Fast Food Industry Leaders

A calculation is used to assess Target and Walmart efficiency that allocating the capital under its control to profitable investments. The return on invested capital gives a sense of how well a company is using their money to generate returns. However, Target sales increased to 4% in 2015 to 2016 but then declined significantly in 2016 to 2017. Target earnings from continuing operations before interest expense and income taxes increased by 5% in 2015 to 2016 but then slightly declined to 1.5% in 2016 to 2017 not reaching the 2015 level. Therefore, Target earnings from continuing operations before income taxes increased to 3.5% in 2015 to 2016 but then slightly declined to

The gross profit margin measures the amount of profits that a company generates from its operations without consideration of its indirect costs. Thehigher thegross profit margin, the greater the efficiency of a company’s operations (Besley & Brigham 2007). It means that the company is generating enough income to cover its operating expenses. On the contrary, a lower gross profit margin indicates that the business is not generating adequate income to cover its operating expenses.

A typical Gross profit margin depending on the industry may be 25 to 30%. Nucor’s Gross profit margin ratio indicates that industry is intense and cost of goods is one of the main of factor in profitability. After examining the five year

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.

A person can see from the analysis that both companies had a fewer profits in 2005 over 2004. The increase of operation expenses was the cause of low net profits. Both companies need to rethink their operating cost to decrease their expenses which in return can help increase their profit margin.

The Gross Margin ratio represents the percent of total sales revenue that TCI retains after incurring the direct costs associated with producing the goods and services sold by them. It helps us distinguish, as much as possible, between fixed and variable costs. With a 20%, 15%, or 10% projected increase in sales, for 1996, we calculated TCI’s GM ratio to be 41.85% , and in 1997 to be 41.84%. This means that around 42% of TCI’s sales dollar is available to pay for fixed costs, like its potential long-term debt to MidBank, and to add to profits.

The determinants of Starbucks profitability over time are variable costs and fixed costs. “A variable cost is a cost that change in direct proportion to a change in the level of activity (dict). Variable costs for Starbucks would include labor, coffee beans, dairy, and plastic products. A fixed cost is indirect costs of business expenses that remain unchanged (dict). Fixed costs for Starbucks include rent, taxes, and insurance as well as advertising. In the figure below (fig 1) we have Starbucks financial data in millions for the year of 2015. This includes their operating expenses, net revenues, such as company-operated stores, licensed stores, CPG, food service. It also includes their total net revenues and their balance sheet. As we can see “Operating costs dropped in the fiscal year

Brands, Inc. owns three of the world’s best known fast-food franchises, which are Kentucky Fried Chicken (KFC), Taco Bell, and Pizza Hut. With a multi-branding strategy, a firm can combine its brands into the same location in order to increase sales and improve operating efficiency.

The analysis of the changes in the net margin shows that the profitability of Dunkin’ Brands has reduced over the three-year period. The net profit margin rises from 42.69% in 2013 to 45.26% in 2014 only to reduce to 39.41 in 2015. This shows that the company generates lower net incomes than it did in the previous years. This could be a result of an increase in costs and could account for the decrease in net income even as the revenue of the company

In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.

In 2017, the firm had a higher percentage of cost of sales in term of revenue than 2016, the cost of sales was 30.11% which was higher than 2016 for 0.21%, that means the firm’s gross margin in 2017 (69.89%) will also lower than the gross margin in 2016 for 0.21%. Burberry had a higher net operating expenses in 2017. The net operating expenses was 55.63% which was higher than 2016 for 1.56%, that also lower the operating margin, therefore the operating margin for the firm has decreased from 16.02% to 14.26% (-1.76%).

It is particularly interesting to note that the higher the fixed costs, the higher the break-even point. Thus, companies with large investments in equipment and/or high administrative-line ratios may require greater sales to break even.

If we look at the fast food industry today there is room for success. Based on RNCOS’ new US Fast Food Market Outlook 2010, fast food industry growth rate is strong. Especially, hamburger sales growth is reported at the healthy rate of 4.6% in 2008. The market is expected to grow to cross the $170 billion marks by 2010.It is believed that due to the economic meltdown, fast food industry is benefiting from people being more prices conscious. People who were enjoying nice means at fancier restaurants are now turning their choice of means to more economical ways.

Company B (88.9%) has a higher gross profit margin most likely because the firm not only manufactures and mass markets a broad line of prescription pharmaceuticals, over-the-counter remedies, consumer health and beauty products but also manufactures medical diagnostics and devices. Company A is lower (76.1%) due to its limited product range (only manufactures drugs).

Since McDonald’s is the most well know fast food chain in the world with a market cap of 69.35 billion, brand recognition is their biggest strength. The secret of McDonald’s success is its willingness to innovate and maintain consistency in the operation of its many outlets. In recent years McDonald’s has introduced Premium Salads, Snack Wraps, fresh Apple Dippers in the United States, and Corn Cups in China. Also, McDonald 's products are priced so low that economic conditions are almost insignificant.