Fast Food Industry Advertising Fast Food Industry 1 Economics of Advertising Presentation Aaron Weiner Jonathan Kligman Charles Funderburk III Charles Hartsfield

Fast Food Industry Advertising Survey Question 2 Industry Overview McDonald’sBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch  What do you think is the most popular fast food restaurant?!  Burger King  Subway  Taco Bell  McDonalds  Chipotle  Wendy’s

Fast Food Industry Advertising Industry Overview 3  The first fast food restaurant was called Automat, located in New York City in 1912 Survey Question Industry Overview McDonald’sBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 4  The first fast food chains were A&W in 1916 and White Castle in 1921 Survey Question Industry Overview McDonald’sBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising McDonalds 5  Paragon Modern Fast Food Restaurant  Began in 1940 by brothers Richard and Maurice Their first mascot was “Speedie”, which then became Ronald McDonald and the Gold Arches in 1961 Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising McDonalds 6  Financials Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising McDonalds 7  Brand Equity Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising McDonalds 8  Top 10 Brand Equity in 2011 Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising McDonalds 9  Price Parody Theory  Big Mac as Economic Indicator  Norway- $7.06  US- $4.30  Hong Kong- $2.13 Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Burger King 10  Began in Florida in 1953 as Insta-Burger King  After financial difficulties, David Edgerton and James McLamore purchased the company and gave it the name we know today, Burger King.  Famous for customization from the 2002 slogan, “Have it your way.” Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Burger King 11  Financials Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Burger King 12  Brand Equity Survey Question Industry Overview McDonalds Burger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 13 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 14  Organization  HHI=  C4= 42%  McDonalds- 21.2%, Yum!- 9.2%, Subway- 6.3%, Wendy’s- 5.3%  All of the big players are publicly traded, besides Subway which is privately owned  Yum! Brands owns: KFC, Pizza Hut, and Taco Bell Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 15 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 16  Key External Drivers  Consumer Spending  Healthy Eating Index  Consumer Sentiment Index  Agricultural Price Index Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Industry Overview 17  Consumer Spending & Healthy Eating Index Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 18  Informative  Price of product and discount offerings  Combative  Quality and brand differentiation  Small Segment Targeting  Health options and seasonal products Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 19  Informative  One of the most attractive aspects to the industry is the low price point  Quality is mentioned along with price to inform the consumers that it is NOT cheap because bad quality Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 20  Informative  Example  McDonald’s Dollar Menu Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 21  Informative  Example  Burger King’s Two For Price of One  Healthy options at a low price Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 22  Combative  This has become more popular with rising regulations due to health concerns  Prevalent because market is not growing in size; thus must attempt to take market share from competitors Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 23  Combative  Example  Big Mac vs. Whopper Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 24  Combative  McDonalds Uses celebrities to attract sports fans and young athletes Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 25  Combative  Burger King  Uses sex appeal  Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 26  Small Segment Targeting  This is often utilized as an attempt to gain new consumers because the market is decreasing by appealing to small segments (health conscious)  Promotes seasonal products that attract specific target audiences Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 27  Small Segment Targeting  McDonald’s  McDonald’s Shamrock Shake  McDonald’s Grilled Chicken Wrap Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Advertising Strategies 28  Small Segment Targeting  Burger King  Targeting children  Targeting animated movie fans Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 29  The top 10 cities in the industry by number of establishments are:  New York  Los Angeles  Chicago  Dallas  Atlanta  Houston  San Francisco  Miami  Seattle  Phoenix Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 30 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 31  We considered a myriad of variables to regress with the raw data  Obesity  Income  Ethnicity  Cost of Living  Total Sales $  Population Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 32 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 33 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 34  Ethnicities Considered  Black  White  Hispanic  Asian Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 35 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 36 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 37 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 38 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 39 Positive and significant relationship between Ad $’s and sales per capita suggests fast food advertising is successful Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 40 Fast food revenue’s relationship with Ad $/capita is even more strongly correlated when looking at the establishment level data Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 41 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 42 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 43 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis SurveyRecommendationStock Pitch

Fast Food Industry Advertising Survey 44 7 questions 100 respondents Questions aimed toward establishing preferences and identifying advertising effectiveness Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 45 Survey Q1 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 46 Survey Q2 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 47 Survey Q3 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 48 Survey Q4 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 49 Survey Q5 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 50 Survey Q6 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Survey 51 Survey Q7 Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data Analysis Survey RecommendationStock Pitch

Fast Food Industry Advertising Data Analysis 52 Takeaways: Real Income and racial composition are big factors in determining Ad $’s spent in a particular area Fast Food companies do not target obese/overweight people There is some correlation between Ad $’s spent and revenue, but it is similar to the chicken and the egg situation. Survey Question Industry Overview McDonaldsBurger King Industry Overview Data Analysis Advertising Strategies SurveyRecommendationStock Pitch

Fast Food Industry Advertising Recommendation 53  Advertisement Strategies  Continue the promotion of healthier options  Promote coffee based drinks and smoothies Higher profit menu item and low cost Growing market segment  Target higher income classes Data proved that fast food is a Normal Good Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurvey Recommendat ion Stock Pitch

Fast Food Industry Advertising Recommendation 54  For instance McDonalds’ McCafe  Variety of coffee options  Able to compete with Starbucks and Dunkin Donuts  Larger profit margins than other products Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurvey Recommendat ion Stock Pitch

Fast Food Industry Advertising Stock Pitch 55  CMG – Chipotle  Quick Metrics  Mkt Cap: $11.3B  Mkt Share: 2.15% and growing quickly  LTG Forecast: 19.8% vs. 14.6% industry  P/E Ratio: vs industry  Current Price: $  52 week high: $  17% upside Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendation Stock Pitch

Fast Food Industry Advertising Stock Pitch 56  Stock is trending higher  Revenue 2012: $2.8B  Revenue 2013 Est. $3.2B, 2014 Est. $3.7B (32% increase) Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendation Stock Pitch

Fast Food Industry Advertising Stock Pitch 57 Risks  Commodity exposure  Corn has a highly correlated inverse relationship with stock price  Consumer Spending  If the recovery faces headwinds, the consumer could decrease spending Survey Question Industry Overview McDonaldsBurger King Industry Overview Advertising Strategies Data AnalysisSurveyRecommendation Stock Pitch

Questions? 58