1. FAST FOOD INDUSTRY IN THE U.S.
Meredith Drummond, Jess Krause, Sofia Steinberger, & Tory Trippe

2. Advertising Strategies Analysis and Recommendations
AGENDA
Introduction
Industry Analysis
Advertising Strategies
Analysis and Recommendations

3. WHY FAST FOOD? Study impacts of health awareness trends
Change from “fast” and “low price” to higher quality food due to consumer demands
How fast food industry advertising has changed to adapt to trends

4. INDUSTRY ANALYSIS

5. BACKGROUND: PRODUCTS & CONSUMERS
Industry Definition: Restaurants where quick service food products are paid for before consumption.
Distribution Chain:
Consume off Site
Delivery Service
Restaurant
Direct to Consumer
Consume on Site

6. BACKGROUND: PRODUCTS & CONSUMERS
Product & Services Segmentation in the Fast Food Restaurant Industry 2015
IBISWorld.com

7. REVENUE
Revenue in the Fast Food Restaurant Industry
IBISWorld.com
Dip due to recession
Revenue Growth
1.6%
0.2%
2.6%
-0.4%
2.9%
1.3%
0.7%
0.8%
2.0%
1.4%

8. CONSUMER SPENDING - Key industry driver is increasing 3.0% 2.2% -0.4%
Consumer Spending in the Fast Food Industry
IBISWorld.com
Dip due to recession
- Key industry driver is increasing
Consumer Spending Growth
3.0%
2.2%
-0.4%
-1.6%
1.9%
2.3%
1.8%
2.4%
2.0%
2.6%

9. EMPLOYMENT
Employment in the Fast Food Restaurant Industry
IBISWorld.com
Dip due to recession
Employment Growth
3.0%
0.6%
0.9%
-2.6%
-1.8%
2.1%
0.7%

10. CONCENTRATION Industry concentration: Low, increasing
Fast Food Marketshare
IBISWorld.com
Industry concentration:
Low, increasing
Number of firms in the industry:
4,562
Four Firm Concentration Ratio
36.2
Sources: IBISWorld.com, Hoovers Online

11. INDUSTRY COMPETITION Degree of barriers to entry: Degree of rivalry:
high, increasing
Degree of barriers to entry:
low, increasing
Reasons for low barriers:
Franchising component
Wide array of food concepts
Primary means of differentiation:
Price
Quality of food
Location/Convenience
Style of food
Service/Ambience
Source: IBISWorld.com

12. INDUSTRY PERFORMANCE Description 2015 Outlook Impact
Relative Importance
Consumer Spending
Total amount spent by Americans on services and new goods and net purchases of used goods
Expected to increase
Healthy Eating Index
Percentage of a recommended diet that an average American consumes
Expected to slowly increase
Agricultural Price Index
Nominal prices received by farmers for US agricultural products; indicator of prices restaurants can expect to pay
Expected to decrease
Consumer Confidence Index
Level of confidence consumers have in the economy
Expected to increase
More
Important
Less

13. INDUSTRY ORGANIZATION
Supply Chain:
Supplier
Supplier
Distributor
Restaurant
Consumer
Supplier
Source: Duke University

14. MAJOR PLAYERS Company Market Share Strategies
Financial Performance for 2015 in United States
17%
Focused on modernizing the format of its stores
More aggressive push into breakfast segment
Revenue expected to increase 3.7%
10.8%
Opens multi-branded restaurants in high-traffic areas
Revenue expected to decrease by 12.4%
6.7%
Shift to Five Dollar Footlong promotion from “Eat Fresh” campaign
Revenue expected to increase 5.6%
4.4%
Strategic price increases
Shift in sales mix towards more premium products
Revenue expected to increase 2%
Source: IBISWorld.com

15. BACKGROUND: TECHNOLOGY
Level of technology change: Medium
Drivers: Reduce labor and food costs
Types of technology:
Wireless technology ordering systems, mobile technology
Point-of-sale systems
Just-in-time scheduling
Social media

16. REGULATION AND ROLE OF GOVERNMENT
Level of regulation: Medium, increasing
Regulations around 4 main issues:
Food safety and standards
Labor relations
Smoking bans
Franchising laws

17. ADVERTISING STRATEGIES: TV

18. ADVERTISING SPENDING BY BRAND IN THE UNITED STATES IN 2013
Ad Spend by Restaurants in 2013
Statistica
Prisoner’s Dilemma

19. MCDONALD’S STILL LEADS THE WAY IN GLOBAL BRAND VALUE
2015 Value of Top 10 Fast Food Brands Worldwide
Statistica
Yum! Is ranked 4th after Starbucks (8.2 bn)

