Hard times fast food and making money
63Market share is everything.
The urgency felt by the big fast food franchises for more market share in a recession is noticeable in the latest TV ads for McDonalds, KFC, Hungry Jack's and other major franchised food outlets
The bun fight begins with attempts to make less look like more as they drop the prices of their "market leader" or cheapest meal, while providing smaller portions to allow some profit. This type of marketing is nothing new, and always features when things get tough.The big guys would like to keep the bun and eat it too!
When sales drop for these large franchises, the market is put under pressure as each of them scramble to increase their market share to avoid losing long term business which can be hard and expensive to win back. They would all like to do so without losing profit margin.
Each wants to take a larger share of the fast food market, so their first bite will be into the restaurant business or pizza shop market and a bit from the markets of smaller competitors
Well things have got very tough in the fast food business in every country that has a McDonald's, a Hungry Jacks or a KFC. Wherever there is money there is fast food, but currently few in the broader market have spare cash to spill on take away food of this type.
This is very bad news for fast food outlets as they are geared to grow not shrink and one out of the top performers has to lose market share for the others to prosper if things get really tough.
Making fast food pay
Fast food that pays well requires franchises have high volume sales and good gross profits.
Without a good volume of customers the margins are very hard to maintain against other franchisees in a given area, so the winners will have spent a lot on new promotions, and fast food will feed advertisers for as long as the survival war goes on. It will be dog eat dog with the consumer being fought over for as long as the market keeps going down, which it most probably will.
The advertising
If you watch Australian television you will have seen the competition hotting up and if you have tried some of the latest meals they are getting very small with lots of spice and sauce.
The price has dropped to about $2.95 for a meal including a drink for the latest contenders, yet the meal has so little food it may still make a profit. the drink is mostly ice anyway.
Loyalty is the game
I wonder how good the bean counters have been at making the margins continue to pay for a product that is so cheap to buy, yet not that much cheaper to deliver to the customer at the drive through or in the shop. It must be biting in to their cost per customer figures and so loyalty will need to be bought to keep the customer coming back.
The take-away food franchises will want to get their profit margin back when people have more to spend, and I say "Good luck with that".
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Comments
just picked up a bucket of kfc for our dinner tonight and place was packed
Yea I went to Red Rooster the other night was waiting for 15minutes grrrrrr. They should be called Slow food not Fast food.
Not sure what it's like for the Aussies but here in the states I see proof of that everyday.
I remember when Burger king sold the Whopper for 99cents while now there is a commercial where the Whopper is scolding his son Whopper Jr. for letting himself be sold for $1 And the Whopper Jr. isn't half the size of the Whopper which also seems a bit smaller.
I gave up fast food a short while ago (It's healthier and cheaper to eat at home) and I've noticed that quite a few fast food spots in my neighborhood look like ghost towns a few even closed down completely.
I think the strongest franchisees will still be flat out at meal time, but the ones that are not located in the right suburbs are hurting.
I used to love a bit of KFC myself cindyvine, but the last 3 times it has been dripping with oil or fat! McDonalds outlets I have tried seem short staffed, Hungry Jacks new ad campaign has bought the customers in, and you will see the fast food companies poring money in to ads on TV. I reckon the fight is gonna be expensive for the industry.
BlondePoet, The pics of fast food on TV just before dinner time look like everything you have dreamed of in food! So we drop cooking, rip of to the local drive-through right when everyone else does, wait for ages then get food that only resembles the ad in packaging!
sevon77, Good to know your kids are getting healthy food! I am cutting back on junk food myself, but break out and eat some about once a fortnight. We are seeing some outlets closing in Australia too.
I'm sensing a bit of a turnaround in thinking by the consumer. Thank heavens for the recession, or depression. We may have a whole generation or two, (x and Y) who have no idea how to cook a casserole or meatloaf because fast food flooded our lives. Good sense and a bit of homework will tell you that fast food is expensive and caters for those who 'don't have time or could not be bothered.' Slackers make franchisees wealthy.
I almost succumbed to McDonalds a few weeks ago. I walked into the business being lured by the smell of fries. The prices were not cheap, the food coming out didn't entice me and the feel of the place made me turn around and go buy a salad sandwich somewhere else.
They are desperate, no doubt to get the already stretched dollar. But they ain't gettin' mine.
The current advertising really sucks too BlondePoet, based on the lowest common denominator of course!
Nice hub...keep writing...
according to doctors the fast food not good for health and body of human beings thay are adding some chemicals to increase the taste and smell .
I like earnest you use no Avatar as your profile. I posted this subject in the Forum yesterday, boy did it go off. You are a very hot hubber indeed.
Thank you Beautiful Blonde one!
