Chic-fil-A Case Study Exhibit 1- Dominant Economic Features The quick serve restaurant industry is a large with 2012 annual revenue of $169.7 billion spread over 190,000 businesses. Globalization of the industry is expected to add $186.2 billion in revenues by 2017. The economy and new health trends caused an average annual contraction of 0.7% across the fast food industry from 2007 to 2012. However, the industry was able to grow by 1.8% and 1.3% in 2010 and 2011. The number of rivals has been increasing because of new entrants that take advantage of low capital that is needed to open a franchise. The franchise model has allowed companies to compete on a growing global level. The QSR companies have extended operations into Europe to …show more content…
The saturation of the US QSR industry has caused firms to look outside of US borders for growth opportunities. Europe has been a very attractive market for global expansion due to its large affluent population and that menu options do not have to be completely customized to the region. China and India are also attractive environments but require more modified product offerings to meet local demands. KFC has had to offer options such as burgers, ribs, or fish to meet local cultural demands in their overseas expansion. The threat of new entrants to the QSR industry is low because of retaliation from existing competitors, low revenue growth rates, and lack of brand strength. These factors do not block out all threats on entry to the market though. A new fast food restaurant will have a hard time competing with the larger established restaurants. The new ones do not have the resources to battle back when they are challenged on price or advertising. The price sensitive consumer is going to choose the lower priced option unless the location of the new restaurant is exponentially more convenient. This is hard to accomplish since many fast food restaurants have multiple locations across the same city. Low revenue growth rates caused by a lack of brand recognition cause the QSR market to be very difficult to find sustained success for new entrants. Companies
An unsuccessful attempt to expand into US markets also puts the companies at risk for experiencing loss in capital. Many new stores will have to be designed and built in the US markets in convenient locations. One must recall that Wendy’s absorbed the company in 1995, and only 11 years later spun it off as its own company again. Wendy’s could not figure out how to successfully expand Tim Hortons in the US, which makes one wonder if Burger King will be any different. It has been proven before through the example of Wendy’s and Krispy Kreme that it is difficult to penetrate markets across borders (Hemmadi, 2014).
The threats of new entrants is very low as there are certain barriers to entry such as a high amount of investments that are required and it is rather
1. Franchisees gain numerous advantage when they purchase a franchise. First, while a franchisee may be opening a new store, it is part of an already established business and system. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Franchisees also get support for management and training activities, as well as financial assistance. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisor’s larger company, and national advertising programs from franchisors. Franchises also have large-volume, centralized buying power. A franchise has proven products, and
The food industry in the UK is a multi-billion pound industry that is mainly dominated by a few competitors such as McDonalds, Burger King, KFC and Subway. Most of the food sold in these fast food restaurants is unhealthy, which is becoming a huge concern as there are many people dying of obesity and other health related problems. This is one of the key social factors facing the fast food market at the moment.
20,000 franchise inquiries every year and select 75 to 80, on average, to become new franchise
I have a lot of faith in Chick-fil-A I think that they could easily reach $8 billion by 2017 if their financial pattern continues. They are very clever in the moves that they implement and know how to follow the right trends to give them at a competitive advantage. Thy have a lot of supportive costumers that I feel will be with them for the long run and as long as they continue to slowly implement new items to keep people excited and stay true the their beliefs I don’t think they have much to worry
In terms of the restaurant industry, the capital requirements for entry are not large. Buildings can be leased, input food supplies can be bought fairly cheaply, and the fees for opening a business, as long as there are not liquor licenses involved, are manageable. Other barriers to entry play a larger role. Reputation is very important in the restaurant industry. It is difficult to build a brand/reputation from scratch. Panera possesses a strong advantage because they already have a great reputation. In 2011, Zagat gave Panera
The fast food, or quick service restaurant industry (QSR), represents approximately 200,000 restaurants and $155 billion in sales in the U.S. alone, they are one of the largest segments of the food industry (Hoovers, 2011). This segment of the restaurant industry is “highly competitive and fragmented… number, size and strength of competitors vary by region, market and even restaurant. All of these restaurants compete based on a number of factors, including taste, quality, speed of service, price and value, name recognition, restaurant location, customer service and the ambience and condition of each restaurant” (Chipotle, 2010).
Part of exciting market segment: The new fast-casual market segment is developing quite rapidly and these restaurants are becoming key players in the industry. This market is a combination of the quick service of traditional fast-food restaurants with the higher quality food
The fast-food industry is changing everyday. There are new products being introduced in the market and new slogans being created. The companies in the fast-food industry will do their best to make the greater burger, and to make bigger and better fries.
Entrants erode the market and rarely grow it enough to the incumbent’s advantage. New entrants have an impact on the industry business but at a moderate level. This is mainly because new firms will find it difficult to compete against the incumbents’ strong brand, like Starbucks and McDonalds, and because the market is saturated. However, the costs of entry are relatively low. Most of the raw materials are cheap and the distribution chain is not complicated. This makes it easy for new companies to enter the market. Also, established companies might leverage their brands as they enter the industry to compete against the incumbents.
The restaurant industry is said to be one of the oldest industries in the economy. As the economy and urbanization grow, so too does the industry of restaurants; it’s for this reason that the industry has been growing at a rapid pace. Even with the restaurant industry ebbing and flowing, there are still new entities entering the fray consistently. Some restaurants may close, but it will not be too long before a new restaurant opens in the place of the old one. Historically, the restaurant industry has contributed nearly 4 percent to the gross domestic product (GDP) of the United States (U.S.) economy. The most recent findings show that the restaurant industry employs more than 12.7 million people (which is approximately equal to 9 percent of the
Ans. Until then they were happy enough simply to expand their business in US, after that reached a certain size and the company had the management time to spend on it then it was time to think about replicating that success abroad. Because the markets abroad are much more competitive than in America where it is a slayer of small businesses, except for fresh produce sellers. Globalization has taken off in recent years, before the turn of the century it was much more difficult and expensive for franchises to efficiently expand outside of their native country.
If a new franchise an offer the consumer a quality product at a reduced price, then the chances of success are greatly increased. For example, Chanello’s and Little Caesar’s offer discounted pizza prices, and maintain the same quality as other pizza chains. These companies spend less on advertising and more on the actual product. That’s a very important concept in this industry, because their quality product at this discounted price gives them a niche in the market. Once a company establishes a niche, they become more visible to the
Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Franchisors are becoming more and more scrutinising as the global economy declines. There is a general understanding within any franchised