My business plan is to open a franchise of little Caesars in Jackson Heights, Queens NY. First let’s look at the fast food industry as a whole. History of the industry The concept of fast food is inspired by ancient Rome, in which bread and wine were sold in street-side stalls. In early 20th century In the United States, fast food history is associated with the introduction of drive-in restaurants. Since then, US industry of fast food has come a long way to become the largest fast food industry in the world.
One of the pioneers of this field is White Castle, was founded in Kansas, in 1921, one of the major names when it comes to the American fast food sector. In 1930's, the American fast food industry achieved yet another milestone - when Howard Johnson's introduced the concept of franchising restaurants in the United States. NAICS Code and industry Description According to NAICS Fast food restaurant 722211, “The restaurant industry comprises establishments primarily engaged in providing food services (except snack and nonalcoholic beverage bars) where patrons generally order or select items and pay before eating.
Food and drink may be consumed on premises, taken out, or delivered to the customer’s location. Some establishments in this industry may provide these food services in combination with selling alcoholic beverages”. (Census) Growth of Industry Since 1982, consumers starting spent more on fast food as compare to table service restaurant, according to figures this annual growth rate turns into 6. 8% as compare to 4. 7% growth rate through 1997. This amount increased from 29. 3 to 34. 2 % between 1982 and 1997, while the restaurant proportion decreased from 41 to 35. 7 percent.
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As per a research of “US Fast Food Market Outlook 2010”, despite the growing concerns such as rising health consciousness and increasing incidences of obesity in the US population the US fast food industry has been witnessing impressive growth for the past few years. This research shows that during the economic down fall it was the only industry that benefited as people have changed their food habits from spending more money on dinning outside at restaurants to fast food products. It was expected that the fast food market will grow at a CAGR of around 5% during 2009-2011. . (Mark)
According to the restaurant association in 2010 sales of restaurant industry are $580 billion; these restaurants are located over 945,000 locations, having 12. 7 million employees (one of the largest private-sector employers) across United States of America. Here are some more facts about restaurant industry: $1. 6 billion: Restaurant-industry sales on a typical day in 2010. $2,698: Average household expenditure for food away from home in 2008. 40 percent of adults agree that purchasing meals from restaurants and take-out and delivery places makes them more productive in their day-to-day life. 73 percent of adults say they try to eat healthier now at restaurants than they did two years ago. 57 percent of adults say they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community. 78 percent of adults say they would like to receive restaurant gift cards or certificates on gift occasions. 52 percent of adults say they would be more likely to patronize a restaurant if it offered a customer loyalty and reward program. 57 percent of adults say they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community. 56 percent of adults say they are more likely to visit a restaurant that offers food grown or raised in an organic or environmentally friendly way. 78 percent of adults agree that going out to a restaurant with family or friends gives them an opportunity to socialize and is a better way to make use of their leisure time than cooking and cleaning up.
In New York restaurant industry is a major source of power in the state’s economy. This industry has key contribution to tax revenues. Restaurant industry is providing jobs to thousands of people; it is becoming an emerging career option to people. They are giving the people nutritious and healthy Manu options to their customers. Restaurant industry is dedicated to protect their environment in these 4 areas, and to reduce their impact on the environment in four key areas: profitability and entrepreneurship, jobs and careers, food and healthy living, and sustainability and social responsibility According to the restaurant association “New York alone has more than 38,596 eating and drinking places, with a projection to register $ 29 billion sales in 2010. In New York in restaurant industry there are 673,800 employments. Here are some more important facts that contribute in the restaurant industry in state’s economy: New York’s restaurants generate an additional $. 98 in sales for the state economy against every $1. In New York’s eating and drinking places generates an additional 23. 4 jobs in state against every extra $1 million. The restaurant job ratio of in New York is 8 percent of employment. By 2020 this It is expected that this industry will be able to reach 10. 4% job growth. (National restaurant association-2) According to Construction Forecasts News & Analysis One of the major factors of fast food industry’s popularity is that they offer low and affordable prices with lots of other benefits together, despite the fact that this industry like other industries of world is face up to lots of problems one like rising prices of energy and food. However it is not been completely overcome the price hike issue.
