Fast Food Industry Leaders
Cory Collins
10/25/13
ECON 450
The quick service restaurant (QSR) industry, also known as the fast food industry, consists of a large variety of restaurant types, including but not limited to ice cream parlors, fast food restaurants, pizza parlors, coffee shops. With all of these different types of eateries, the QSR industry makes up a massive section of small businesses in America. This means that the market size is large, and that there are not restrictive barriers to entry. Some of the giants in the fast food industry are McDonald’s (MCD), Starbucks (SBUX), and Yum Brands (YUM). While McDonald’s and Starbucks operate under only one brand name, Yum Brands consists of multiple fast food restaurant brands such as KFC, Taco Bell, Pizza Hut, and WingStreet. In order to compare how these industry leaders compare to one another, performance metrics be used. Due to the nature of the fast food industry, the metrics that are most used to measure are Food Cost, Labor Cost, Weekly Sales, Average Order per Customer and Employee Turnover. To further analyze this market we must understand how some of these key metrics works.
Food (Variable) Cost is calculated as % of total expense. For larger franchise chains such as Subway and McDonald’s the food cost is usually lower due to their large buying power.1 Labor (Fixed) Cost is also calculated as a percent of total expense. Much like Food Cost, it is usually one of the most expensive costs that restaurants incur. Sales (Revenue) is another important metric because this allows you to see which companies are collecting the most money through their only service, which is sales. This will be found in the income statement of a company’s financial statements.
Demand:
In the quick service restaurant business, the products being offered are food and drink at the lowest cost possible to satisfy company revenue as well as the consumer’s willingness to pay. Demand for the industry’s product is has been referred to as
10/25/13
ECON 450
The quick service restaurant (QSR) industry, also known as the fast food industry, consists of a large variety of restaurant types, including but not limited to ice cream parlors, fast food restaurants, pizza parlors, coffee shops. With all of these different types of eateries, the QSR industry makes up a massive section of small businesses in America. This means that the market size is large, and that there are not restrictive barriers to entry. Some of the giants in the fast food industry are McDonald’s (MCD), Starbucks (SBUX), and Yum Brands (YUM). While McDonald’s and Starbucks operate under only one brand name, Yum Brands consists of multiple fast food restaurant brands such as KFC, Taco Bell, Pizza Hut, and WingStreet. In order to compare how these industry leaders compare to one another, performance metrics be used. Due to the nature of the fast food industry, the metrics that are most used to measure are Food Cost, Labor Cost, Weekly Sales, Average Order per Customer and Employee Turnover. To further analyze this market we must understand how some of these key metrics works.
Food (Variable) Cost is calculated as % of total expense. For larger franchise chains such as Subway and McDonald’s the food cost is usually lower due to their large buying power.1 Labor (Fixed) Cost is also calculated as a percent of total expense. Much like Food Cost, it is usually one of the most expensive costs that restaurants incur. Sales (Revenue) is another important metric because this allows you to see which companies are collecting the most money through their only service, which is sales. This will be found in the income statement of a company’s financial statements.
Demand:
In the quick service restaurant business, the products being offered are food and drink at the lowest cost possible to satisfy company revenue as well as the consumer’s willingness to pay. Demand for the industry’s product is has been referred to as