The sustainable and profitable strategy of the fast-food industry - Focus on McDonald's

As you might already know, fast-food restaurants have been popping up all over the world for several decades now. In the United States alone, more than 200,000 restaurants hire over 4 million people. The fast-food industry (also called Quick Service Restaurants - QSR) was valued at $647.7 billion in 2019 and generates across the world more than $570 billion in revenue. In the United States, the main market of this industry, fast-food restaurants have experienced significant revenue growth, from $6 billion in the 1970s to $200 billion in 2015. The industry’s development is not going to stop there, given that its annual growth for the next few years is estimated to reach 2.5%.

The key factor of the fast-food industry’s success lies in its main strategy. Fast-food restaurants provide affordable meals and inexpensive offers. Consumers will hardly find a similar amount of food at such a low price. Fast-food franchises can easily offer local offers at an inexpensive cost. McDonald’s strategy for instance is based on adaptation and innovation. McDonald’s is currently known as the biggest fast-food restaurant chain in terms of revenue, serving over 69 million customers every day in over 100 countries. The franchise owns more than 37,000 outlets and has succeeded in mastering a remarkable capacity of adaption depending on various changes within its worldwide market. It has, therefore, always managed to overcome every challenge so far.

In creating local offers, such as the MacDonald’s donut sticks offer for breakfast (where you can buy 6 donuts for only $1.29), fast-food restaurants have been able to generate local support. Fast-food restaurants are generally open from early in the morning to late at night, consequently they are always here when you get a little hungry creating a real sense of freedom and belonging. This sense of community is enhanced by some products providing added value. For instance, the toys offered when buying Happy Meals make the kids even more inclined to ask their parents for such special menus. Parents and adults are also targets of this kind of marketing strategy through items adding value to the meals (such as the Coca Cola glasses that cause a sensation every year).

McDonald’s, like most other fast-food restaurants, relies on adaptation to attract as many potential customers as possible. The franchise has adapted its delivery service using the Uber Eats platform to win over higher-income customers and people who do not want to spend time waiting in stores. Therefore delivery orders quickly became more and more popular among its wealthiest customers. This type of pricier services allows the company to earn twice as much as basic in-store orders.

Adaptation does not only apply to national customers but also more and more to new international markets. When entering the Japanese market, McDonald’s had to adapt its products to local customers’ tastes and consumption habits. Owing to the smaller appetite of Japanese customers, the servings were reduced. The recipes were also modified to stay as close as possible to the local tastes and the hamburgers buns were thus replaced by fried rice cakes. Adaptation is essential to acquire new customers from different cultures. In the same way, the Indian market required McDonald’s to adapt the ingredients used in its products. Beef has then been replaced by chicken in order to comply to the Hindu culture and to meet the customers’ needs.

The chosen strategy by the fast-food industry is both wide and wise in offering affordable products while staying competitive. The industry has managed to stay this competitive for over 40 years thanks to its innovative and adaptive skills.

However, the fast-food industry might be challenged in the near future by fast-casual restaurants that are gaining market at that time. Although fast-casual restaurants only account for less than 10% of the restaurant market, they have experienced a growth of over 500% since 1999. Those restaurants provide higher-quality food through partnerships with local producers. In order to remain competitive and not to be outperformed by those restaurants, fast-food franchises should rely on their competitive advantage (low prices) while providing a more upscale atmosphere. This might for instance be achieved by getting rid of the food assembly line that gives the bad impression of being in a factory.

Marianne M.