Quick-Service Foods Sector
Compiled By:
Laura Keller
Stephanie Latimer
Nate Tuenge
Steven Austed
Shelly LiaBraaten
Aaron Lum
Sector Definition
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Commercial restaurant service comprises everything
from restaurants and cafeterias to ice cream parlors,
bars, and cafes
Focus on limited-service restaurants which offer
rapid food preparation and low prices, with or
without seating. The average check price is usually
less than $7.
Sector’s Dominate Traits
(AKA Fun with Statistics)
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Market Size: $128.2 billion, 28.2% of total
foodservice sales
Market Growth Rate: 4.2% in 2003 and slowing
Fun with Statistics continued..
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Industry Profitability:
Fun with Statistics continued..
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Stage in the Growth Cycle: Maturing industry,
focusing on growing same-store sales
Capital Requirements: High fixed costs. Food &
beverages, labor, and real estate top costs
Focus on Product innovation
Prevalence of integration: Stores integrating into
quick-service (Delis)
Rivalry: Highly competitive market, several
companies vying for our meal dollars
Competitive Forces
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Food Prices
Supply Shock & Fuel Costs
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Product Differentiation
Price Discounting vs. Innovation
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Government Regulation
Smoking & Minimum Wage
“Beef it’s what's for dinner”(US) Cattlemen's Beef Board
Industry Expected to Grow
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Growing Industry – more people are eating out
than ever before
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2003 – 46.9% of meals away from home
2010 – will spend 53% of meals away from
home
Industry Expected to Grow
(continued)
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Why are Americans spending more money on meals
away from home?
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Decline in cost difference between eating out and
eating in
 2002 – only cost 25% more to eat at a restaurant
Less free time
 2003 – over 50% of U.S. families were dualearner households
More disposable income
 Aging baby boomers are progressively wealthier
 1999 to 2004 – real disposable income increased
at 1.8% per year
Shift in Industry Focus:
From Discounting to Innovation
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Price Wars of 2000 2002
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Saturated markets
resulted in fierce
competition between
rivals
(McDonald’s vs. Burger
King)
To compete for the
economically
downtrodden customer
base, major competitors
drastically lowered
prices ($0.99 value
menus)
Discounting greatly
hurt profitability – not
a sustainable strategy
Shift in Industry Focus:
From Discounting to Innovation (continued)
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Product Innovation –
2003
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Mimicked the success of
the new “quick-casual”
concept – higher
quality, higher prices
At fast-food
restaurants, sales
grew 5.4% in 2003
Found that people are
willing to pay more for
quality products
Health food craze
Future Focus
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Less emphasis on U.S.
expansion and price
discounting
Continued focus on
product innovation
and current store
improvements
Remodeling stores to
improve image
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Wendy’s, McDonald’s,
and Jack in the Box
have announced
accelerated remodeling
plans for 2005
International Expansion: China
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U.S. fast food market is
saturated and firms are
looking to expand abroad
Large Chinese market
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25% of World’s population
KFC – rated #1 consumer
brand in China
McDonald’s and Starbuck’s
plan to focus their
international expansion on
China over the next several
years

Hoping to establish
themselves in the market by
the 2008 Beijing Olympics
Strong companies
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McDonald’s Corporation
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Panera Bread Co.
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Aroma Café, Boston Market, Chipotle Mexican Grill
Was known as St. Louis Bread Company
Wendy’s International
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Baja Fresh, Tim Hortons, Café Express, Pasta Pomodoro
McDonald’s Corporation
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Strong brand name
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Worldwide presence
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18,000 stores
Mixes McDonald’s American
style with local tastes
Systemwide sales of $4.2 billion
“As a condition of the franchise agreement,
McDonald's owns the property on which most
McDonald's franchises are located.”
Panera Bread Co.
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Systemwide sales of nearly
$1 billion in 2003
Second fastest growing chain in 2004
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Stores in 35 states
Moved into the quick-service market before many of the
others did
“There are currently 656 Wi-Fi enabled Panera Bread
bakery-cafes, from California to Virginia.”
Wendy’s International
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Systemwide sales of $11.6 billion
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Restaurants in the US and Canada
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6000
Different restaurant segments are broken up
Stock Comparison
What key factors will determine
competitive success or failure?
o
Following
Demographics
o
Understanding the
economy
o
International Markets
Following Demographics
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Chiptole Mexican Grill (McDonald’s Corp.)
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Baja Fresh (Wendy’s International)
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Qdoba (Jack In a Box)
Understanding the Economy
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Economic Recession:
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Promoting a more positive
supply / demand
relationships, which
resulted in a stable sales
growth
Economic Boom:
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Focus capital expenditures
on new units, focus on
new products
Industry Attractiveness
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Industry attractive to investors, especially
franchising
Industry very profitable, and expected to
keep growing because of increases in
disposable income and dual worker homes
Low barriers to entry, but intense
competition and high fixed costs cause
many ventures to fail
Sources
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Restaurant Research: Operators Focusing on SameStore Sales - May 2005 - Franchising World Franchising World - International Franchise
Association
Industry Trends: Restaurants
Industry Profile: Restaurants
How the Industry Operates: Restaurants
Sources
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Milton, Dennis P.; Standard & Poor’s Industry Surveys: Industry Trends - Restaurants;
21 April 2005; http://0www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405
/rst20405.htm#trends.
Milton, Dennis P.; Standard & Poor’s Industry Surveys: Current Environment Restaurants; 21 April 2005; http://0www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405
/rst_0405.htm#environ.
Milton, Dennis P.; Standard & Poor’s Industry Surveys: Industry Profile - Restaurants;
21 April 2005; http://0www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405
/rst10405.htm#profile.
Milton, Dennis P.; Standard & Poor’s Industry Surveys: How the Industry Operates Restaurants; 21 April 2005; http://0www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405
/rst30405.htm#operates.
Restaurant Research: Operators Focusing on Same-Store Sales - May 2005 Franchising World - Franchising World - International Franchise Association
http://quotes.nasdaq.com/quote.dll?mode=basics&kind=&timeframe=10y&intraday=of
f&charttype=ohlc&splits=off&earnings=off&movingaverage=None&lowerstudy=volume
&comparison=on&index=&symbol=WEN&symbol=MCD&symbol=PNRA&symbol=&symb
ol=&symbol=&symbol=&symbol=&symbol=&symbol=&FormType=&mkttype=&pathna
me=&page=charting&selected=PNRA
http://en.wikipedia.org/wiki/Mcdonald%27s
Image Sources
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http://timmyray.typepad.com/timmy_ray/weird/
http://www.6foot6.com/fr/agfaimages/china/ChBeijing
_BrandKFC.jpg
http://www.dwworld.de/dw/image/detail/1,1599,1076556_3,00.html
http://www.mccscamppendleton.com/clubs/fast_food/f
ast_food.html
http://www.mcdonalds.com/usa/eat/features.html
http://www.starbucks.com/aboutus/internationaldev.as
p
http://www.wendys.com/food/Family.jsp?family=4
www.google.com