Freshen up: Consumer health consciousness
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IBISWorld Industry Report H4512 Fast Food and Takeaway Food Services in Australia April 2019 Bao Vuong
2 About this Industry 15 Major Markets 27 Collins Foods Limited 2 Industry Definition 17 International Trade 28 Subway Systems Australia Pty Limited 2 Main Activities 18 Business Locations 2 Similar Industries 29 Operating Conditions 3 Additional Resources 20 Competitive Landscape 29 Capital Intensity 20 Market Share Concentration 30 Technology and Systems 4 Industry at a Glance 20 Key Success Factors 30 Revenue Volatility 20 Cost Structure Benchmarks 31 Regulation and Policy 5 Industry Performance 22 Basis of Competition 32 Industry Assistance 5 Executive Summary 23 Barriers to Entry 5 Key External Drivers 23 Industry Globalization 33 Key Statistics 6 Current Performance 33 Industry Data 8 Industry Outlook 24 Major Companies 33 Annual Change 11 Industry Life Cycle 24 McDonald’s Australia Holdings Pty 33 Key Ratios Limited 13 Products and Markets 25 Competitive Foods Australia Pty Ltd 34 Jargon & Glossary 26 Domino’s Pizza Enterprises Limited 13 Supply Chain 26 Yum! Restaurants Australia Pty Limited 13 Products and Services 27 Craveable Brands Pty Ltd 15 Demand Determinants
www.ibisworld.com.au | (03) 9655 3881 | [email protected] WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 2 About this Industry
Industry Definition Industry firms primarily provide fast usually provided in takeaway containers food, such as burgers, pizza, sandwiches or packaging, and is consumed on the and sushi, and takeaway for immediate premises, taken away or delivered. The consumption. Customers order or select industry also includes fast food sold in items and pay before eating. Food is food halls and food courts.
Main Activities The primary activities of this industry are Cooked chicken retailing Pizza retailing Hamburger retailing Fish and chips retailing Sandwich retailing Juice bar operation Mobile food van operation Sushi retailing Takeaway food retailing Ice cream retailing
The major products and services in this industry are Burgers Chicken-based fast food Desserts and confectionery Other fast food Pizza Sandwiches, salads and juices
Similar Industries G4112 Convenience Stores in Australia Businesses in this industry sell some foods that are intended for immediate consumption.
X0002 Franchising in Australia Franchising is when a franchise owner is granted, for a fee, the right to offer, sell or distribute goods or services under a business system determined by the business founder.
H4511a Restaurants in Australia Companies in this industry retail full meals to be eaten on the premises.
H4511b Cafes and Coffee Shops in Australia Stores in this industry provide meals for immediate consumption on the premises.
IBISWorld writes over 500 Australian industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com.au
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About this Industry
Additional Resources For additional information on this industry www.ausfoodnews.com.au Australian Food News www.hospitalitymagazine.com.au Hospitality Magazine www.insideretail.com.au Inside Retail www.retailbiz.com.au Retailbiz
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Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24 Snapshot $20.1bn 3.3% 0.5% Profit Wages Businesses $1.4bn $3.5bn 26,194
Revenue vs. employment growth Health consciousness Market Share McDonald’s 10 108
Australia Holdings 106 Pty Limited 25.1% 5 104 Competitive Foods 0 102
Australia Pty Ltd Index % change 100 8.6% -5 Yum! Restaurants 98 Australia Pty -10 96 Year 11 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25 Limited 6.0% Revenue Employment SOURCE: WWW.IBISWORLD.COM.AU p. 24 Enterprises
Key External Drivers 1.8% Health consciousness 6.6% TAS 0.9% SA NT 1.5% Real household ACT discretionary income 10.4% WA Demand from restaurants Median age of the 31.1% population NSW
18.9% QLD
p. 5 28.8% VIC
SOURCE:SOURCE: WWW.IBISWORLD.COM.AU WWW.IBISWORLD.COM.AU
Industry Structure Life Cycle Stage Mature Regulation Level Light Revenue Volatility Low Technology Change Low Capital Intensity Medium Barriers to Entry Medium Industry Assistance Low Industry Globalisation Low Concentration Level Medium Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33
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Executive Summary Consumer health awareness has have reduced demand for existing transformed the Fast Food and Takeaway players. External competition has also Food Services industry over the past five risen, with growth in the range of pre- years. Increased awareness of fast food’s cooked meals offered by supermarkets nutritional content and a conscious effort and significant competition from by consumers to choose healthier options restaurants and cafes. have affected industry demand. Industry Industry revenue is forecast to grow at operators have responded by introducing an annualised 0.5% over the five years a range of healthier, premium choices through 2023-24, to $20.7 billion. with less fat, sugar and salt. The change Greater convenience and improved in consumer preferences has also nutritional content of industry products prompted an influx of new operators are projected to drive revenue growth. offering higher quality fast food options. Operators will likely provide consumers Revenue is expected to rise at an with an evolving and adaptable product annualised 3.3% over the five years selection to gain market share. through 2018-19, to $20.1 billion. This Traditional fast food operators are includes anticipated growth of 0.5% in anticipated to further adjust their ranges, the current year, as discretionary adding new healthy options and catering incomes rise. to changing consumer tastes. The The median age of Australia’s industry is also projected to continue population has increased slightly over the changing as a result of new online and past five years, shifting demand towards mobile app ordering systems, making healthier fast food options. Older age ordering and delivery more appealing to groups are typically less likely to younger demographics. However, consume industry products. As a result, intensifying external competition from traditional fast food has declined as a operators such as pubs, cafes and share of industry revenue, while revenue restaurants over the next five years are from premium and healthy categories has anticipated to limit demand and grown. Competition among industry therefore constrain industry revenue players has been intense over the past growth. As a result, industry growth is five years, as traditional operators have forecast to be slower over the next fought for market share while new five-year period compared with the establishments offering healthier options previous five-year period.