At the same time the hazards of fast food are now becoming well known and add to it another major threat to fast food industry is the increase of the number of good dinners. From the past year’s experience it is expected from the fast food industry to charge a bit more from the full service restaurant as the customer focuses on the dinners special and values. According to FDA figures “Quick service restaurants are projected to post sales of $164. 8 billion in 2010, a gain of 3. 0 percent over 2009. Sales at full-service restaurants are projected to reach $184. 2 billion in 2010, an increase of 1. 2 percent in current dollars over 2009” ”.
It is been expected from the eating-and-drinking place segment increase by 4. 5% to show the strongest growth in 2010. This is expected from fast food industry among all commercial industry segments that the strongest growth is in retail-host restaurants with a 4. 9 percent sales increase (this segment includes the food places located in gas/service stations and drug and grocery stores). (FDA-1) A big highlight of fast food industry is the availability of meals that meet a person’s requirements. This gives a sigh of relief to those parents or partners who have to travel between work and home for a big part of the day.
With a lot of variety of delicacies like fish and chips, vegetarian and non-vegetarian burgers and pizzas are served with complimentary alcohol and carbonated drinks at many of these fast food restaurants. Though accessories like coleslaw, baked potatoes and mushy peas gives the solution to have vegetables in meals but the intake of fried food is making the new age child far from the balanced diet. There are lots and lots of varieties of fast food chains like Subway, Burger King, McDonald’s, Pret-a-Manger and Pizza Hut accommodate the demands for seafood, lean meat, special diet meal components, and other considerable regional variations.
Experiments within the fast food industry had created new products like snacks such as sandwiches and baguettes. Fast food industry is also fulfilling the customer’s demand of dry of semi-dry meals which the customer can cook those meals in their own kitchen with less amount of time. Most fast food restaurants are now combining different style of food which is related to different cultures. This industry now flourishes on international appeal promoted by niche chains.
At many outlets and drive-ins, the customers can see the food being prepared, so that they can be satisfy that the food they are going to have in that fast food restaurant is completely safe and made in hygienic conditions. Unvarying menus, special traded marks and a unique atmosphere can be observed at these take-away services and sit-ins all over the world. Eat-on-the-go is another unique style of fast food which just not removes the need for traditional cutlery, but also provides the choice to the customers to treat their foods in their own traditional or cultural style in their own selected atmosphere.
The common menus include pitas, fried chicken, nuggets and tacos, served along with complimentary salads and breads. The fast food industry is now operating independent vendors. These venders have set standardized cooking, and production methods, and easy availability of low-cost delicacies. In 2009 because of the economic fall the restaurant industry also lost jobs. Regardless of the losses, the industry is still outperforming the national economy, and job growth is expected to resume in 2010. Still this industry remains one of the nation's largest private sector employers with its 12. million employees. By 2020, the industry is expected to employ 14 million more people with an increase of 1. 3 million jobs. Colorado is expected to post the strongest sales growth in 2010 at 2. 9 percent (2010 industry sales of $8. 7 billion), followed by Idaho at 2. 8 percent ($1. 6 billion). Forecasted to post growth of 2. 7 percent: New Jersey ($12. 8 billion), New York ($29. 0 billion), North Carolina ($12. 8 billion) and Texas ($34. 8 billion). The top states by restaurant sales volume in 2009 will be California at $58. 0 billion (2. percent growth); Texas at $34. 8 billion (2. 7 percent growth); New York at $29. 0 billion (2. 7 percent growth); Florida at $27. 6 billion (2. 4 percent growth); and Illinois at $18. 7 billion (1. 9 percent growth). In American from last few years people are been converted in to fast food choices . as in 1970, the Americans spent a total of $6 billion on fast food - the same am the same amount increased to $110 billion by 2000.
