AnalysisEssay Preview: AnalysisReport this essay1997 lost 111 million in net income due to divesture (pg 149)1997 38% company own 2004 23% company own long term target to reduce company own2003 NI = 585million sales = 8.3 billion ROS 7% (pg 149)Fast food industry NRA increase 4.3% to 408 b in 2003 858,000 rest made us rest industry 12 millionLate 1990s early 2000 consumer spending increased trend towards sit down restaurant (better service, more comfortable dining experience (pg 149)
8 major segments made up fast food: sandwich chains, pizza chains, family restaurants, grill buffet, dinner houses, chicken chains, non dinner concepts & other chains (149)
Sandwich chains struggling due to discounted price (150)Threat of obesity & demand for better service demand for healthier products (150)lowered demand for hamburgers fries and soft drinks combinationsAs a result per store sales declined in Hardees carls jr. McDonalds & Jack in the box however, Quiznos, taco bell schlotsks subway & wendys increase made more healthy food items
Industry going to healthy crazy with Mcdonalds Premium salads / Burger kings low fat grilled chicken sandwiches. 150Increased growth among dinner houses (applebees Red Lobster, Outback steakhouse, increased in-direct competition of chicken chains & grilled buffet chains (150)
KFC dominated chicken segment Sales 3.8 b in 2002 & estimated sales of 5 billion on 2003 (150) look at exhibit 3Competitors Chick-fil-A / Popeyes / ChurchsBoston Market major threat (upscale deli offering healthy, “homestyle chicken -Roasted) (150)Segment Sales fell in 2003 from 64% in 1993 to 51% in 2003 (ChickfillA & boston market combined market share by 11% 150)Distinguish from more traditional fast food refuse building drive thrus & established most units outside of shopping malls rather than major city intersections (151)
Despite market share gains by Boston & Chikcfilla KFC customer base remained loyal due to KFCs unique taste (153)Maturation of US fast food industry increased intensity of competition within chicken segment (153) Resulted in competitors focusing on new product introduction & intense marketing campaigns
Chains attempted to differentiate themselves based on unique product KFC used animated images of Colonel drive home its home-style image 153New product introduction popcorn chicken, honey bbq & spicy bbq wings heritage design Cajun style murals balcony over drive-thru (153)Demographic & societal trends influenced demand for food eaten outside of the home (rising incomes, higher divorce rates, people married later in life. More than 50% of women worked outside of home dramatic incrase since 1970. Double household income contribution. Less time to prepare meals more spending power more need to eat out. 153
Slow growth populations rate in US along with overpopulation of fast food chains. intensified competition (154)Baby boomers 35 to 50 yrs largest consumer group largest consumer group for fast food 51 to 64 second largest group as consumer age they become less eager to go to fast food rest. 154
Ethnic food rising in pop US immigrants 13% of US population in early 2004 looked for native food stores 154Labor cost made 30% of total cost second to food & bev. less younger people short pool of empoloyees high turnover rates forced to hire lower quality workers (154)
Turned to better training program & mentoring systems paired new employees with more experienced ones to combat high turn over 154Intense competition in mature rest. industry difficult to increase price hard to combat increase in cost due to pension plans & healthcare 154
Technology used to lower cost & improve efficiencies ( computers were used to improve labor scheduling, accounting, payroll, sales analysis & inventory control resduced serving time & cashier accuracy 154
Higher cost & poor availability of prime real estate another trend that negatively affected profitability 154US market mature more rest turned to international markets 155YUM! Brand became worlds largest rest chain in 2003 21,000 stores in US close to 33,000 in non USKFC had a hard time breaking into german market in 1970 & 1980 germens not accustomed to buying take out or ordering food over the counter 155KFC more success in Asia & latin America where chicken was traditional dish 155International expansion risk harderd to control quality as physical distance from HQTime, cultural & language difference incrased communication & operational problems. 155Internet was breaking down communication & language barriers 155Many of KFCs problems during 1980 & 1990s were limited menu & inability to quickly bring new products to market 155
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