Hard times fast food and how to make money
Market 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.
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".