Although from the above figure it is very obvious that McDonald’s has a clear edge over all his competitors, but still this industry is the best example of perfect competition. In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Still, buyers and sellers in some auction-type markets say for commodities or some financial assets may approximate the concept. Perfect competition serves as a benchmark against which to measure real-life and imperfectly competitive markets”.
Profitability of the industry under perfect competition As I said fast food industry is an example of perfect competition market, so the question is how much control an individual company has to determine the price or decide the profit margin? To answer this question we need to look at the theoretical concept of economic, as per the economic concept; “In contrast to a monopoly or oligopoly, it is impossible for a firm in perfect competition to earn economic profits in the long run, which is to say that a firm cannot make any more money than is necessary to cover its economic costs.
In order not to misinterpret this zero-long-run-profits thesis, it must be remembered that the term 'profit' is also used in other ways. Neoclassical theory defines profit as what is left of revenue after all costs have been subtracted, including normal interest on capital plus the normal excess over it required to cover risk, and normal salary for managerial activity. Classical economist’s on the contrary defined profit as what is left after subtracting costs except interest and risk coverage; thus, if one leaves aside risk coverage for simplicity, the neoclassical zero-long-run-profit thesis would be re-expressed in classical parlance as profits coinciding with interest in the long period, i. e. the rate of profit tending to coincide with the rate of interest. Profits in the classical meaning do not tend to disappear in the long period but tend to normal profit.
With this terminology, if a firm is earning abnormal profit in the short term, this will act as a trigger for other firms to enter the market. As other firms enter the market the market supply curve will shift out causing prices to fall. Existing firms will react to this lower price by adjusting their capital stock downward. This adjustment will cause their marginal cost to shift to the left causing the market supply curve to shift inward. However, the net effect of entry by new firms and adjustment by existing firms will be to shift the supply curve outward.
The market price will be driven down until all firms are earning normal profit only”. (Michael R. Baye-1) It is important to note that perfect competition is a sufficient condition for allocate and productive efficiency, but it is not a necessary condition. In perfect competition if a company want to control price in the market it is important for the company to get involve in some kind of merger activities which give the company some extra powers over pricing a good example of such an activity is to bound the suppliers in some kind of contracts and restricting then to supply their products to your competitors.
As we have seen this industry is growing with every passing year, so let’s discuss some of the marketing plan for the business in general the marketing plan for Little Caesars Pizza analyzes the company’s present state, the environment in which the company is competing in, and projections for the upcoming year. As a new location for the current franchise owners in a severely competitive market, many solutions will be offered to help Little Caesars Pizza advance in its market share locally here in Jackson Heights, Queens NY.
We will build on the main corporate vision of Little Caesars Pizza, which is “To be the best take-home pizza chain by exceeding customer expectations with extraordinary value, great tasting products, and outstanding people while providing strong returns to our stakeholders” (“Little Caesars Pizza – Franchise Opportunities: About Us” 2011). A set of goals have been organized, all of which will contribute to the success of this franchise location in the upcoming years. We analyze its strengths and weaknesses that this particular Little Caesars Pizza is facing in its current atmosphere.
The strengths including quality customer service through family owned franchises, constantly expanding into new markets and quality products are essential to it and must continually be emphasized throughout the organization. Other opportunities are laid out that must be taken advantage of for growth to occur. After analyzing and averaging data of current operations we have calculated projected gross sales to be around $382,225. 00. Expenses and taxes would be taken from this to reach a net income for the year. The organizational structure of the Little Caesars Enterprises is quite structured.