Key External Drivers Health consciousness Real household discretionary income The perceived health and nutritional value Changes in household discretionary of fast food affects industry demand. incomes affect industry demand. An Increasing health consciousness reduces increase in discretionary income enables demand for traditional fast food, such as consumers to allocate more money pizzas and hamburgers, which are towards takeaway meals and fast food. perceived to be unhealthy. Traditional fast This factor provides industry firms with food still accounts for most of industry an opportunity to boost revenue. revenue. However, rising health Conversely, a decline in discretionary consciousness can encourage consumers income prompts households to cook to spend on healthier industry options, more meals at home rather than eating offsetting the downturn in demand for less out, reducing industry demand. Real healthy fast food. Health consciousness is household discretionary income is expected to increase in 2018-19. expected to increase in 2018-19.
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Industry Performance
Key External Drivers Demand from restaurants Median age of the population continued Restaurants compete with industry The age of consumers partly drives establishments for consumer demand for fast food. Older age groups are expenditure. As consumers spend more less likely to consume traditional fast food. at restaurants, they are likely to spend As the median age increases, demand for less on fast food services. Competition fast food tends to decline. However, older from restaurants is anticipated to grow age groups often substitute traditional fast over the next five years as they expand food for healthier fast food options offered their takeaway ranges, threatening by the industry, offsetting the negative industry revenue growth. In 2018-19, effect of an ageing population. The median demand for restaurants is expected age of the population is expected to to increase. increase marginally in 2018-19.
Health consciousness Real household discretionary income
108 6
106 4 104 2 102
Index 0 100 % change
98 -2
96 -4 Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25
SOURCE: WWW.IBISWORLD.COM.AU
Revenue growth for the Fast Food and revenue growth over the past five years. Current Takeaway Food Services industry has However, a range of healthier fast food Performance been solid over the past five years. options has provided some expansion Industry revenue is expected to increase opportunities. Consumers have revised at an annualised 3.3% over the five their fast food eating habits and years through 2018-19, to $20.1 billion. operators have responded by expanding This includes anticipated growth of healthy ranges and introducing new 0.5% in the current year, as rising products. Trends in household discretionary incomes support discretionary income, combined with consumer spending on industry competition from restaurants, cafes, products. Increasing public awareness convenience stores and supermarkets, of the importance of a balanced diet has have also affected demand for fast food contained traditional fast food outlets’ over the period.
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Industry Performance
External competition Fast food operators have faced Restaurants have become a growing increasingly strong competition from source of external competition for the external sources over the past five years. industry over the past five years. Over Supermarkets have expanded their the period, restaurants have expanded ranges of home-cooked meal their product offerings to include a range replacements and heat-and-serve of foods that were once mainly provided products such as pastas and pre- by fast-food operators. While traditional packaged mini meals. These retailers fast food segments, such as burgers and have emerged as one-stop shops that pizza, have struggled, their gourmet provide consumers with fast, affordable restaurant equivalents have grown and high-quality food. Many of these strongly. As a result, some consumers products are substitutes for traditional have moved away from the industry, fast food. Traditional convenience stores favouring restaurants instead. have also attempted to access this market Restaurants have also been capturing a by expanding their fast food options, larger share of takeaway sales, with such as pre-made sandwiches, salads and many now providing family deals and baked goods. takeaway options.
