QUICK-SERVICE INDUSTRY OVERVIEW

SONGKI KIM

JEFF OHLMAN

NADINE CHAMSEDDINE

DANA WILLIAMS

JORGE DIETRICH

JOSE GUZMAN

Margin Trends 2004Burger’s Big Three

McDonald % 10 Burger King % -10.5 Wendy’s % 3 McKey Foods: Burgers [McDonalds sub.] Sun Valley: Chicken [TGWU union] McCain Foods GB Ltd: Chips [North York] Sweetheart International: Ronald McDonald

cups and straws [Holland]

Compare 2004 Sales (Mil.)

Burger King,$1,300

$19,065

Wendy' s,$3,636Sonics,

$536

$9,170

$-

$5,000

$10,000

$15,000

$20,000

Annual Sales

Yum

McDonald

Market Share 2004Burger’s Big Three

McDonald % 59

Burger King % 21

Wendy’s % 20

Porter’s Five Competitive Forces

Entrants - Low/Moderate- Brand awareness and lower cost competitive advantage. Require time and large capital Investment

Rivalry – High- Burger King, Wendy’s, J.B., are heavy competitors

Power of Suppliers – Low- Most have the purchasing power to negotiate lower prices

Porter’s Five Competitive Forces Competitive Force - Threat/Power- Prices and

product offering are the main sources of competition Substitutes- Low/Moderate- Trends show

consumers prefer healthier and more exotic alternatives

Buying power -Most players have a lower cost competitive advantage. Top players also achieve economies of scale via this

Rivalry among Existing Competitors

Intense rivalry and competition market share among existing fast-food competitors

Slowing growth rate of sales To attract customers….

- increase advertising

- price discount

- offer new product

Threat of New Entrants

Economies of scale force new entrants to enter at a cost disadvantage

Require higher fixed costs to enter existing market

Have strong customer loyalty Willing to defend new entrants with price

discounting and advertising

Threat of Substitute Products

There are….

- numerous restaurants and other eating alternatives

- a variety of high-quality, reasonably priced eating alternatives

Customer switching costs are low

McDonalds Corporation

McDonald’s History In 1955 Milkshake-Machine Salesman Ray

Kroc took out a franchise on a hamburger store owned by two McDonald brothers. Today McDonald’s is the largest fast food operator in the world.

50 Million customers every day, 12000 Restaurants in the USA, and 30,000 Worldwide in 119 countries

The chain has grown by one new outlet every 17 hours in the last decade.

Marketing Strategy Global Brand Awareness ‘Golden

Arches” Marketing Alliances Global Sponsorship Alignment with country-level marketing

activities Focused on its customers

Marketing Budget Advertising Costs:

• [In Millions]

2004 $ 619.50 2003 $ 596.70 2002 $ 532.30

Subsidiaries

Boston Market Chipotle Mexican Grill Donatos Pizzeria Business Note: in December 2003 McDonalds sold

Donatos Pizzeria Business

Suppliers Europe Golden West Foods: Buns, Ketchup,

Syrup, milkshake mix [McDonald’s subsidiary]

SWOT AnalysisStrengths

Financial Power- McDonald’s spends more on advertising on a single brand than any other organization. In 1986 a colossal $789m, or 6.3% of system wide sales, went to advertising. It is one of the five largest television advertisers in the US, with children as its prime target. After Santa Claus, Ronald McDonald is the figure best known to US Children.

Recipe for Success- McDonalds revolutionized the fast food Industry. They introduced a new production process that lowered labor costs.

SWOT AnalysisWeaknesses/Opportunities/Threats

Weakness-It is possible that a company can become so large it saturates the market.

Opportunities- Because of its financial power McDonalds could move into to other industries/products at any time.

Threats- Competitors, Suppliers, Workers Unions, Attacks of health campaigns, and Environment.

