brand Equity The second largest fast food chain (18.8% of US
fast-food hamburger business) Successful items: WHOPPER® Sandwich More than 55 Global market operations Customized Fast Food service Real Estate investment (pursuit of the best
location in town) Financial support from the parent company
(Texas Pacific Group)
Strengths
2nd Largest burger chain Brand recognition and recall Over 11,000 locations worldwide WHOPPER has highest brand recognition Economy of scale provides buying power Unique product to differentiate product (flame
broiled). Customization allows customer to “have it your
way”
Weaknesses
Declining market share Self-restricted the diversification of
product development because of stickiness to strong ‘Burger King’ brand image
Weak product development
Slowed revenue and income growth
Weakness We are in a “Burger Slump” BK has no other business segment Ameriking , 2nd largest franchise filed for Chapter 11 “Revolving” door in corporate board room, 10 CEOs in 14 years High franchise rate makes BK vulnerable to multiple disparate
policies Failure to introduce new brand lines 3 of 10 largest franchises are in chapter 11 Lackluster marketing
International expansion
Only serving 1% of the world’s
population (Potential growth in
China & India with new product
development)
Growing dining-out market
Opportunities
Opportunities
Consumers have positive perception of brand.
Take advantage of healthy eating trend. Consider new brands and franchises. Reduce cost of entry for BK franchise Expand in Asia market Reduce underperforming outlets
Mature industry Fiercely competitive environment
• With other franchises (McDonald)
• With the local competitor Growing health-conscious consumers (Low Carb Trend)
• The social issue of McDonald’s ‘Supersize me’ Changing demographics (Rapid transition into the aging
society) Vulnerability to the fluctuation of foreign exchange rates from
expanding global operations Unreliability of supplier for the recent cow-related disease
(i.e. Mad Cow Disease)
THREATS
BK Marketing Mix-Place
AmeriServe Food Distribution - It plans an orderly transition of distribution services - Approximately 5,800 Burger King restaurants currently
served H & H Foods
- Supply South Texas-area Burger King ® restaurants with beef patties
Restaurant Services, Inc. (RSI) - The exclusive purchasing agent for the vast majority of
products and services used by BURGER KING® restaurant owners in the United States and is manager of the system's supply chain.
Bibliography
Corporate Information http://proquest.umi.com/pqdweb?index=0&did=168203801&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1126476479&clientId=30358
Franchise list http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105&STORY=/www/story/11-12-2002/0001839842
Marketing Strategy http://proquest.umi.com/pqdweb?index=3&did=818659331&SrchMode=1&sid=1&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1126477227&clientId=30358
SWOT http://search.epnet.com/login.aspx?direct=true&db=buh&an=16823714 Corporate Info - http://www.bk.com/CompanyInfo/index.aspx
Sonics Annual Report (2004) - http://www.sonicdrivein.com/pdfs/annualReports/04_12annualReport.pdf
Financial Info - http://www.hoovers.com/burger-king/--ID__54531,ticker__--/free-co-fin-factsheet.xhtml
SONIC DRIVE-IN
Sonic, America’s drive-in, originally Top Hat drive-in,started as a hamburger and root beer stand in 1953.
Sonic is the largest chain of drive-in restaurants in the United States and Mexico, with more than 1 million customers a day
Sonic has 3000 drive-ins coast to coast
Sonic Marketing strategy
Multi-layered growth strategy, targeting earnings per share of approximately 20% for the year ending September 2005.• Addition of drive-ins
• Increasing media expenditure to boost brand awareness
• Accelerating franchise development and ascending royalty rate
Sonic Marketing strategy
Highly differentiated concept, through personalized carhop service, and a variety of menu choices.
Accelerated Expansion program• Opening 167 new franchises in 2004
• Opening 188 new drive-ins in 2004
• Planning to open 185 drive-ins in 2005
Sonic Marketing strategy
Solid Sales Trends• Sales increase of 13% in 2004, and 6.5%
same store sales
• Sales increase of 18% in 2005, and 6.8% same store sales
Sonic Marketing strategy
Solid Financial performance• Revenues rose 20% to $536 million 2004 and
18% in the first nine months of 2005
• Net income per diluted share rose 19% in 2004 and is up to 21% the first nine months of 2005
• ROE has exceeded 20% for five consecutive years.
Sonic Subsidiaries
Sonic Industries Sonic Restaurant
Sonic Strengths
Carhop Service: many customers enjoy the personal carhop who delivers the order to the car with a free mint
Overall Good Company: Listed for the 10th consecutive year by Forbes magazine to be one of the “ 200 best small companies in America”
Sonic Strengths
Multi-layered growth strategy:
• Listed at number 50 for percentage increase in sales on the top 50 Growth chains list( Restaurant Business, July 2003)
• Ranked number 80 on the Hot Growth Companies list ( Business Week, June 2003)
Good Franchise: Listed in the top 10 on Entrepreneur magazine’s “Franchise 500 list” (January 2003)
Great Sales Records: Increase of 13% in 2004 , and 18% in the first 9 months of 2005.
