FAST FOOD INDUSTRY OVERVIEW

McDonald has spread across the globe, and emerging markets are one of the fastest growing areas in the industry. But the fast food industry is facing its challenges, especially in the United States. From rising food costs, economic recession and changing perceptions about health, many fast food franchises have been under great pressure. Despite of the challenge, the rise in disposable income of middle class consumers and the demand for quick bites in emerging economies are expected to drive the demand for fast food.

In addition, increasing number of workingwomen and their changing lifestyles is another factor contributing to the growth of this market. The fast food industry has been adopting new practices and offering new products. There is plenty of demand for a quick bite at all times of the day in modern society. However, fast food contains high amounts of trans-fats and saturated fats, which consequently hamper human health as they lack nutritional value. This factor is expected to have an adverse effect on the growth of the market.

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Thus, an amplifying demand for healthy fast food such as salads is expected to open the new opportunities for the fast food market. Fast food is expected to rapidly gain market in Asia Pacific and Europe due to its affordability, easy accessibility and huge investment in promotional activities by leading players of the industry. Currently, burgers constitute the largest fast food segment and are expected to maintain their escalation in the upcoming years. Some of the key participants in fast food industry include McDonald, KFC, Bugger King, Pizza Hut and Dominos among others.

In addition, a large number of local fast food vendors are present worldwide.

CHALLENGES

There are challenges for the fast food industry in recent years that have been pressuring profit margins. The industry as a whole has proven robust enough to withstand these challenges, though some players have done better than others. Over the last decade there has been increased focus on the quality of food served in fast food restaurants. Typically highly processed and industrial in preparation, much of the food is high in fat and has been shown to increase body mass index (BMI) and cause weight gain. Popular books such as Fast Food Nation and documentaries like Super Size Me have increased public awareness of the negative health consequences of fast food. Fast food companies have responded by adopting healthier choices and have had some measure of success, but the shadow of bad press still hangs over the industry. Rising commodity prices have also significantly crunched many fast food franchises. With food and beverage inputs making up approximately 33% of costs, higher prices for livestock, corn, wheat and more have seriously shrunk margins over the past decade. In such a fiercely competitive space it is impossible to force a price increase on customers, so profit margins are often south of 10%. The recent economic recession did lower commodity prices, but the recession brought on its own complications, and now prices for commodity inputs are on the rise again.

Fast food had been thought to be largely recession proof, and indeed the industry did not suffer nearly as much as other discretionary spending sectors. In fact, there was some increase in consumer visits as people choose cheaper fast food options over fast casual or traditional restaurant choices. But overall, the recession hurt spending, and consumers overall purchased less with each trip. Fast food franchises fared reasonably well but still felt some pain. Market saturation is also a relevant issue in the fast food industry today, at least in the U.S. There is a McDonald franchise is in almost every town, and it usually sits in a row with several competitors. With so many competitors who offer similar products there are fewer customers per location. Increasingly fast food restaurants are also losing market share to fast casual, a relative newcomer in the restaurant space.

OPPORTUNITIES

Busy citizens still need quick meal options, and fast food restaurants are fighting these challenges with gusto. Now offering healthy choices to battle the stigma of unhealthy food, some quick service restaurants now focus on fresh or organic products. From franchises focused solely on salads or healthy wraps to the lower calorie options offered at traditional burger franchises, consumers are able to make better choices. Fast food franchises are also focusing on expanding into new product lines, such as the coffee initiative in the McCafe. Intended to offer competition to Startbucks, McDonalds is luring customers back into their stores, hoping they will purchase food as well. Many franchises have been exploring other meal times such as breakfast and the mid-afternoon snack for growth opportunities and to increase real estate utilization. The industry is most effectively battling saturation within the United States by creating a much more diverse range of offerings so that there are many more types of quick service restaurants than ever before. The fast food industry is still a large and diverse industry with plenty of opportunity. Challenge is being answered with innovation, and fast food franchises are responding with new offerings, pricing and strategies to lure consumers back in. Non-traditional fast food franchises are springing up and gaining traction, and more creativity will always be welcome! Consumers are now on the look-out for new ways to eat fast and healthy. And as the industry continues to evolve and the economy strengthens, fast food franchise profitability will continue to grow.

Regulatory environment

A study recently suggests government regulation of fast food could slow or reverse the damaging effects of the obesity epidemic, if government steps in to regulate global marketing of fast foods such as burgers, chips and sugar drinks like soda, in a report to be released Monday according to Al-Jazeera America. Unless governments take steps to regulate their economies, the invisible hand of the market will continue to promote obesity worldwide with disastrous consequences for future public health and economic productivity.­ There have been pressures that call for governments to do more to prevent obesity from occurring initially, rather than risking the high human and economic costs of treating the health effects of obesity such as diabetes, heart diseases and cancer. The public also urges governments should regulate fast food to prevent and hinder obesity by developing policies that include economic incentives to growers to sell healthy fresh foods, and disincentives to industries that develop and sell highly processed foods and soda. Furthermore, the public suggests governments should reduce subsidies to farmers, growers and companies who use excessive amounts of fertilizers, pesticides, chemical and antibiotics. Also, fast-food advertising geared to children and youth markets should be regulated.

GOVERNMENT ESPONSE

In the United States, there are employment and labor laws that govern all businesses when it comes to the treatment of employees. The U.S. Department of Labor prescribes regulations to protect workers’ rights, specifically those who are young or those may become victims of discrimination. There are several laws that regulate employers in the U.S. The law that are most important to businesses in the restaurant industry are the Fair Labor Standards Act (FLSA), the Occupational Safety and Health Act (OSHA) and the Equal Employment Opportunity Commission. The lack of public awareness illustrates the challenge workers face in building wider support. Workers participating in the strikes represent a tiny fraction of the industry. And fast-food jobs are known for their high turnover rates and relatively young workers. The steps of interventions by government might be regulating unhealthy food marketing; limiting the density of fast food outlets; pricing reforms to decrease fruit/vegetable prices and increase unhealthy food prices; and improved food labelling. The most commonly supported pre-selected interventions were related to food marketing and service. Primary production and retail sector interventions were least supported. The dominant themes were the need for whole-of-government and collaborative approaches; the influence of the food industry; conflicting policies/agenda; regulatory challenges; the need for evidence of effectiveness; and economic disincentives. .