Competitive Trend Analysis

Burger King

BK Background

Founded in 1954

Second Largest Fast Food Chain Worldwide

Global operations of the $11.3 billion company

BURGER KING® restaurants serve approximately 1,072

customers per restaurant, per day, or approximately 11.8

million customers daily worldwide

The BURGER KING® system employs more than 300,000

people system wide

Fascinating BK Facts

Today, Burger King operates the #2 hamburger chain

(behind McDonald's) with more than 11,200

restaurants across the US and in about 55 other

countries

Since its founding in 1955, BURGER KING® has

sold well over 2.1 billion hamburgers annually

BK Brand Strategy

Brand image• Masculine oriented (Burger ‘King’ – not Burger Queen)

• ‘‘King’: The larger size than the average burger Food

• Great-taste• High quality• Fun• Value • Portability

Slogan: ‘Have it your way’• Customized• Customer-oriented• Differentiation from other fast-food competitors

BK Marketing Mix Strategy

Product (Whopper) Price (Compare with McDonald,

Wendy’s, Yum! and Subway) Promotion (Stick with the jumbo size

burger – the opposite force against the recent trend of Low Carb)

Place(Distribution)

BK Marketing Mix-Product Whopper Sandwich Fire Grilled Burgers Chicken, Fish & Veggies Salads Breakfast Treats Sides & Beverages Kids Menu

BK Marketing Mix-Price Price Range

- $4 - $8 for a value meal

The value meal for breakfast

- For example, suggested Enormous Omelet Sandwich retail price: $2.99, or $3.49

BK Marketing Mix-Promotion

Advertising Slogan (2004-present) “Have it your way”

Star Wars deal - The fast-food chain's first global promotion

Burger King Offering Low Carb- Allow substitutions of french fries with salads and bottled water for soft drinks

A Big Breakfast at Burger King- Debuts Enormous Omelet Sandwich

Burger King Target Audience

Customer with the sophisticated taste but still need fast food service

Middle class household with the discretionary income

Family with kids

Financial Picture Private company – hard to obtain

numbers 11,200 restaurants 2004 sales 13 billion 2004 sales growth 18.2

Burger King Largest Franchises AAFES AmeriKing Aramark C&L Carrolls Corp #1

franchise Cimm's Compass Deignan-Kauffman

HMS Host Nath Quality Dining Sodexho-Marriott Sydran TA Operating Group Veterans Canteen Westwind

Exclusive Supplier Restaurant Services, Inc. (RSI) Cooperative serving BURGER KING®

restaurant owners in the United States. Founded in 1991 Purchasing agent for U. S. Burger King

system.

SWOT Analysis

Strengths

Global Brand Equity The second largest fast food chain (18.8% of US

fast-food hamburger business) Successful items: WHOPPER® Sandwich More than 55 Global market operations Customized Fast Food service Real Estate investment (pursuit of the best

location in town) Financial support from the parent company

(Texas Pacific Group)

Strengths 2nd Largest burger chain Brand recognition and recall Over 11,000 locations worldwide WHOPPER has highest brand recognition Economy of scale provides buying power Unique product to differentiate product (flame

broiled). Customization allows customer to “have it your

way”

Weaknesses

Declining market share Self-restricted the diversification of

product development because of stickiness to strong ‘Burger King’ brand image

Weak product development

Slowed revenue and income growth

Weakness We are in a “Burger Slump” BK has no other business segment Ameriking , 2nd largest franchise filed for Chapter 11 “Revolving” door in corporate board room, 10 CEOs in 14 years High franchise rate makes BK vulnerable to multiple disparate

policies Failure to introduce new brand lines 3 of 10 largest franchises are in chapter 11 Lackluster marketing

International expansion

Only serving 1% of the world’s

population (Potential growth in

China & India with new product

development)

Growing dining-out market

Opportunities

Opportunities Consumers have positive perception of

brand. Take advantage of healthy eating trend. Consider new brands and franchises. Reduce cost of entry for BK franchise Expand in Asia market Reduce underperforming outlets

Mature industry Fiercely competitive environment

• With other franchises (McDonald)

• With the local competitor Growing health-conscious consumers (Low Carb Trend)

• The social issue of McDonald’s ‘Supersize me’ Changing demographics (Rapid transition into the aging

society) Vulnerability to the fluctuation of foreign exchange rates from

expanding global operations Unreliability of supplier for the recent cow-related disease

(i.e. Mad Cow Disease)

THREATS

BK Marketing Mix-Place AmeriServe Food Distribution - It plans an orderly transition of distribution services - Approximately 5,800 Burger King restaurants currently

served H & H Foods

- Supply South Texas-area Burger King ® restaurants with beef patties

Restaurant Services, Inc. (RSI) - The exclusive purchasing agent for the vast majority of

products and services used by BURGER KING® restaurant owners in the United States and is manager of the system's supply chain.

