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Key economic and business characteristics of the fast-food industry

The following text have been written on background of the more extensive analysis of the industry’s key economic and business characteristics.

  • The industry size reached almost 100 billion in 2005, with an CAGR of only 2.7 percent, which signifies an overall matured market. America have a total market share of 62.2%, but as the trend shows, then the market share is getting smaller since the emerging markets of Europa and Asia-Pacific are expected to have great growth.
  • The growth of the American market is only around 2.6 percent at the moment, and it is expected to drop 0.5 percent in the next couple of years. In comparison the Asian and European market are at 3.0 and 3.7 percent at the moment and expected to hold this growth through the next 5 years.
  • The whole industry is largely controlled by Quick Service Restaurants (QSR), which are responsible for 72.8 percent of the whole industry revenues.
  • The largest players of the fast food industry are McDonalds Corporations, YUM Brands Inc. SubWay and Burger King, where SubWay has the most diversified profile. McDonalds is the industry leader, with revenues that is more than double the next on the list.
  • The industry has been through the shake-out stage of the industry life-cycle, and the largest companies now own some of their former competitors. !YUM Brands Inc. are the one with the most top brands in its portfolio. Two of their brands are on BusinessWeek’s top 100 over global brands.
  • All the large companies have the advantage of economies of scale, which is displayed in their continuing effort to provide low priced value meals to their customers.
  • The American fast food industry has in the last decade been defined by buy-outs and increasingly focuses on revitalising their own brands. Furthermore in the last couple of years there has been a larger focus on improving their profit margins. This was to be able to improve the economic growth even though the market has been saturated and have reached its maturity stage according to the industry life cycle. Another reaction from the fast food companies was a larger focus to go from focusing on the domestic market to focusing on the global market. Large amounts of the largest fast food companies have been focusing on attaining market shares in countries with high growth opportunities and in general are at the earlier stages of the industry life cycle.
  • Consumer trends have in the recent years not been favourable to the general fast food industry. There has been a large focus on obesity and the causes thereof, where fast food in general has been mentioned as a large sinner by both WHO and other large health organisations. This has speeded up the maturing of the unhealthy part of the industry, whereas the health focused players has been experiencing a higher success.