Fast food outlets to learn to adapt

Consumer trends have been favouring premium dining, greater convenience and healthier menu items and fast food outlets are increasingly meeting this need, says IBISWorld.

According to IBISWorld reports, the fast food industry is expected to generate revenue of $19.3 billion in 2016-17 and post annualised growth of 1.4 per cent over the five years through 2021-22. The pizza restaurants and takeaway industry is expected to generate revenue of $3.7 billion in 2016-17, and post annualised growth of 2.2 per cent over the five years through 2021-22.

McDonald’s, KFC and Hungry Jacks have all underperformed in the past five years. These operators have attempted to adjust their images and reputations by offering more premium and healthy menu items. For example, McDonald’s has added numerous café-style items to their menu, reduced the sugar and salt content of its food and added new premium food options. However, this tactic has had limited success. Conversely, revenue for Domino’s Pizza has grown strongly over the past five years, significantly outperforming both the fast food industry and the pizza restaurant and takeaway industry.

“The strategy for Domino’s has differed to other traditional fast food outlets,” IBISWorld Senior Industry Analyst Andrew Ledovskikh said. “Instead of only attempting to compete with premium pizza stores or just add healthy options to its menu, the company has expanded its store network by more than 100 locations in five years and focused on technology-related convenience, such as guaranteed 20-minute delivery times and SMS ordering.”

IBISWorld also identified the role of online ordering platforms, including Delivery Hero and MenuLog, for fast food operators. These platforms allow smaller restaurant and takeaway businesses to access a wider customer base and improve the convenience of their delivery services. As a result, they can more effectively compete with larger, more established fast food brands.

Commenting on the size and performance of players in the industry, Mr Ledovskikh said, “While many larger, traditional food operators have struggled over the past five years, smaller operators have benefited from premium and healthy eating trends. These operators have also been attempting to improve the convenience of their product offerings through online and mobile ordering platforms.”

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