BibliographyCorporate Information http://proquest.umi.com/pqdweb?index=0&did=168203801&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1126476479&clientId=30358

Franchise list http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105&STORY=/www/story/11-12-2002/0001839842

Marketing Strategy http://proquest.umi.com/pqdweb?index=3&did=818659331&SrchMode=1&sid=1&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1126477227&clientId=30358

SWOT http://search.epnet.com/login.aspx?direct=true&db=buh&an=16823714 Corporate Info - http://www.bk.com/CompanyInfo/index.aspx

Sonics Annual Report (2004) - http://www.sonicdrivein.com/pdfs/annualReports/04_12annualReport.pdf

Financial Info - http://www.hoovers.com/burger-king/--ID__54531,ticker__--/free-co-fin-factsheet.xhtml

SONIC DRIVE-IN

Sonic, America’s drive-in, originally Top Hat drive-in,started as a hamburger and root beer stand in 1953.

Sonic is the largest chain of drive-in restaurants in the United States and Mexico, with more than 1 million customers a day

Sonic has 3000 drive-ins coast to coast

Sonic Marketing strategy Multi-layered growth strategy, targeting

earnings per share of approximately 20% for the year ending September 2005.• Addition of drive-ins

• Increasing media expenditure to boost brand awareness

• Accelerating franchise development and ascending royalty rate

Sonic Marketing strategy Highly differentiated concept, through

personalized carhop service, and a variety of menu choices.

Accelerated Expansion program• Opening 167 new franchises in 2004

• Opening 188 new drive-ins in 2004

• Planning to open 185 drive-ins in 2005

Sonic Marketing strategy Solid Sales Trends

• Sales increase of 13% in 2004, and 6.5% same store sales

• Sales increase of 18% in 2005, and 6.8% same store sales

Sonic Marketing strategy Solid Financial performance

• Revenues rose 20% to $536 million 2004 and 18% in the first nine months of 2005

• Net income per diluted share rose 19% in 2004 and is up to 21% the first nine months of 2005

• ROE has exceeded 20% for five consecutive years.

Sonic Subsidiaries Sonic Industries Sonic Restaurant

Sonic Strengths Carhop Service: many customers enjoy

the personal carhop who delivers the order to the car with a free mint

Overall Good Company: Listed for the 10th consecutive year by Forbes magazine to be one of the “ 200 best small companies in America”

Sonic Strengths

Multi-layered growth strategy:

• Listed at number 50 for percentage increase in sales on the top 50 Growth chains list( Restaurant Business, July 2003)

• Ranked number 80 on the Hot Growth Companies list ( Business Week, June 2003)

Good Franchise: Listed in the top 10 on Entrepreneur magazine’s “Franchise 500 list” (January 2003)

Great Sales Records: Increase of 13% in 2004 , and 18% in the first 9 months of 2005.

Continuously increased revenue ( chart 1)

SonicStrengths Menu

• Unique menu items that include Toaster Sandwiches, extra- long cheese coneys, hand battered onion rings, and a variety of drinks and deserts

• Quality Burgers: named one of the top three in the Best Overall burger QSR category for seven consecutive years( Restaurants & Institutions Annual Choice in Chains Awards, March 2003)

• Cream pie shake distinguished as most appealing and unique beverage in its category and receives “Best in Class” award ( Restaurant Business, May 2001)

Sonic Weaknesses

International Presence: Except for 7 drive-ins in Mexico, Sonic Does not have a well established international market

Brand awareness: although Sonic has a differentiated service that is the carhop, and a quality burger, it is still not viewed as the leader in the fast food industry.

Cost of the international franchise: To get a Sonic international franchise, the investor must have $3.5 million in assets and $2.5 million in cash which could hinder the development of new franchises abroad

SonicOpportunities International market growth National market: more than half of the

3000 drive-ins are located in 9 states, the rest are developing markets

Sonic Threats

Obesity awareness: this will push sonic to include light meals

Gas prices: the rise of gas prices will increase the prices of sonic

Hurricane Katrina will have negative impact on the Sonic Franchises since Louisiana and Mississippi are two core markets for Sonic. 60 restaurants in Louisiana, Mississippi and Alabama were damaged by Katrina.