The family oriented atmosphere that it continues to impose in its franchises help develop a more personable relationship with its customers and develop a strong and healthy work environment. Little Caesars is an industry leader and will continue to grow in its current operations. Strategic Plan/ Focus The following portion demonstrates four aspects of Little Caesars Pizza’s business strategy influencing in our marketing plan. The mission/vision, goals, core competence/sustainable competitive advantage, and Corporate Philosophy of Little Caesars Pizza. 1 - Mission/Vision
The mission of Little Caesars Pizza is, as described on the corporate web-site: “To be the best take-home pizza chain by exceeding customer expectations with extraordinary value, great tasting products, and outstanding people while providing strong returns to our stakeholders” (“Little Caesars Pizza – Franchise Opportunities: About Us” 2006). The Radford Manager agrees that they follow the corporate mission statement and use it as a model in day to day operations. Goals Little Caesars Pizza maintains a strong focus on value, great tasting pizza, and convenience. Financial Goals To make enough profit to exceed the initial start-up cost of the franchise. To minimize expenses while still offering premium ingredients and customer service. To increase sales by 10% from the first year of operation through promotion and customer service.
To uphold the corporate mission/vision. To obtain a good reputation mainly from the student population as getting their money’s worth and holding a good customer relationship while maintaining outstanding customer service. To create and maintain a happy and healthy work environment - Core Competencies and Sustainable Competitive Advantage. When discussing Little Caesars Pizza’s core competency, there are two main objectives it seeks to achieve: Supply convenient high-quality, competitively priced, pizza to the community’s population. To deliver the pizza products in a timely manner with exceptional customer service. To transform these core competencies into a sustainable competitive advantage, Little Caesars will maintain quality relationships with its suppliers while continuing to emphasize customer service to employees. Corporate Philosophy At the heart of Little Caesars Pizza’s philosophy is a profound commitment to give back to the communities that sustain its business. Little Caesars Pizza and its franchisees are devoted to numerous organizations throughout the United States. One of the most significant programs Little Caesars has founded is a nationally recognized program called the Love Kitchen, a pizza restaurant on wheels, and was established in 1985 by Little Caesars founders to feed the homeless and hungry in the United States and Canada.
Since its start, the Love Kitchen has fed more than 1. 5 million people in need. In addition to visiting soup kitchens and homeless shelters, the Love Kitchen also responds to disasters, including the recent hurricanes in the Gulf Coast area, the site of the World Trade Center attacks on September 11, 2001, and the Alfred P. Murrah Federal Building bombing in Oklahoma City in 1995. The Little Caesars Love Kitchen has received presidential declaration from the Reagan, Bush and Clinton Administrations, as well as a certificate of appreciation from the State of Michigan.
Its franchisees support the Love Kitchen by providing food and labor for servings in their markets. There are no fees associated with the Love Kitchen for the driver, the vehicle, or fuel. Franchisees find it very rewarding to support the Love Kitchen in their communities. Target Markets The primary target market for Little Caesars Pizza is middle and low income families who desire to pay a low amount of money for a large portion of food to feed their family members.
The secondary market consists of students who have little or no income and rely on part-time jobs or money from elsewhere to fund their food budget. Points of Difference The “points of difference” that differentiates the company from its competitors fall into three important areas: Superior Ingredients. Little Caesars uses superior ingredients and offers a variety of foods which includes sandwiches and side items. Compared to other pizza places that only focuses on one product which is pizza. Family Owned Environment.
The owners of the Little Caesars Pizza value customer service and satisfaction and emphasize this to its employees. • Affordability. The fast food industry provides a variety of cheap menu items which makes it affordable to many people. Positioning In the past, pizza products have been either fast but lacked quality or focused on quality but was time consuming, but not both. Little Caesars Pizza combines these two desirable characteristics to obtain a positioning in consumers’ minds as fast and high quality pizza, which allows customers to order them fresh out of the oven and tasty (Little Caesar Enterprises, Inc. 2011). Marketing Program The four marketing elements that are used by Little Caesars are explained in detail below. The promotion strategy is the most evident with the Hot-N-Ready deal that it offer. Product Strategy Little Caesars is known for its pepperoni and cheese pizzas being readily available whenever you want. It also offer different crust styles, bread products, wings, sandwiches, and salads. Little Caesars emphasizes its use of only the finest ingredients to serve the highest quality products to its customers that are expecting more for their money.