20. A Closer Look at McDonald’s Brand Value
McDonald’s Global Brand Value
Statistica

21. BRAND LEADERS HAVE LOWEST AD TO SALES RATIOS%
Jubille4 Gold Ad-Sales ratio of 11.91% in 2007,10.25% in 2008, .42% in 2009, 5.72% in 2010 and defaulted in 2011

22. AVERAGE AD-TO-SALES HAS DECREASED FROM 3. IN 2007 TO 2
AVERAGE AD-TO-SALES HAS DECREASED FROM 3.0* IN 2007 TO 2.53 IN 2014 FOR THE INDUSTRY
* Excludes:Jubilee4 Gold

23. TELEVISION DOMINATES ADVERTISING EXPENDITURE
2013 Advertising Spend in the food & beverage industry in the US by medium
Statista
MOST AMOUnt of ad spend is on Cable TV

24. QUICK SERVICE RESTAURANTS REPRESENT THE LARGEST ADVERTISERS IN FAST FOOD SPACE
Total TV advertising expenditure
TV advertising data

25. INDUSTRY LEADERS DOMINATE TV AD AIR TIME
Total seconds of TV advertising
TV advertising data
Coffee & Donut Restaurants
Quick Serve Restaurants
Pizza Restaurants & Delivery Services
McDonalds spends advertises for the most amount of time (36% of total TV Advertising time in fast food category)
Yum! Brands, which owns Taco Bell, Pizza Hut and KFC is responsible for approximately 24% of fast food TV advertising time

26. Morning News & Overnight Ad Slots have the highest fast food adverting traffic
Proportion of TV advertising by daypart for fast food categories
TV advertising data
In general the morning news and overnight time slots are the most popular time slots for fast food advertisers
05:00 AM-
09:00 AM
09:00 AM-
12:00 PM
12:00 PM-
03:00 PM
03:00 PM-
05:00 PM
05:00 PM-
07:00 PM
07:00 PM-
08:00 PM
08:00 PM-
11:00 PM
11:00 PM-
11:30 PM
11:30 PM-
01:00 AM
01:00 AM-
05:00 AM
Prime time is one of the top three most popular times for fast food advertisements as this is where viewership is highest
The popularity of the overnight and morning news time slots are most likely due these slots being relatively cheap as well as being relevant for breakfast food items

27. Typical after lunch time Typical after dinner time
FAST FOOD COMPANIES ADVERTISE WHEN CUSTOMERS WILL BE MOST RECEPTIVE TO THE PRODUCTS
Total seconds of TV advertising by time of day
TV advertising data
Typical after lunch time
Typical after dinner time
Afternoon and evening coffee purchasing behaviors is likely highly variable for the average consumer and is influenced by primarily by endogenous factors such as mood or energy level. As a result coffee advertisers can have a greater effect on customer’s purchasing behavior at these strategic times.
Coffee and donut advertising spikes at after-meal times to incentivize impulse buys
Pizza Restaurants have an advertising spike at 4 PM and 11 PM to incentivize impulse & binge purchases

28. Reality and Drama are the most popular programs among fast food advertisers
Total seconds of TV advertising by program type
TV advertising data
Most engaging programs
So more likely to be engaged in advertisements

29. subsections of the fast food market allocate their TV ad spend differently between program types
Proportion of TV advertising time per program type
TV advertising data
Coffee and donut restaurants advertise the most heavily in reality, which accounts for 77% of their total TV adverting time
The entirety of this reality TV spike comes from Starbucks

30. Most fast food chains diversify their advertising strategy, but advertise on only one program type
Proportion of TV advertising by program type
TV advertising data
Dunkin advertises on Sports “America Runs on Dunkin”, ppl think of their team/America
In general, high profit margin customers most likely female, Reality TV has high female viewership
Coffee & Donut Restaurants
Quick Serve Restaurants
Pizza Restaurants & Delivery Services
Most brands advertise across several TV show types in order to diversify their audiences
Some brands choose to advertise on only one or two types of programs including Dunkin Donuts, Hardees and Jimmy John’s

31. NBC is the top network for fast food advertisers
Proportion of TV advertising spending network
TV advertising data
Network
# of Viewers
5.804 mil
3.155 mil
8.089 mil
6.434 mil
1.414 mil
Median Age
49.3
46.2
55.6
52.3
47.1
# Adults 18-49
1.3 mil
0.9 mil
1.4 mil
0.5
Median HH
$55,00
$49,300
$43,500
$47,200
$40,600

