The Fast Food Industry and How it Works
By Connor Touhey | May 5, 2022
The fast food industry in the world, but in America especially, is something to behold. A 100 years ago, our country was mostly made up of local or regional restaurants. Food generally took longer to make, and for many Americans, eating happened in the home more than anything. However, as roadways and cars became more commonplace, there emerged a new kind of food option: the fast food joint. Today the fast food industry in America is raking in revenues well over $200 billion a year. For an industry that was only pulling in $6 billion in revenue in 1970 (around $40 billion in today’s dollars), that is a pretty impressive growth. But why have these fast food chains come to dominate the market so drastically?
I’ll give you three words: Cheap, Fast, Convenient. These are the three words that perfectly describe the booming, billion-dollar fast food industry. By offering prices most people can afford, placing restaurants on trafficked roads, and having minuscule wait times, consumers have little to lose in terms of time, money, and effort. Well, now we know why fast food chains are popular but how are they profitable? They sell food for almost nothing, they lease or buy expensive real estate in order to have convenient locations, and they employ lots of workers in order to ensure quick, reliable service. Well, profits come from one thing and one thing only–Volume. Similar to the mentality of Walmart or Costco, the convenience and affordability of fast food chains is made possible by the fact that when enough food is sold, profits are attainable for owners. By pumping out food quickly enough and to a lot of people, these fast food chains are able to get by on their tight margins and remain profitable.
So how does McDonald's or Chick-Fil-A manage all of their stores? At some point, the number of locations would get too big to stay manageable right? Well, yes. And that is why these companies found a way to remain in control of their businesses as they grew exponentially; Franchising. Franchising is essentially when an everyday person, let's call him Paul, wants to open up a fast food restaurant. He has two options: he could try to open up his own burger shack and call it Paul’s Poppin’ Patties and hope people are willing to give it a try, or he could go to a well-established burger restaurant like Wendy’s, pay them a fee, and then sell his burgers under that name and brand while paying the Wendy’s corporation a royalty off of his sales. While it might make more sense in terms of freedom and potential profitability for Paul to open his own restaurant, opening a Wendy’s offers him stability from brand loyalty and brand recognition from consumers. It is the same reason why some of us rewatch the Office 10 times instead of watching something new. We know we like it, so why waste our time with something we might not like?
There is no denying the fast food industry is a dominating force in our economy. It gives jobs to 4 million people in this country, and it dominates our roadways, our culture, and our diets. Roughly 50 million Americans eat fast food a day, and there are no signs of this slowing down. What will happen in the future? Will people begin to see the health consequences of fast food or are we already too far gone? Will supply chain issues and job shortages cause the industry to rupture? Will companies be able to keep up with changes in eating trends and food availability? It is hard to say, but as of now, the fast food industry is here to stay.
Edited by Martha Wyatt-Luth and Maggie Reddington