Little Caesars uses its boxes to advertise its number one promotion. The pizza boxes are covered with the Hot-N-Ready logo. You can also find a few coupons on the box to be cut out and used. This helps bring its customers back by reminding them of the great deals Little Caesars’ offer every time its customer goes back for another piece of pizza. Price Strategy Affordability is Little Caesars number one price strategy. Its most recognized price strategy, as mentioned before, is the Hot-N-Ready pizzas for five dollars. This is its main price strategy however it also offers deals on the second pizza that you order at a set price.
Little Caesars tries to make its food more desirable through price creating the attitude that you can get more for your money with convenience and great taste. Promotion Strategy The promotion strategy that Little Caesars has is primarily the Hot-N-Ready pizzas for five dollars. By having the Hot-N-Ready offer, it attracts many families that need a sufficient meal quick and cheap. Instead of delivering these pizzas, Little Caesars wants to make its customers experience a more personal approach by having its customers pick up their pizzas.
This helps the customers build a relationship with Little Caesars and keeps them coming back for more, which other companies lack by using the delivery service. This company does a great thing for families; with pizza being such a hot commodity these days, it is offering great convenience for little money (Little Caesar Enterprises, Inc. , 2011). Little Caesars also has certain promotions like Family Fun Pack, where Hasbro has combined with Little Caesars to have a drawing for four Hasbro games and one Family Pizza Party. It also offers sports deals for the sports fans.
Little Caesars focuses on cheap and convenient food and achieve this with all its promotions. Little Caesars expectation of growth comes from its strategic planning and development. These strategies will be shown in the opening of more franchises and the spreading of its innovative promotional tactics; most recently the Hot-N-Ready slogan. This slogan is meant to aim towards value-oriented markets and focus on the quality of the Little Caesars product. Implementing these strategies of quality, freshness, and including price; with their $5 pizza deal, will help the company increase revenues, broaden its market, and grow as a company.
The local Little Caesars in Radford should focus on implementing more advertising and low-cost student discounts. As the only advertising they do now is done all by corporate as part of the franchise, no additional campaign is done on the owners’ behalf. Also it should consider the delivery option due to the main target market locally is students, due to the lack of ability of and/or willingness of students to pick-up their own pizza. This poses a big problem with the local Little Caesars because competitors like Highlander’s and Mike’s Pizza are providing a good product with convenience of free delivery.
Marketing on Campus with flyers and coupons should be a focus as well as to obtain recognition of the students. Most students do not go through catalogs or look online for food deals; they simply use what is given to them and what they know.
- Census: U. S. Census Bureau code and description of industry 2007, retrieved on 03-30-2011 http://www. census. gov/cgi-bin+/sssd/naics/naicsrch
- FDA-1: According to FDA figures “Quick service restaurants are projected to post sales of $164. 8 billion in 2010, a gain of 3. 0 percent over 2009. Retrieved on 03-31-2011 from http://www. da. gov/food/
- FDA-2: According to the FD;C Act is protected through episodic unannounced inspections of facilities and products, educational activities, analysis of samples, and legal proceedings. Retrieved on 03-31-2011 from http://www. fda. gov/food/
- FDA-3: According to FD;C local governments inspect restaurants, fast food spots and similar outlets, U. S. State and Local Governments is doing an important role in these federal efforts, state and local governments are extremely active in the food inspection. Retrieved on 03-31-2011from http://www. fda. gov/food/
- FDA-4: According to FDA Trend Analysis Report on the Occurrence of Food borne Illness Risk Factors in Selected Institutional Foodservice, Restaurant, and Retail Food Store Facility Types (1998-2008). Data items Showing Statistically Significant Improvement in fast food industry. Retrieved on 03-31-2011 http://www. fda. gov/food/labelingnutrition/default. htm
- FDA-5: According to FDA Trend Analysis Report on the Occurrence of Food borne Illness Risk Factors in Selected Institutional Foodservice, Restaurant, and Retail Food Store Facility Types (1998-2008). Percentage of observations found in compliance for each risk factor.
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