Quicklinks: Summary, products and services, successful companies | Income and profitability | Expenses | History, strategy and challenges
Summary, products and services
Summary of the fast-food chain business: how do fast-food chains work? How do they make money?
Most fast-food chains work on a franchise model, where the company sells licenses to operate a restaurant to franchisees. The franchisees are then responsible for running the restaurant and paying royalties back to the company. The company also typically provides some level of support, such as marketing and product development.
The fast-food business model is based on selling a high volume of food at low prices. Fast-food chains typically offer a limited menu of relatively inexpensive items that can be prepared quickly and easily. The goal is to make food that is appealing to a wide range of customers and to get them in and out of the restaurant as quickly as possible.
To make money, fast-food chains rely on a combination of low prices, high volume, and efficient operations. They also often have very high margins on some items, such as soft drinks, which helps to offset the low margins on other items.
There are a few different ways that fast-food chains make money:
- Selling food at low prices: This is the most obvious way that fast-food chains make money. By selling food at low prices, they are able to attract a large number of customers who are looking for a cheap meal.
- High volume: Fast-food chains make money by selling a high volume of food. They typically have very efficient operations that allow them to serve a large number of customers in a short period of time.
- High margins: Fast-food chains often have high margins on some items, such as soft drinks. This helps to offset the low margins on other items.
- Franchising: Many fast-food chains make money by franchising their restaurants. Franchising allows the company to sell licenses to operate a restaurant to franchisees. The franchisees are then responsible for running the restaurant and paying royalties back to the company.
List and description of the five most successful companies in the fast-food chain business. How big are they and what is their market value?
- McDonald’s – McDonald’s is the largest fast-food chain in the world with over 36,000 locations in over 100 countries. They have a market value of over $100 billion.
- Burger King – Burger King is the second largest fast-food chain in the world with over 15,000 locations in over 100 countries. They have a market value of over $20 billion.
- Wendy’s – Wendy’s is the third largest fast-food chain in the world with over 6,500 locations in 30 countries. They have a market value of over $9 billion.
- Taco Bell – Taco Bell is the fourth largest fast-food chain in the world with over 7,000 locations in 27 countries. They have a market value of over $8 billion.
- KFC – KFC is the fifth largest fast-food chain in the world with over 20,000 locations in 130 countries. They have a market value of over $15 billion.
Income and profitability
List of the top three sources of revenue for fast-food chains (AKA how do they make money?) – including percentages of income and examples in US dollars for each
- Food sales: This is the most obvious source of revenue for fast-food chains. They make money by selling food to customers. The average fast-food chain restaurant generates about 60% of its revenue from food sales. In 2018, the average fast-food chain restaurant in the United States generated $1.5 million in revenue from food sales.
- Beverage sales: Many fast-food chains also generate a significant amount of revenue from beverage sales. The average fast-food chain restaurant generates about 20% of its revenue from beverage sales. In 2018, the average fast-food chain restaurant in the United States generated $300,000 in revenue from beverage sales.
- Merchandise sales: Some fast-food chains also generate revenue from merchandise sales. The average fast-food chain restaurant generates about 5% of its revenue from merchandise sales. In 2018, the average fast-food chain restaurant in the United States generated $75,000 in revenue from merchandise sales.
Pricing: What are average prices among fast-food chains
In the United States, the average price for a fast food meal is about $7.50. However, there is a wide range of prices among different fast food chains. For example, McDonald’s meals typically cost around $5, while meals at Wendy’s or Burger King can cost up to $10.
One reason for the price differences is that some chains offer more menu items than others. For example, McDonald’s offers a wider variety of burgers and chicken sandwiches than Wendy’s, which means that customers have more options to choose from. In addition, McDonald’s also offers breakfast items, while Wendy’s does not.
Another reason for the price differences is that some chains use higher-quality ingredients than others. For example, McDonald’s burgers are made with 100% beef, while Wendy’s burgers are only made with 80% beef. As a result, McDonald’s burgers tend to be more expensive than Wendy’s burgers.
Finally, some chains offer combo meals that include a drink and a side item along with the main entrée. These combo meals typically cost more than ordering an entrée by itself. For example, a Big Mac meal at McDonald’s costs about $8, while ordering a Big Mac by itself would cost about $6.
In general, fast food prices vary depending on the chain, the location, and the type of meal that you order. However, you can expect to pay around $7.50 for a typical fast food meal in the United States.
What are the profit margins in the fast-food chain business? In a percentage range.