I've noticed that too - Mcdonalds are apparently doing great with their mini meals! It's such a simple idea really but when you look closer isn't really value for money - just a scaling down. Great hub!
I really love seafood, so when I was in college, I visited Long John Silvers (fast-food seafood). It fit my budget, and I thought to myself, how bad could it be, at least it would still be shrimp. It turned out that what I bought was deep-friend batter :D
Ah well, live and learn.
Wonder if the same thing is happening to Chinese take-out.
Ah the wonders of fast food. I bought a KFC meal the other day so small it was not even a snack!
Ahhh the wonders of fast food! Not my cuppa tea TBH and avoided at all costs. I don't get the attraction, though my kids loved KFC. I like the way you pointed out the simple truth: fast food outlets have one objective - make more for less! I worked in catering for a few years and the profit margin was - huge. And this despite folks thinking they were buying something that looked great value for money. The ones getting the value were the ones that were doing the selling! Nice hub Earnest :)
Thanks for the comments frogdroppings. I think there will be an ad war amongst the larger franchises too, with the economy down.
You know times are tough when the fast food joints start to lock and load. We're cycling more pasta into our weekly menu here at our house. Not that we've been to a fast food place in many years, because we haven't, but these days, we try not to go out to eat at all.
Yes all the indicators are in Tom, rough time ahead! I am glad to know that all the Rubenoff mob are getting real food! Pasta is good religiously too, if you believe in the FSM.
I don't know if or when it will arrive in Australia, but KFC has introduced a new Grilled chicken in the US and it tastes great. They are so far avoiding the low budget menu tactic with this product and I think they will have great success.
Thanks for the comment Ron, This could be a good tactic. I think if things continue to get tough people may eat KFC less often, but opt for the real meals and avoid the price war that is happening here in the mini meal segment.
Just as the cost of yogurt has gone up, the size of the cup has gotten smaller. And you are right about the extra seasonings.
I liked reading this. Thank you for sharing.
Thanks chauncygardener, I wonder what they will try next?
Fast food is becoming more desperate. I think some of the recent slogans are like a desperate bf/gf begging their lover to stay in the toxic relationships. Great hub by the way. You do not have the self-serve soda fountains in Australia?
Hi SweetirPie! I am not sure what a soda fountain is called in Australia but we do have self serve drink dispensers in store at most of the big franchises.
In my country Fast food business is grow up like a worm in my computer. But this business for anyone who get a lot of money. I am just only a customer.
Hello prasetio33. The businesses are quite expensive to buy, but I would not like to own one at this time.
another Great hub you are right they are quite expensive to buy
earnestshub -how are you doing long time you did not visit my hub Thanks
Hi Lgali, I'm doing fine thank you! Have I missed some hubs? Sorry, I will go now and take a peek.Have a great day!
Hi EH.. You are so right here. The pressure really is on small outlets everywhere.. even in Bumble Town.. Our Pizza Man was about to franchise on the same day the 'recession' hit; but luckily realised that he really didn't have the time to hunt the ingredients for more than one outlet. Good Hub Sir.
Thank you Pearldiver. Fast food is a good indicator of financials in Australia I reckon! I believe it is possible to read the economy from where fast food is at!
Thanks for a great hub.
For quite some time now packaging of all types has been shrinking. Smaller packages of everything from cereal to laundry detergent, but the prices stay the same or are even higher. They think they are fooling us? Maybe some people... LOL Good hub.
They try to lure with cheaper prices, but the size of the product has shrunk more than the price has. You're still getting less for your money.
Fast food is such an expensive way to eat all the way around. Convenience is never cheap, no matter how they fake it with smoke and mirrors.
I've never heard of "Hungry Jack's". Is that a burger place?
Peggy W and Laughing Mom, there is no fooling you lot! LM Hungry Jack's is a big fast food hamburger franchise in Australia.
Here in the States I don't have any idea how the market will stand the changes going on. It's amazing to me since I know nothing about marketing and I can see that destruction is around the corner, why don't these "experts" see it? Do I hear our President naming a food czar? It probably will happen next. He's naming a czar for everything else. God hub, Ernest!
Thanks no body, I would guess that the American fast food chains are already taking a big hit in some parts of the USA.
Interesting, informative hub. I have noticed the lines at Mickey D's seem a lot shorter!
Thanks habee! The economy is being talked up in Australia again, but the fight will still go on for market share.
blondepoet says:
7 months ago
Great hub EH, I am still trying to get KFC's secret recipe for their chicken.
Oh don't Hungry Jacks and McDonalds make their burgers look so appealing, almost enough to drool at the mouth, apparently they add some kind of gloss on the lettuce and bun to make it more appealing. However when you get there , after being woken up from falling asleep in the car waiting for it, it suddenly has shrunk half the size and the inside looks a bit rough. Ooooooo the scams.