Health and quality Growing consumer awareness of the increasingly emphasising premium meals importance of healthy eating has and quality ingredients. This shift, transformed the industry over the past combined with foodie culture, has five years. Australians have become increased the number of smaller increasingly health conscious due to operators differentiating themselves public campaigns discouraging based on quality. This trend has unhealthy lifestyles. This trend has prompted more gourmet options in the encouraged consumers to purchase fast food market and new food options healthier alternatives, affecting demand that were previously considered for industry products. This trend has restaurant meals. While a shift towards boosted the number of fast food options premium products has provided support available to consumers. Industry for fast food operators, many competing operators have increasingly offered restaurants and cafes have also embraced healthier eating options, including salad the trend, which has limited growth in and juice bars, and sushi stores. These industry demand. Major players have new fast food options were initially sought to benefit from the food culture viewed as passing trends. However, these shift, introducing premium menus with new retailers have now cemented their higher quality ingredients. However, position in the fast food market, some operators have found it hard to increasing competition in an already change their image. Consequently, major saturated and competitive market. players such as McDonald’s have Australia’s food culture has struggled to keep up with the strong significantly changed over the past five growth of smaller premium operators years. Food service outlets have been such as Grill’d.
Profit Increasing demand for premium industry growing focus on controlling food waste products has boosted profit margins over have further supported profit growth. the past five years, especially for certain However, weaker demand for traditional gourmet operators, such as Grill’d, which fast food has limited growth in offer higher quality products that attract profitability over the period. Some higher prices. Tighter cost controls and a operators have turned to marketing and
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Industry Performance
Profit promotional deals, limiting profit margins incentive deals. These offers and deals continued to encourage sales and maintain market ultimately affect industry profit margins, share. For example, operators have with many operators introducing loss- offered buy-one-get-one-free offers and leading deals to attract consumers.
Industry structure Enterprise numbers have increased over among operators due to differing the past five years, due to the entry of corporate strategies, limited suitable healthier and premium fast food players. locations and rental costs. Industry However, intense competition has made employment has trended upwards over the trading landscape difficult for smaller the past five years, largely driven by operators, limiting new entrants. Growth growing demand for casual staff and in store numbers has varied considerably more flexible working arrangements.
Rising consumer demand for nutritious Industry Industry revenue fast food is projected to drive revenue
Outlook growth for the Fast Food and Takeaway 10 Food Services industry over the next five years. However, continuing health 8 consciousness trends will also hinder 6 industry performance, especially for traditional operators, as consumers limit 4
consumption of unhealthy food. % change 2 Revenue is forecast to grow at an annualised 0.5% over the five years 0 through 2023-24, to $20.7 billion. The -2 addition of premium menu options is Year 11 13 15 17 19 21 23 25 anticipated to support industry revenue growth. Increasing household SOURCE: WWW.IBISWORLD.COM.AU discretionary income is also projected to boost sales. However, strong profitability is forecast to remain relatively competition from restaurants and cafes, steady over the next five years, as ongoing and concerns about the fat content of competition offsets gains from premium traditional fast foods are likely to sales due to downward price pressure on constrain revenue growth. Industry longstanding industry products.
Consumer trends Increasing consumer demand for Operators embracing healthy eating premium and healthy fast food is trends are projected to take market projected to drive revenue growth over share from well-established fast food the next five years. Consumer concerns chains, which are traditionally about the fat content of traditional fast associated with unhealthy food. These foods are likely to limit growth in these traditional operators will find it harder segments, while premium products are to improve their perception among anticipated to become more widely consumers. Menu innovation will be key available. This trend is anticipated to to success over the next five years, with boost profitability for premium operators likely to expand low-fat or operators, as premium products often low-sugar ranges to meet shifting carry higher margins. consumer demand.
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Industry Performance
Industry participation Enterprise numbers are projected to rise over the next five years. Competitive Larger players are pressures will likely force some smaller players to exit the industry, but this is anticipated to undertake projected to be offset by an influx of new refranchising to improve players in niche markets. Growth in profit margins operator numbers will be driven by consumers shifting away from traditional fast food options towards healthier and but also loosens the franchisor’s control higher quality alternatives. over the store network. Without direct Establishment numbers are also forecast control, the franchisor risks declines in to increase, fuelled by well-established product and service quality. The industry operators expanding their store franchisor may also have difficulty networks. New players are anticipated to adjusting prices in response to shifts in push employment numbers upwards trading conditions. over the next five years. However, Mobile food vans are projected to be a competitive pressures in some segments growing industry segment over the next will prompt operators to restructure and five years. With lower barriers to entry reduce operating costs, rein in wage and higher demand, many new players expenses and close underperforming are forecast to enter the industry through stores. In an attempt to improve profit this segment. Food vans serve food in margins, larger players are forecast to convenient locations, such as the beach undertake refranchising, selling licences or near major events, and often operate for corporate-owned stores to new or late at night. Benefits for operators existing franchisees. Refranchising include lower rental expenses, and stores is a trade-off for franchisors, as it greater freedom to experiment with food decreases marginal costs significantly offerings and locations.
