The fast food industry is estimated to include over 1000 businesses and points of sale. Note that due to the high number of new businesses in conjunction with high occurrences of business closures, this data can only be regarded as estimation.
There are 3 main types of business active in the industry:
- Mega franchise stores running dozens of branches.
- Small, private franchises running a limited number of branches
- Independent businesses focusing on one or two types of food.
Customers: Defining the Target Market and its Size, Market segmenting
Potential clientele in the industry includes the entire population, according to necessity, taste preference, age, kosher food, geographical vicinity, and food type.
The industry is highly competitive. This stems from other fast food establishments located at close geographical vicinity or distant businesses receiving consumer priority due to food type preference. Additional indirect competition stems from restaurants, kiosks, and frozen food.
Vendors can be grouped into two main groups:
- Food vendors: raw materials, basic products, and prepared products.
- Supply vendors: kitchen equipment, dining area equipment, and cutlery.
Independent businesses usually advertise in local print and via direct marketing by way of brochure distribution to home and business mailboxes.
Additional marketing resources are magnets, delivery service, and promotions.
Future Development Options
- There has recently been discussion regarding health damages of some fast food products. This discussion has already triggered food menu renewal and update at some large fast food chains, and they now serve a combination of health food menus with other less damaging products. This trend is expected to increasingly develop.
- Private chains have begun offering alternatives to fast food by focusing on lower prices or a different, less standard product. One example is of hamburger counters erected at some of the supermarket chains.
Factors Affecting Success:
Acquaintance with the product, quality of food, and addressing the customer’s taste preference, location, quality, and speed of service.
A high investment in remodeling, design, and equipment, the process of receiving a business license and the cost of purchasing franchise rights if a franchise branch is established as opposed to an independent business.
Required human resources include a manager- responsible for general management and operation of the restaurant, kitchen employees, counter employees, general employees, and delivery persons.
- Kitchen equipment- ovens, refrigerators, stoves, and work counters, according to the type of food specialization.
- Sales area- a sales counter, chairs and tables.
- Kitchenware and cutlery.
- Location construction, remodeling, and design. Plans must take into account foundation and construction provisions required to receive a business license.
- Equipment purchase according to the list presented.
Industry revenue and profitability
Revenue per working pizzeria (single business or chain branch), for example, averaged 833-1,035 thousand NIS for the year 2003. Material consumption percentage ranges between 23-32% at an independent pizzeria, and between 19-23% at a franchise.
The food and restaurant industry is a high-risk industry- there are many new business, but the number of failed or closed businesses is high as well. The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure. A partial return on the supply investment may be possible, as the market is abundant with used supplies.
Licenses and Certifications:
In order to open a new coffee shop a business license is required from local authorities, the police, and the Ministry of Health, after qualifying for such a permit.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance , loss of income insurance, and food poisoning insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.