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SWOT Analysis of the Fast Food BusinessSWOT

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SWOT Analysis: Fast Food Industry

While the global economy has been tumultuous for various industries, the fast food industry has not been hugely affected. Even with the society becoming more aware of the health risks that come with eating unhealthy food, their market share has continued to rise in the past 5 years. This could be due to the steps the industry has taken to respond to the customers' preferences by introducing healthy options in their menus. International fast food restaurants are perceived to have benefited from the recovering economy as people get more disposable income and choose to eat out. It is estimated that the expansion of these restaurants globally has been the sole driver of growth in the industry as emerging economies demand more fast food choices. The barriers to entry are low in the market. While a good number of established chains are there, the top 4 in the category serve 40% of the market. A majority of the restaurants are owner-operated and serve their immediate environment (Global Fast Food Restaurants: Market Research Report, 2015).

Introduction

Franchise Help (FH), an independent research and consultant firm, found that the fast food industry, also referred to as Quick Service Restaurants (QSR), has been around for nearly 100 years now. The modern franchising system is believed to have been started by Howard Johnson in the 1930 when a second location of his was franchised to a friend as a way of expanding operations. The focus of fast food franchises is high volume, low costs as well as high speed products. The food is often precooked or preheated and is served to-go. Some locations offer their customers seating options. For kiosks or stands, the food is always standardized and is sourced from a central place with the menu and marketing being the same for all the locations (Franchise Help, 2015).

Strengths

Save Money

According to Bacic Media Group (BMG) (2013), the offerings are usually priced much lower compared to what other restaurants offer. For this reason, it is popular with the less financially endowed members of the society. While this is true, fast food is also popular with the high class of the society because of the convenience that it provides. The offerings are also sweet so they appeal to almost everyone. Even the most popular celebrities eat fast food. Fast food is not limited to a given segment of the society like the media likes to portray it (BMG, 2013).

Save Time

According to BMG (2013), the second reason fast food is so popular is because of the time saved. The waiting period is almost nonexistent. The food is prepared within minutes and served just as fast. Drive-thrus offered by some restaurants make it even possible to order food without getting out of the car. In comparison to the traditional outlets, fast foods also save time (BMG, 2013).

Healthy Choices

According to BMG (2013), while fast food has always been associated with unhealthy meals, the industry is slowly adapting to the demands of the market and is now offering healthy options in their menu. The population is paying more attention to their health and the industry is changing to serve them better. The offerings include salads, wraps, grilled chicken, among others. The healthier food is often priced higher than the others (BMG 2013).

Weaknesses

In line with Spencer (2015), is a researcher at an investment research firm named Value-Line, people are increasingly becoming more health conscious and the increase in cases of cancer and obesity has forced people to make drastic choices concerning the food they eat. These concerns are not good for the industry which has always been seen as an unhealthy option (Spencer, 2015).

Moreover, Spencer (2015) indicates that the industry has faced several challenges in the last few years and profit margins have been pressed. According to BMG (2013), looking at the bigger picture, the industry remains vibrant and is capable of wading through the floods, though some industry players are more capable than others. According to Fast Food Industry Analysis (2015), typically, most of the food churned out by the outlets has been shown to increase BMI because of their high fat concentration. Various books and documentaries have raised the awareness of the population concerning the health risks of consuming fast food. The industry is responding by availing to their consumers more healthy choices but the bad coverage in the press will definitely hurt business (BMG, 2013).

According to Fast Food Restaurants (QSR) (2012), the commodity prices that have been rising lately have also crunched several fast food franchises. As well, the report indicates 33% of the cost outlay is food and beverages inputs and rising corn, livestock and wheat prices have lead to a drop in margins over the last ten years. The market is so fiercely competitive that forcing prices on customers would guarantee the death of the business (Fast Food Industry Analysis 2015, 2015). The profit margins are therefore very low. While the recession did result in lower prices of commodities, the prices have begun to rise once again. The industry had been perceived as recession proof but even though the affect was minimal, there were some shocks (Fast Food Restaurants (QSR), 2012). Interestingly, there was a rise in consumer visits as people opted for cheaper food (BMG, 2013).

According to Fast Food Restaurants (QSR) (2012), market saturation is another factor that is relevant in the industry currently, at least in the United States. For instance, a McDonald can be found in nearly every town and the street is usually lined with a cluster of other competitors. With the outlets offering similar products, the competition is fierce and they have to share the few customers among the many outlets. Fast casual is also making inroads in the restaurant niche and is taking with it some customers from the fast food space (Fast Food Restaurants (QSR), 2012).

Opportunities

According to Spencer (2015), most of the food industry's international sales are made by the fast food sub-sector. As well, he points out that foreign markets offer opportunities to grow fast if the companies are open to getting workable plans that can appeal to wide range of tastes and customs. Having a big brand name is an advantage when seeking new markets internationally. This is the major advantage that has allowed them to dominate the international markets (Spencer, 2015).

In line with Fast Food Restaurants (QSR) (2012), Fast food franchises offer a good opportunity for finding a profitable niche in the food franchise space. The report indicates that there are a lot of offerings by these businesses ranging from the usual options to the ethnic favorites that can be useful when entering a new market. BMG (2013) points out that since the industry operates on the principle of convenience, several businesses have specialized in making fast deliveries while maintaining quality. On account of this dependability, customers looking to have a quick meal can expect to find good service from them.

Writing for Houston Chronicle, Ingram (2015) argues that several of the businesses afford their franchisees nationally-recognized branding and tested business models that have been known to work. Moreover, also available are multi-unit franchise opportunities where one franchise owner is allowed to have several franchises under the same brand. He reiterates that this arrangement gives the business people an opportunity to offer their customers more variety and enhance convenience. According to Ingram (2015), the business models of fast-casual restaurants have given people the chance to invest more funds into the local communities than the fast food chains have done. He acknowledges that the smaller fast-casual restaurants often make their purchases locally and so contributing to the growth of the local agricultural sector. Such a boost can also lead to an increase in the demand for their products because of the money made available. Ingram also points out the models also allows for higher wages for workers than fast food chains do. The ability to pay more allows them to source better qualified staff and so leading to a boost in their product quality (Ingram, 2015).

Consistent with McDonald's Corporation (2014), busy citizens are in need of quick meals, and the fast food chains are trying hard to ward off the casual segment from infiltrating into their market base. In keeping with Ingram (2015), the fast-casual is making available healthy food as an alternative to the fat food options that have gotten bad press from the health conscious media. He points out that their offerings give the customers the opportunity to make better choices concerning what they feed their bodies. According to McDonald's Corporation (2014), McDonald's is also considering getting into new product lines like Coffee in McCafe. This will compete well with the likes of Starbucks. Several fast food chains are now expanding their offerings to include mid-afternoon snack and breakfast as a way of growing their income and as a way of adequately utilizing their real estate. The saturation in the U.S. is being battled by… [END OF PREVIEW]

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