Mad Cow disease: This may eventually lead to customers shifting to other fast foods alternatives

SonicRevenue Revenue for the fiscal year ended August 31,2004 Revenue for the nine months ended May 31,2005 Projected revenue for the year ended August 31, 2005

$280,056 $280,056$330,638

$446,640$536,446

$442,493

$589,990

$32,627 $32,627 $38,956 $52,261 $63,015 $51,341 $68,454$0

$100,000$200,000$300,000$400,000$500,000$600,000$700,000

2000 2000 2001 2003 2004 2005 projected2005

Total Revenues

Net Income

SonicDrive-in Sales Sales for the fiscal year ended August 31,2004 Sales for the nine months ended May 31,2005 Projected sales for the year ended August 31, 2005

$224,880 $267,463 $330,707 $371,518 $499,551

$1,533,948$1,704,014$1,874,562$1,988,842

$2,219,340$1,777,235

$2,369,647

$449,585 $374,663

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2000 2001 2002 2003 2004 2005 projected2005

partner drive ins

franchise drive ins

SonicPorter’s Analysis High rivalry among competitors

• Little product differentiation

• Low customer loyalty which leads customers to shift easily to another fast food chain.

• High number of fast food restaurants.

SonicPorter’s Analysis Low threat of new entrants

• Economies of scale. Sonic alone has 3000 drive ins which makes the cost of manufacturing low, and thus giving it a competitive advantage

• High Capital requirement ( equipment and training)

• Service differentiation through carhops

SonicPorter’s Analysis Low bargaining power of supplier

• Cost of shifting suppliers is low

• Substitute products are not an option because beef is part of the burger

SonicPorter’s Analysis Threat of substitutes

• People can shift to a different fast food

Low bargaining power of buyer• No buyer concentration

Sonic References http://www.fastfoodfacts.info/blog/ http://www.entrepreneur.com/franzone/d

etails/0,5885,12-12---282811-,00.html www.Sonicdrivein.com

JACK & THE BOXCOMPETITIVE ANALYSIS

IMPORTANT DATES Born in San Diego California 1.951 as a Pioneers in

the “Drive-Thru” serving system Major expansion to 1000 restaurants in the Western

and Southwestern markets They become a private owned company in 1988 1.992 went public with 17.2 million shares 1995 Great advertising campaign with expansion to

Southeastern markets until 2001 With a long-term goal of becoming a national

restaurant company, Jack in the Box entered the fast-casual restaurant category in 2003

STRATEGY Jack in the Box Inc., founded in 1951, is a

restaurant company that operates and franchises Jack in the Box® restaurants and, through a wholly owned subsidiary, Qdoba Mexican Grill®.

The company also operates approximately 40 proprietary convenience stores called Quick Stuff, which is a major-branded fuel station and is usually developed adjacent to a full-size Jack in the Box restaurant.

COMPANY STRATEGY… Jack in the Box is among the nation's leading fast-food

hamburger chains, with more than 2,000 quick-serve restaurants in 17 states. As the first major hamburger chain to develop and expand the concept of drive-thru dining.

Jack in the Box has always emphasized on-the-go convenience, with approximately 85 percent of the half-billion guests served annually buying food at the drive-thru or for take-out. In addition to drive-thru windows, most restaurants have indoor dining areas and are open 18-24 hours a day.

COMPANY STRATEGY… Jack in the Box offers a broad selection of distinctive,

innovative products targeted at the adult fast-food consumer, including hamburgers, specialty sandwiches, salads and ice cream shakes. Hamburgers represent the core of the menu, including the signature Jumbo Jack, Sourdough Jack and Ultimate Cheeseburger. And, because value is important to fast-food customers, the company also offers value-priced products on "Jack's Value Menu," including tacos, a chicken sandwich and Breakfast Jack.