Continuously increased revenue ( chart 1)
SonicStrengths
Menu• Unique menu items that include Toaster Sandwiches,
extra- long cheese coneys, hand battered onion rings, and a variety of drinks and deserts
• Quality Burgers: named one of the top three in the Best Overall burger QSR category for seven consecutive years( Restaurants & Institutions Annual Choice in Chains Awards, March 2003)
• Cream pie shake distinguished as most appealing and unique beverage in its category and receives “Best in Class” award ( Restaurant Business, May 2001)
Sonic Weaknesses
International Presence: Except for 7 drive-ins in Mexico, Sonic Does not have a well established international market
Brand awareness: although Sonic has a differentiated service that is the carhop, and a quality burger, it is still not viewed as the leader in the fast food industry.
Cost of the international franchise: To get a Sonic international franchise, the investor must have $3.5 million in assets and $2.5 million in cash which could hinder the development of new franchises abroad
SonicOpportunities
International market growth National market: more than half of the
3000 drive-ins are located in 9 states, the rest are developing markets
Sonic Threats
Obesity awareness: this will push sonic to include light meals
Gas prices: the rise of gas prices will increase the prices of sonic
Hurricane Katrina will have negative impact on the Sonic Franchises since Louisiana and Mississippi are two core markets for Sonic. 60 restaurants in Louisiana, Mississippi and Alabama were damaged by Katrina.
Mad Cow disease: This may eventually lead to customers shifting to other fast foods alternatives
SonicRevenue Revenue for the fiscal year ended August 31,2004 Revenue for the nine months ended May 31,2005 Projected revenue for the year ended August 31, 2005
$280,056 $280,056$330,638
$446,640$536,446
$442,493
$589,990
$32,627 $32,627 $38,956 $52,261 $63,015 $51,341 $68,454$0
$100,000$200,000$300,000$400,000$500,000$600,000$700,000
2000 2000 2001 2003 2004 2005 projected2005
Total Revenues
Net Income
SonicDrive-in Sales Sales for the fiscal year ended August 31,2004 Sales for the nine months ended May 31,2005 Projected sales for the year ended August 31, 2005
$224,880 $267,463 $330,707 $371,518 $499,551
$1,533,948$1,704,014$1,874,562$1,988,842
$2,219,340$1,777,235
$2,369,647
$449,585 $374,663
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2000 2001 2002 2003 2004 2005 projected2005
partner drive ins
franchise drive ins
SonicPorter’s Analysis
High rivalry among competitors• Little product differentiation
• Low customer loyalty which leads customers to shift easily to another fast food chain.
• High number of fast food restaurants.
SonicPorter’s Analysis
Low threat of new entrants• Economies of scale. Sonic alone has 3000
drive ins which makes the cost of manufacturing low, and thus giving it a competitive advantage
• High Capital requirement ( equipment and training)
• Service differentiation through carhops
SonicPorter’s Analysis
Low bargaining power of supplier• Cost of shifting suppliers is low
• Substitute products are not an option because beef is part of the burger
SonicPorter’s Analysis
Threat of substitutes• People can shift to a different fast food
Low bargaining power of buyer• No buyer concentration
Sonic References
http://www.fastfoodfacts.info/blog/ http://www.entrepreneur.com/franzone/d
etails/0,5885,12-12---282811-,00.html www.Sonicdrivein.com
JACK & THE BOXCOMPETITIVE ANALYSIS
IMPORTANT DATES Born in San Diego California 1.951 as a Pioneers in
the “Drive-Thru” serving system Major expansion to 1000 restaurants in the Western
and Southwestern markets They become a private owned company in 1988 1.992 went public with 17.2 million shares 1995 Great advertising campaign with expansion to
Southeastern markets until 2001 With a long-term goal of becoming a national
restaurant company, Jack in the Box entered the fast-casual restaurant category in 2003
STRATEGY
Jack in the Box Inc., founded in 1951, is a restaurant company that operates and franchises Jack in the Box® restaurants and, through a wholly owned subsidiary, Qdoba Mexican Grill®.
The company also operates approximately 40 proprietary convenience stores called Quick Stuff, which is a major-branded fuel station and is usually developed adjacent to a full-size Jack in the Box restaurant.
COMPANY STRATEGY… Jack in the Box is among the nation's leading fast-food
hamburger chains, with more than 2,000 quick-serve restaurants in 17 states. As the first major hamburger chain to develop and expand the concept of drive-thru dining.
Jack in the Box has always emphasized on-the-go convenience, with approximately 85 percent of the half-billion guests served annually buying food at the drive-thru or for take-out. In addition to drive-thru windows, most restaurants have indoor dining areas and are open 18-24 hours a day.