Competition External competition from supermarket Many consumers view sandwiches and chains and other hospitality industries is wraps made in cafes as higher quality than anticipated to pose the greatest threat to fast food products, many of which are sold fast food retailers over the next five years. at similar prices. Restaurants are Supermarkets will likely expand their anticipated to continue reducing demand prepared meal ranges, while restaurants for traditional industry markets, providing and cafes are set to capture a growing more takeaway options to maximise sales. share of the quality-conscious consumer Industry operators will likely benefit from market. Cafes will continue to target the reviewing the quality and price of menu lunchtime market with a selection of items to differentiate themselves from healthy and convenient meal options. competition and appeal to consumers.
Innovation Smartphone apps are projected to a delivery service in partnership with continue changing the way many fast UberEATS. Other fast food operators food operators and customers interact. have started to follow suit and tap into Previously, apps mainly focused on demand for online ordering. For made-to-order meals such as pizza, example, Hungry Jack’s signed an where ordering ahead of time or choosing exclusive partnership with Menulog in different delivery options provided November 2018. This trend is forecast to increased convenience. However, in June benefit traditional fast food operators 2017, McDonald’s launched McDelivery, with extensive store networks and
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Industry Performance
Innovation significant capital resources. Online fast food operators, view menus and continued ordering can provide a competitive edge place orders using the website or app. by increasing convenience for established The orders are then relayed to the players that are struggling to change their operator for processing and delivery. image to meet increased demand for These websites provide a key sales healthy and premium products. New avenue for smaller fast food providers, smaller enterprises will likely struggle to giving them access to an online ordering establish online ordering options due to platform with significant customer traffic limited geographic reaches and resources without investing in a website, ordering to invest in online operations. system and promotional activity. These Other websites, such as Menulog and platforms are anticipated to become EatNow, have been changing the way more commonplace, with smaller players people order fast food. Menulog is an that do not use them likely to endure online takeaway ordering portal that declining demand as consumers shift to allows customers to browse a range of ordering online.
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Industry Performance
Life Cycle Stage Establishment numbers have exhibited growth Technology improvements are improving efficiency The industry is growing slower than the overall economy
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Industry Performance
Industry Life Cycle The Fast Food and Takeaway Food numbers. Demand for new healthier food Services industry is currently in the retailers and entrants at the premium mature phase of its life cycle. Industry end of the market have supported This industry value added, a measure of the industry’s establishment numbers. However, the is Mature contribution to the overall economy, is market is becoming saturated as valuable forecast to grow at an annualised 2.3% locations become harder to come by and over the 10 years through 2023-24. This competition intensifies. Nonetheless, the represents an underperformance industry has benefited from rapidly relative to the economy, with GDP expanding healthy foods segments. projected to grow by an annualised 2.7% A slow rate of technological change has over the same period. The industry’s also supported the industry’s mature life relatively slower growth is typical of a cycle status. Technological advances in mature industry. the industry have focused on efficiency Industry establishment numbers are gains from point-of-sale systems or forecast to grow over the 10 years improved online ordering systems. through 2023-24. Competition among However, some smaller operators such as players and a softer retail economy have food trucks have not taken up such had a minimal effect on establishment systems due to installation costs.
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Supply Chain KEY BUYING INDUSTRIES Z9901 Consumers in Australia Consumers demand a range of fast food items as part of their weekly expenditure.
KEY SELLING INDUSTRIES F3601 General Line Grocery Wholesaling in Australia Wholesalers in the industry supply fast food stores with canned goods, coffee, condiments, cooking oils and fats, eggs, salt and tea. F3602 Meat, Poultry and Smallgoods Wholesaling in Australia Fast food stores purchase meat such as beef, pork and lamb from meat wholesalers. F3603 Dairy Produce Wholesaling in Australia Wholesalers in this industry supply fast food operators with milk, cheese and cream produce. F3605 Fruit and Vegetable Wholesaling in Australia Operators in this industry supply a range of fruit and vegetables to fast food stores. F3609 Soft Drink and Pre-Packaged Food Wholesaling in Australia Fast food stores purchase confectionery, nuts, potato chips and soft drinks from wholesalers.
