1. Quick-Service Foods Sector Compiled By: Laura Keller Stephanie Latimer Nate Tuenge Steven Austed Shelly LiaBraaten Aaron Lum

2. Sector Definition Commercial restaurant service comprises everything from restaurants and cafeterias to ice cream parlors, bars, and cafes Focus on limited-service restaurants which offer rapid food preparation and low prices, with or without seating. The average check price is usually less than $7.

3. Sectors Dominate Traits (AKA Fun with Statistics) Market Size: $128.2 billion, 28.2% of total foodservice sales Market Growth Rate: 4.2% in 2003 and slowing

4. Fun with Statistics continued.. Industry Profitability:

5. Fun with Statistics continued.. Stage in the Growth Cycle: Maturing industry, focusing on growing same-store sales Capital Requirements: High fixed costs. Food & beverages, labor, and real estate top costs Focus on Product innovation Prevalence of integration: Stores integrating into quick-service (Delis) Rivalry: Highly competitive market, several companies vying for our meal dollars

6. Competitive Forces Food Prices Supply Shock Supply Shock & Fuel Costs Product Differentiation Price Discounting vs. InnovationInnovation Government Regulation SmokingSmoking & Minimum WageMinimum Wage Beef its what's for dinner- (US) Cattlemen's Beef Board

7. Industry Expected to Grow Growing Industry – more people are eating out than ever before 2003 – 46.9% of meals away from home 2010 – will spend 53% of meals away from home

8. Industry Expected to Grow (continued) Why are Americans spending more money on meals away from home? Decline in cost difference between eating out and eating in 2002 – only cost 25% more to eat at a restaurant Less free time 2003 – over 50% of U.S. families were dual- earner households More disposable income Aging baby boomers are progressively wealthier 1999 to 2004 – real disposable income increased at 1.8% per year

9. Shift in Industry Focus: From Discounting to Innovation Price Wars of 2000 - 2002 Saturated markets resulted in fierce competition between rivals (McDonalds vs. Burger King) To compete for the economically downtrodden customer base, major competitors drastically lowered prices ($0.99 value menus) Discounting greatly hurt profitability – not a sustainable strategy

10. Shift in Industry Focus: From Discounting to Innovation (continued) Product Innovation – 2003 Mimicked the success of the new quick-casual concept – higher quality, higher prices At fast-food restaurants, sales grew 5.4% in 2003 Found that people are willing to pay more for quality products Health food craze

11. Future Focus Less emphasis on U.S. expansion and price discounting Continued focus on product innovation and current store improvements Remodeling stores to improve image Wendys, McDonalds, and Jack in the Box have announced accelerated remodeling plans for 2005

12. International Expansion: China U.S. fast food market is saturated and firms are looking to expand abroad Large Chinese market 25% of Worlds population KFC – rated #1 consumer brand in China McDonalds and Starbucks plan to focus their international expansion on China over the next several years Hoping to establish themselves in the market by the 2008 Beijing Olympics

13. Strong companies McDonalds Corporation Aroma Café, Boston Market, Chipotle Mexican Grill Panera Bread Co. Was known as St. Louis Bread Company Wendys International Baja Fresh, Tim Hortons, Café Express, Pasta Pomodoro

14. McDonalds Corporation Strong brand name Worldwide presence 18,000 stores Mixes McDonalds American style with local tastes Systemwide sales of $4.2 billion As a condition of the franchise agreement, McDonald's owns the property on which most McDonald's franchises are located.

15. Panera Bread Co. Systemwide sales of nearly $1 billion in 2003 Second fastest growing chain in 2004 Stores in 35 states Moved into the quick-service market before many of the others did There are currently 656 Wi-Fi enabled Panera Bread bakery-cafes, from California to Virginia.

16. Wendys International Systemwide sales of $11.6 billion Restaurants in the US and Canada 6000 Different restaurant segments are broken up

17. Stock Comparison

18. What key factors will determine competitive success or failure? o Following Demographics o Understanding the economy o International Markets

19. Following Demographics Chiptole Mexican Grill (McDonalds Corp.) Baja Fresh (Wendys International) Qdoba (Jack In a Box)

20. Understanding the Economy Economic Recession: Promoting a more positive supply / demand relationships, which resulted in a stable sales growth Economic Boom: Focus capital expenditures on new units, focus on new products

21. Industry Attractiveness Industry attractive to investors, especially franchising Industry very profitable, and expected to keep growing because of increases in disposable income and dual worker homes Low barriers to entry, but intense competition and high fixed costs cause many ventures to fail

22. Sources Restaurant Research: Operators Focusing on Same- Store Sales - May 2005 - Franchising World - Franchising World - International Franchise Association Restaurant Research: Operators Focusing on Same- Store Sales - May 2005 - Franchising World - Franchising World - International Franchise Association Industry Trends: Restaurants Industry Profile: Restaurants How the Industry Operates: Restaurants

23. Sources Milton, Dennis P.; Standard & Poors Industry Surveys: Industry Trends - Restaurants; 21 April 2005; http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst20405.htm#trends.http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst20405.htm#trends Milton, Dennis P.; Standard & Poors Industry Surveys: Current Environment - Restaurants; 21 April 2005; http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst_0405.htm#environ.http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst_0405.htm#environ Milton, Dennis P.; Standard & Poors Industry Surveys: Industry Profile - Restaurants; 21 April 2005; http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst10405.htm#profile.http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst10405.htm#profile Milton, Dennis P.; Standard & Poors Industry Surveys: How the Industry Operates - Restaurants; 21 April 2005; http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst30405.htm#operates.http://0- www.netadvantage.standardandpoors.com.oasis.oregonstate.edu/docs/indsur/rst_0405 /rst30405.htm#operates Restaurant Research: Operators Focusing on Same-Store Sales - May 2005 - Franchising World - Franchising World - International Franchise Association Restaurant Research: Operators Focusing on Same-Store Sales - May 2005 - Franchising World - Franchising World - International Franchise Association http://quotes.nasdaq.com/quote.dll?mode=basics&kind=&timeframe=10y&intraday=of f&charttype=ohlc&splits=off&earnings=off&movingaverage=None&lowerstudy=volume &comparison=on&index=&symbol=WEN&symbol=MCD&symbol=PNRA&symbol=&symb ol=&symbol=&symbol=&symbol=&symbol=&symbol=&FormType=&mkttype=&pathna me=&page=charting&selected=PNRA http://en.wikipedia.org/wiki/Mcdonald%27s

24. Image Sources http://timmyray.typepad.com/timmy_ray/weird/ http://www.6foot6.com/fr/agfaimages/china/ChBeijing _BrandKFC.jpg http://www.6foot6.com/fr/agfaimages/china/ChBeijing _BrandKFC.jpg http://www.dw- world.de/dw/image/detail/1,1599,1076556_3,00.html http://www.dw- world.de/dw/image/detail/1,1599,1076556_3,00.html http://www.mccscamppendleton.com/clubs/fast_food/f ast_food.html http://www.mccscamppendleton.com/clubs/fast_food/f ast_food.html http://www.mcdonalds.com/usa/eat/features.html http://www.starbucks.com/aboutus/internationaldev.as p http://www.starbucks.com/aboutus/internationaldev.as p http://www.wendys.com/food/Family.jsp?family=4 www.google.com