Joe DavidCompetition in the U.S. quick service restaurant (QSR) industry
This article aims to examine the competition in the U.S. quick service restaurant (QSR) industry and identify the key contenders for the crown of market leadership. The U.S. has been the leader and founder of many modern-day fast food and quick service restaurant chains. The first ever fast food restaurant in the country was opened on July 7, 1912.
Market size of the U.S. quick service restaurant (QSR) industry
Fast food and quick service restaurants serve fast food cuisine with quick service and affordable price. Many of this type of restaurants provide very minimal table service, while others do not have table service at all. This industry is dominated by global fast food chains, while local and non-chain operations also need to be taken into account.
Fast food and quick service restaurant industry is a booming one in the USA. According to Lock (2019) it generated a revenue of $273 billion in 2019. Some sources forecast that the market size in 2020 would be around $293 billion; however, there are strong doubts whether this can be achieved or not, due to the lockdown and current economic challenges.
Routley (2019) reports that an average individual spending on fast food in the USA is $1200 a year. Approximately, a quarter of the population eats three or more fast food meals a week. This clearly demonstrates why the country’s quick service restaurant industry is booming so much!
Key competitors in the U.S. quick service restaurant (QSR) industry
Total number of fast food restaurants in the USA is over 200,000 that serve around 50 million Americans every single day. Tayler (2019) reports that the 10 biggest fast food restaurant chains in the USA (based on the number of locations each restaurant has in the country) in 2019 were Subway, Starbucks, McDonald’s, Dunkin (formerly known as Dunkin Donut’s), 7-Eleven, Pizza Hut, Burger King, Taco Bell, Domino’s Pizza, and Circle K. It should be mentioned that Yum! Brands, Inc. operates KFC, Pizza Hut, Taco Bell, and the Habit Burger Grill.
Subway with its low franchise fee, was well ahead of its competitors in 2019 with a total of 23,801 restaurants in the country, though the number is down from 24,798 in 2018 (Lock, 2019). Starbucks and McDonald’s have 14, 608 and 13,914 locations respectively. Interestingly, Subway has more restaurants in the country than McDonald’s and Burger King’s combined. It is worth noting that the total number of Burger King’s locations is 7,330.
According to Narishkin and Cameroon (2019) the cost of opening a Subway franchise is between $116,000 and $263,000 which is very low compared to the cost of opening a McDonald’s franchise which is up to $2.2 million. It may cost between $297,000 and $2,109,000 to open a Pizza Hut franchise, while approximately $315,000 to open a Licensed Starbucks store (Franchise Help Holdings, 2020). The franchise start-up costs of Wendy’s, KFC, and Taco Bell are similar to that of McDonald’s.
However, apart from the start-up costs, another important matrix of success needs serious attention. For instance, each Subway franchisee earned around $422,000 in 2016 compared to McDonald’s average revenue generation of $2.6 million. Peterson (2019) reports that the current revenue generation by an average McDonald’s restaurant is around £2.7 million a year.
Fast food and quick service restaurant industry in the USA is marked by intense competition with each brand coming up with new strategies and techniques. New menus, concepts, and products are often tested to steal some spotlight from each other. Some brands have reintroduced old favourites like grilled cheese sandwiches, and hot dogs, while some others (e.g. Pizza Hut) are revamping their older sit-down restaurants to focus on faster delivery and takeaway-oriented locations.
Fast food and quick service restaurants in the USA are segmented on the basis of the products they offer i.e. hamburger, sandwich, pizza, Mexican, and others. Subway, McDonald’s, and Pizza Hut are well-known for sandwiches, hamburgers, and pizzas respectively and they are unlikely to beat each other in their key product areas.
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Last update: 14 June 2020
References:
Franchise Help Holdings (2020) Pizza Hut Franchise, available at: https://www.franchisehelp.com/franchises/pizza-hut/#:~:text=Pizza%20Hut%20has%20a%20franchise,applied%20toward%20national%20marketing%20efforts. (accessed 14 June 2020)
Lock, S. (2019) Revenue of the quick service restaurant (QSR) industry in the United States from 2002 to 2019, available at: https://www.statista.com/statistics/196614/revenue-of-the-us-fast-food-restaurant-industry-since-2002/ (accessed 13 June 2020)
Narishkin, A., and Cameroon, S., (2019) Subway’s 42,000 locations are the most of any fast-food chain on the planet, but franchise owners are taking a hit, available at: https://www.businessinsider.com/subway-fast-food-chain-locations-franchise-rise-fall-2019-8?r=US&IR=T (accessed 12 June 2020)
Peterson, H. (2019) Here’s what it costs to open a McDonald’s restaurant, available at: https://www.businessinsider.com/what-it-costs-to-open-a-mcdonalds-2014-11?r=US&IR=T (accessed 12 June 2020)
Routley, N. (2019) Ranked: Biggest Fast Food Chains in America, available at: https://www.visualcapitalist.com/biggest-fast-food-chains-in-america/ (accessed 10 June 2020)
Taylor, K. (2019) 10 fast-food chains with the most locations in America, available at: https://www.businessinsider.com/10-fast-food-chains-with-the-most-locations-in-america-2019-6?r=US&IR=T (accessed 12 June 2020)
Photo credit: Pixabay
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.
M Rahman