32. MOST FAST FOOD BRANDS ADVERTISE PRIMARILY WITH ONE OR TWO NETWORKS
Proportion of TV advertising network
TV advertising data
Network effect – same consumers seeing same ads = higher recall (memory jamming)
Coffee & Donut Restaurants
Quick Serve Restaurants
Pizza Restaurants & Delivery Services
Within the fast food space, generally the smaller brands advertise with fewer networks while larger brands such as McDonalds advertise on many. This is likely because there are network effects due to memory jamming.
In general pizza restaurants advertise on a variety of networks despite being on the whole smaller brands

33. TV INSIGHTS WHEN: Advertise Morning News, Overnight, Prime Time
Coffee chains advertise after mealtime to create impulse buys
WHERE:
Reality & Drama Shows
Advertise on genres that match targeted audience
Product Placement
WHO:
Brands use network demographics with high viewership in their target audience (i.e. Spanish Language)
WHY:
Drive impulse buys & brand recall

34. ADVERTISING STRATEGIES: HEALTH & OBESITY

35. FAST FOOD AND ADVERTISING TO CHILDREN
What we know:
• There is a correlation between exposure to fast food advertising and children’s food consumption/body weight
• Exposure to fast food television ads has been associated with a 1.1% rise in children’s consumption of fast food
although no direct connection between bmi and advertising, we know that fast food is heavily associated with bmi

36. ADVERTISING TO CHILDREN STRATEGIES
•In 2012, McDonald’s advertised 16% more to children than teenagers and 8% more to children than adults
•Ads for healthy kids meals only account for 25% of fast food TV ads for children
•Several Fast Food companies offer advergame apps
•Advertising for non-kids’ meals on children’s network (i.e. Subway)
“Fast food restaurants also continued to target black and Hispanic youth, populations at high risk for obesity and related diseases.20 Increased advertising on Spanish-language TV raises special concerns. Combined advertising spending on Spanish-language TV by all fast food restaurants increased 8% from 2009 to KFC and Burger King increased their spending by 35% to 41% while reducing Englishlanguage advertising, and Domino’s and Subway increased Spanish-language advertising by more than 15%. Hispanic preschoolers’ exposure to fast food ads on Spanish-language TV increased by 16% reaching almost one ad viewed per day. They also saw 100 more of these ads than older Hispanic children or teens saw. However, just 5% of Spanish-language ads viewed by Hispanic children promoted kids’ meals. As in 2009, black children and teens saw approximately 60% more fast food ads than white youth, due largely to greater TV viewing. However, advertising for Starbucks, Popeyes, Papa John’s, and some Burger King products appeared during programming watched relatively more often by black youth. Black and Hispanic youth were more likely than their white and non-Hispanic peers to visit one-third or more of all fast food websites. For instance, Hispanic youth were 30% more likely to visit HappyMeal.com, and black youth were 44% more likely to visit the site.” -

37. ADVERTISING TO CHILDREN, BY PRODUCT
Children's food and beverage advertising consumption in U.S. 2013
Statista

38. INCREASE IN ADVERTISING TO MINIORITIES
Advertising targeted at black youth contains 60% more calories and sodium compared to white peers
In 2012, black youth saw twice as many ads for Starbucks and Popeyes than their white peers
Combined advertising spending on Spanish-language TV by all fast food restaurants increased 8% from 2009 to 2012

39. US CONSUMERS FEEL THAT FAST FOOD ADS ARE RELATIVELY TRUSTWORTHY ADS
Which advertisements do you feel are the most trustworthy?
Statista

40. Highest Fast Food Per Capita States
OBESITY AND FAST FOOD AVAILABILITY
Most Obese States
Highest Fast Food Per Capita States
South Carolina
Mississippi
Ohio
Louisiana
Nebraska
Texas
Indiana
Iowa
Tennessee
Wyoming
Kansas
Arkansas
Oklahoma
Kentucky

41. HEALTH SECTION INSIGHTS & IMPLICATIONS
Advertising fast food to children manipulates the perception of what is healthy to both children and parents
Fast food advertisers are specifically targeting minority groups:
Minorities are seeing more fast food advertisements
The content contains more calories
This will lead to a more obese minority population

42. RECOMMENDATIONS

43. RECOMMENDATIONS Investment Strategy
Market Leader (McDonald’s) is decreasing in brand value: look to other firms that are capitalizing on consumer’s changing preferences
Subway exceeds McDonald’s in # of stores (US) & annual growth rate
Highest growth sector lies with fast casual
Advertising Strategy
Adapt to consumer’s shift in preferences
Focus on quality food & experience
Continue to capitalize on impulse buys depending on target market

44. THANK YOU