SUBSIDIARIES

Qdoba Mexican Grill, which was acquired by Jack in the Box Inc. in January 2003, is an emerging leader in fast-casual dining

Operates more than 230 restaurants in 35 states. Qdoba is renowned for offering nouveau Mexican

cuisine

SWOT ANALYSISStrengths

The revenues of the company for the last four years are continually growing

The company is also showing good profits The company is remodeling 200 stores per

year Offers higher quality customer service

Weakness The company has to spend an a higher

percentage of money in advertising, assets, and strategic planning.

They do not have much presence in the Southeast region which is a profitable market.

OPPORTUNITIES Since Jack in the Box is a very well

known company in the Southwest they can always use this good-will in order to attack other markets now that the company is growing .

THREATS

The late increase in the meat and oil prices

Changing consumer tastes & preferences Large investments required to stay

competitive are eating away at profit margin

TRENDS

TRENDS

TRENDS

Yum! Brands, inc.

Yum! Brands inc. is the largest restaurant company with more than 34,000 company, franchise, license, and joint ventures, in more than 100 counties.

.

Yum! Brands, inc. Oct 1997 Pepsi co. owner of KFC, pizza

hut, and Taco bell formed a publicly owned and independent company: Tricon Global restaurants inc.( Yum! Brands former name)

May 2002 the company acquired Yorkshire Global restaurants, Inc. and changed the name to Yum! Brands, inc.

Yum! Brands, inc. Growth Strategies Build dominant China brands

• China is the number one market for new company development

• China division operating profits were more than $200 million in 2004

Run great restaurants• 100% CHAMPS culture restaurants

(Cleanliness, hospitality, Accuracy, Maintenance, Product Quality and Speed)

Yum! Brands, inc.Growth Dtrategies Multi-brand great brands

• Yum! Is the world leader in multi-branding, offering consumers more choice by combining two brands under one roof

• Yum! Owns 2900 multi-brand restaurants Worldwide.

Yum! Brands, inc. Growth strategies Drive profitable international growth

• Yum! Restaurants International (YRI) owns more than 11,000 restaurants outside the US

• YRI opened 700 restaurants every year for the past 5 years. And in 2004 YRI opened 3 new restaurants each day of the year.

• In 2004 YRI revenues totaled $2.1 billion, and operating profit reached $337 million

Yum! Brands, inc.A & W Restaurants, inc. Is based in Louisville, KY Founded in 1919, serving all American

pure beef hamburger and hot dogs. Owns 600 food outlets in 13 countries

and territories around the world and 600 points of distribution at Yum! Multibramds restaurants.

Yum! Brands, inc.KFC Corporation Is the most popular chicken restaurants chain Is based in Louisville, KY Was founded in 1953 and specializing in

Original recipe, Extra Crispy, and Colonel’s Crispy Strips with home style sides, BBQ Wings, and Chicken sandwiches.

Owns 13000 outlets in more than 80 countries

Yum! Brands, inc.Long John Silver’s, inc. Is the world’s largest quick-service seafood

chain. Is based in Louisville, KY Was founded in 1969and specializing in

batter-dipped fish, chicken, shrimp, and hush-puppies.

Owns 1200 restaurants worldwide, and 200 additional points of distribution in multi-brand restaurants

Yum! Brands, incPizza Hut Inc. Is the World’s largest pizza restaurant

company Is based in Dallas, TX Specializes in pan pizza, thin n crispy pizza,

hand tossed style pizza, and stuffed crust pizza

Owns 7500 restaurants in the USA, and more than 4500 restaurants in over 80 countries

Yum! Brands, incTaco Bell Corp. Is the nation’s leading Mexican-style

quick service restaurant Specializes in Tacos, burritos,

quesadillas, border bowls, and nachos Owns 6000 restaurants in the USA and

serves 35 million people.

Yum! Brands, inc. Corporate Responsibility Community involvement

• Yum! Brands foundation corporate sponsor of dare to care program to end hunger

• YUMeals program to end hunger in the USA

• Pizza Hut book it program to help develop reading interest for children

• KFC colonel kids charity to provide nationwide access to childcare

• Taco bell teen programs

Yum! Brands, inc. Corporate Responsibility Diversity

• For the past two years, Yum! Has been recognized in Fortune magazine’s top 50 “ Best Companies for Minorities”

• Yum! Has been recognized in Black Enterprise magazine as one of the 30 best companies in diversity