External factors affecting the fast food industry Essay

There are a number of external factors that have a deep impact on the sales and revenue earnings of the fast food chains. The changing demographics, shift in consumer taste and preference, eating habits, increase in cost of supplies and labor, economic condition of the geographical area in which the outlets are located – all these are some of the factors that affect the profitability of the business. Pricing strategy Families and individuals in the higher income group are most frequent visitors to the fast food restaurant. The disposable income plays an important role in determining consumerism in this sector. The prices on the menu card is not so important when it comes to catering to high disposable income group. But that restricts the customer base and may not be an ideal situation for the company. Today’s lifestyle has incorporated the fast food industry into its daily schedule. The Wendy’s or the McDonald’s have menu cards that suit the pocket of the low-income segment group too. Recently McDonald’s had introduced the Dollar Menu where all items cost $1 only. It was a runaway hit with the teenagers and youngsters. The variance in price has enabled McDonald’s to attract customers from all segments. In response to this pricing strategy Wendy’s and Burger King also introduced low priced meals to suit the pocket of all segments. Back Yard Burgers on the other hand have higher priced burgers at $3. 59. The premium priced menu card has not found acceptance with all consumer segments but the management does not want to compromise on the price of the products. It believes that in terms of quality of the food items the prices are reasonable. Back Yard Burgers wanted to distinguish itself from the cutthroat competition in the industry with premium quality products. The management strategy holds good in terms of quality and service but is it good enough for the survival of the company? A look at the sales figures for the past 3 years gives an indication of the sales and revenue trend. Consumer taste and preference The ever changing taste buds and increasing changes in lifestyle of the consumer has kept the fast food industry on their toes. Rising mobility, increasing number of women joining the workforce and hectic schedules leave very little time for a home cooked meal. The need for faster options in food and service was felt that led to the tremendous growth in the fast food industry. Quick serve burgers, pizzas and sandwiches accompanied by French fries and coke became the ideal meal for the average Americans. A diet rich in fat and sugar attracted the consumers in plenty. This resulted in obesity and a disease prone society. Diabetes, heart problems were some of the impacts that the cheesy diet had on the consumers. Lawsuits were filed against some major players in this field like McDonalds for the growing obesity among children and adolescents. This awakened the consumers of fast food and they realized the necessity for healthy alternatives. Health conscious consumers are more alert of what they eat and how it can affect them. The industry witnessed a radical change in consumer taste and preference. This brought about a sharp decline in revenues for the fast food industry. The fast food chain operators brought about a change in their strategy by adding salads, fruits, and soups to the menu cards. Low calorie burgers and sandwiches are offered in addition to the regular menu items. This offers the customers with choice to healthier meal options. Back Yard Burgers has also adapted to the changing consumer preference by adding nutritious salads and milkshakes to their menu card. Introduction of grilled charbroiled burgers that claim lesser fat and lower calories have attracted the consumer interest and taste. Healthier and tastier alternatives in food items prepared with fresh ingredients are the strategic point of Back Yard Burger’s customer service. This has not only earned it a good reputation among the loyal consumers who return for more of the great quality food and taste but has also strengthened its market position. But the fast food industry cannot ensure consumer loyalty since the interest of consumers is flickering. They always want to try something new and better variety of options in food that they consume. To serve the changing tastes of the consumer and maintain their interest the restaurant needs to constantly make changes to its menu card by adapting to their taste buds. Back Yard Burgers should keep this mind while formulating their operating strategy. With more fast food companies offering a wide range of products and services, Back Yard Burgers should also draft changes to its existing operating structure. One way of achieving this objective would be to combine the essential features of both fast food and full service restaurants. A menu card that features in a regular full service restaurant integrated with fast food service will work wonders for the company – boosting sales and revenue with an increasing consumer base. Event catering and home delivery service could also open newer avenues for the company.