COMPANY STRATEGY… Jack in the Box offers a broad selection of distinctive,
innovative products targeted at the adult fast-food consumer, including hamburgers, specialty sandwiches, salads and ice cream shakes. Hamburgers represent the core of the menu, including the signature Jumbo Jack, Sourdough Jack and Ultimate Cheeseburger. And, because value is important to fast-food customers, the company also offers value-priced products on "Jack's Value Menu," including tacos, a chicken sandwich and Breakfast Jack.
SUBSIDIARIES
Qdoba Mexican Grill, which was acquired by Jack in the Box Inc. in January 2003, is an emerging leader in fast-casual dining
Operates more than 230 restaurants in 35 states. Qdoba is renowned for offering nouveau Mexican
cuisine
SWOT ANALYSISStrengths
The revenues of the company for the last four years are continually growing
The company is also showing good profits The company is remodeling 200 stores per
year Offers higher quality customer service
Weakness
The company has to spend an a higher percentage of money in advertising, assets, and strategic planning.
They do not have much presence in the Southeast region which is a profitable market.
OPPORTUNITIES
Since Jack in the Box is a very well known company in the Southwest they can always use this good-will in order to attack other markets now that the company is growing .
THREATS
The late increase in the meat and oil prices
Changing consumer tastes & preferences Large investments required to stay
competitive are eating away at profit margin
TRENDS
TRENDS
TRENDS
Yum! Brands, inc.
Yum! Brands inc. is the largest restaurant company with more than 34,000 company, franchise, license, and joint ventures, in more than 100 counties.
.
Yum! Brands, inc.
Oct 1997 Pepsi co. owner of KFC, pizza hut, and Taco bell formed a publicly owned and independent company: Tricon Global restaurants inc.( Yum! Brands former name)
May 2002 the company acquired Yorkshire Global restaurants, Inc. and changed the name to Yum! Brands, inc.
Yum! Brands, inc. Growth Strategies
Build dominant China brands• China is the number one market for new
company development
• China division operating profits were more than $200 million in 2004
Run great restaurants• 100% CHAMPS culture restaurants
(Cleanliness, hospitality, Accuracy, Maintenance, Product Quality and Speed)
Yum! Brands, inc.Growth Dtrategies
Multi-brand great brands• Yum! Is the world leader in multi-branding,
offering consumers more choice by combining two brands under one roof
• Yum! Owns 2900 multi-brand restaurants Worldwide.
Yum! Brands, inc. Growth strategies
Drive profitable international growth• Yum! Restaurants International (YRI) owns
more than 11,000 restaurants outside the US
• YRI opened 700 restaurants every year for the past 5 years. And in 2004 YRI opened 3 new restaurants each day of the year.
• In 2004 YRI revenues totaled $2.1 billion, and operating profit reached $337 million
Yum! Brands, inc.A & W Restaurants, inc.
Is based in Louisville, KY Founded in 1919, serving all American
pure beef hamburger and hot dogs. Owns 600 food outlets in 13 countries
and territories around the world and 600 points of distribution at Yum! Multibramds restaurants.
Yum! Brands, inc.KFC Corporation
Is the most popular chicken restaurants chain Is based in Louisville, KY Was founded in 1953 and specializing in
Original recipe, Extra Crispy, and Colonel’s Crispy Strips with home style sides, BBQ Wings, and Chicken sandwiches.
Owns 13000 outlets in more than 80 countries
Yum! Brands, inc.Long John Silver’s, inc.
Is the world’s largest quick-service seafood chain.
Is based in Louisville, KY Was founded in 1969and specializing in
batter-dipped fish, chicken, shrimp, and hush-puppies.
Owns 1200 restaurants worldwide, and 200 additional points of distribution in multi-brand restaurants
Yum! Brands, incPizza Hut Inc.
Is the World’s largest pizza restaurant company
Is based in Dallas, TX Specializes in pan pizza, thin n crispy pizza,
hand tossed style pizza, and stuffed crust pizza
Owns 7500 restaurants in the USA, and more than 4500 restaurants in over 80 countries
Yum! Brands, incTaco Bell Corp.
Is the nation’s leading Mexican-style quick service restaurant
Specializes in Tacos, burritos, quesadillas, border bowls, and nachos
Owns 6000 restaurants in the USA and serves 35 million people.
Yum! Brands, inc. Corporate Responsibility
Community involvement• Yum! Brands foundation corporate sponsor of
dare to care program to end hunger
• YUMeals program to end hunger in the USA
• Pizza Hut book it program to help develop reading interest for children
• KFC colonel kids charity to provide nationwide access to childcare
• Taco bell teen programs
Yum! Brands, inc. Corporate Responsibility
Diversity• For the past two years, Yum! Has been
recognized in Fortune magazine’s top 50 “ Best Companies for Minorities”
• Yum! Has been recognized in Black Enterprise magazine as one of the 30 best companies in diversity