Fast-food chains have relatively low profit margins when compared to other types of businesses. For example, according to one industry report, the average profit margin for fast-food restaurants in the United States was just 3.7% in 2017. This means that for every $100 in sales, the average fast-food restaurant only made $3.70 in profit.
There are a number of reasons why fast-food chains have such low profit margins. First, they generally have high operating costs due to the need to purchase large quantities of food and supplies, as well as pay for labor. Additionally, fast-food chains typically have very little pricing power and are highly competitive, which puts downward pressure on prices and profits. Finally, many fast-food chains are franchise operations, which means that they have to share profits with franchisees.
Despite their low profit margins, fast-food chains are still able to be successful businesses due to their high volume of sales. For example, while McDonald’s only had a profit margin of 16.7% in 2017, it still generated over $24 billion in net income because it had sales of over $143 billion. Similarly, while Yum! Brands (the parent company of KFC, Taco Bell, and Pizza Hut) had a profit margin of just 6%, it still generated over $1 billion in net income because it had sales of over $16 billion.
In conclusion, while fast-food chains generally have low profit margins compared to other types of businesses, they are still able to be successful due to their high volume of sales.
Expenses
What is the cost to build a fast-food chain business? With an example.
The cost to build a fast-food chain business can vary depending on the size and location of the restaurant. For example, a small fast-food chain in a rural area may cost less to build than a large fast-food chain in a major city. The cost of land, construction, and equipment can also vary depending on the location. In addition, the cost of labor and supplies will be higher in a major city than in a rural area.
Assuming that you are looking to build a small fast-food chain with two locations, one in a rural area and one in a major city, the following is an estimated breakdown of costs: Land: $30,000 (rural) – $100,000 (major city) Construction: $50,000 (rural) – $250,000 (major city) Equipment: $20,000 (rural) – $50,000 (major city) Labor: $10,000 (rural) – $50,000 (major city) Supplies: $5,000 (rural) – $25,000 (major city) Total estimated cost: $115,000 (rural) – $475,000 (major city)
List and description of the top three ongoing expenses for fast-food chains. What percentage does each represent?
The top three ongoing expenses for fast-food chains are rent, labor, and food. Rent typically represents the largest expense for fast-food chains, followed by labor and food. The percentage of each expense varies depending on the location and size of the restaurant, but typically rent is the largest expense, followed by labor and food. Rent is the ongoing expense that represents the largest percentage for fast-food chains.
The average fast-food chain spends about 10 percent of its revenue on rent, according to QSR magazine. That means for every $100 in sales, a fast-food chain spends $10 on rent. Labor is the second-largest ongoing expense for fast-food chains. The average fast-food chain spends about 30 percent of its revenue on labor, according to QSR magazine. That means for every $100 in sales, a fast-food chain spends $30 on labor.
Food is the third-largest ongoing expense for fast-food chains. The average fast-food chain spends about 20 percent of its revenue on food, according to QSR magazine. That means for every $100 in sales, a fast-food chain spends $20 on food.
History, strategy and challenges
What is the history of the fast-food chain business? With examples for each continent of the world.
The first fast food restaurant is generally credited to White Castle, which was founded in Wichita, Kansas in 1921. However, there are earlier examples of restaurants serving food quickly at a low price. For example, in the late 19th century, “hash houses” became popular in New York City. These establishments served simple food quickly and cheaply.
In the early 20th century, as America became more industrialized and people had less time to cook at home, there was an increase in the number of eating places that served food quickly. In addition, the development of refrigeration made it possible to mass-produce food and keep it fresh for longer periods of time. This made it possible for restaurants to serve a wider variety of food. The first fast food chains began to appear in the 1930s. These included A&W Root Beer stands and McDonald’s.
Fast food chains really took off in the 1950s and 1960s with the growth of car culture and suburbanization in the United States. The rise of fast food chains coincided with an increase in obesity rates in the United States and other developed countries.
Today, there are fast food chains all over the world. In recent years, there have been some challenges to the fast food industry. For example, rising obesity rates have led to increased scrutiny of the nutritional content of fast food. In addition, the global economic recession has led to a decrease in spending on fast food. Despite these challenges, the fast food industry continues to grow and be profitable.
Some interesting facts about the fast food industry include: -There are an estimated 300,000 McDonald’s restaurants worldwide -Burger King is present in over 100 countries -The average American spends about $1,200 on fast food each year -The global fast food market is worth over $570 billion