Products and Services Growing public awareness of the quality ingredients. The number of importance of healthy eating has led to premium burger retailers, such as Grill’d, growth in the range of products offered have increased. This segment has also by the Fast Food and Takeaway Food faced rising competition from Services industry over the past decade. restaurants, with an influx of new Consumers have become increasingly restaurants providing gourmet burgers. concerned about fat and salt content. As a result, fast food operators have Chicken-based fast food expanded their menus to include Chicken-based fast food includes fried healthier options such as salads, yoghurt and grilled chicken products, including and wraps. New operators with a chicken burgers. KFC is the key player in premium or healthy focus have also this segment. Other notable operators entered the industry to benefit from include Red Rooster, Nando’s and shifting consumer demand. Oporto. This segment has increased as a portion of industry revenue over the past Burgers five years, supported by the perceived Traditional hamburgers account for the healthiness of some chicken products. largest share of industry revenue. Chicken burgers are not included in this Pizza segment. Unsurprisingly, industry The pizza segment has declined as a heavyweights McDonald’s and Hungry proportion of industry revenue over the Jack’s support the hamburger segment’s past five years, due to growth in segments dominance. However, this segment’s involving healthier fast foods. While share of industry revenue has fallen over demand has benefited from new the past five years. This fall is due to operators entering this segment, strong increased competition across the price competition among key players has industry, together with growth in fast decreased revenue. For example, Pizza food ranges and healthy eating trends. To Hut has reduced prices over the past five maintain demand for this segment, some years to compete with the low-cost burger vendors have expanded product offerings of Domino’s. This segment is ranges to include healthier, leaner burger also subject to rising competition from varieties and offered increased pizza restaurants, with consumers customisation and options for higher increasingly demanding higher quality
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Products & Markets
Products and Services woodfired pizzas. Most pizza increasing popularity of options perceived continued restaurants also provide takeaway as healthy, such as yoghurt and fruit. options, which has further decreased Increased demand for premium products demand for this segment. among consumers has also benefited this segment, as consumers have increasingly Sandwiches, salads and juices sought out gourmet dessert options. Demand for sandwich, salad and juice bar products has grown significantly over Other fast food the past five years, increasing this Other fast foods include pies, sausage segment’s share of industry revenue. rolls, pasties, battered fish and hot chips. Growth has been due to consumers Collectively, these products have declined increasingly favouring healthier fast food as a portion of industry revenue over the and industry operators progressively past five years. Growing social awareness expanding their product ranges. US- regarding the benefits of healthy lifestyles based Subway has been a key player in and balanced food choices has reduced the sandwich segment, having entered consumer demand for fattier foods, such the industry in 1988 with the launch of as pies and chips. its first Australian store in Perth. Sumo This segment also includes Thai, Salad and Healthy Habits are other Japanese, Indian, Chinese, Mexican and notable players in this segment. other cuisines. International fast food has gained popularity and these products Desserts and confectionery have increased as a share of industry Desserts and confectionery products revenue over the past five years. Wider include ice creams, pastries, yoghurt and awareness of foreign cuisines and fruit. Despite rising health concerns consumer receptiveness to trying new regarding the fat and sugar content of foods have supported this growth. Many some products, this segment has increased products in this segment also benefit as a proportion of revenue over the past from consumers viewing them as value five years. Revenue has benefited from the for money.
Products and services segmentation (2018-19)
8.0% Sandwiches, salads and juices 2.8% Desserts and confectionery 14.2% Other fast food 39.3% Burgers 17.3% Pizza
18.4% Chicken-based fast food Total $20.1bn SOURCE: WWW.IBISWORLD.COM.AU
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Products & Markets
Demand Consumer demand for fast food is driven a broader selection of healthy food Determinants by trends in household discretionary options to maintain demand. This trend income, convenience and health has opened up opportunities for new consciousness among consumers. Growth operators to enter the industry and offer in discretionary income has heavily healthier options, expanding the range of influenced consumer demand for fast healthy fast food on offer. Industry food over the past five years, as operators have also increasingly focused consumers have spent more on premium on premium meals, with consumers items. Higher incomes have allowed demanding higher quality, restaurant- consumers who are pressed for time to style food. This trend has encouraged allocate more spending towards fast food operators to highlight the freshness and and save time that would otherwise be quality of their ingredients to gain a spent cooking. This effect was partially competitive edge. Operators that produce offset by increased spending on premium restaurant-quality meals at competitive products outside the industry, such as prices have been particularly successful, restaurant meals, as higher discretionary by combining demand for quality with income can lead consumers to substitute the convenience of fast food service. away from low-quality fast food products. Convenience is a key factor in Changing consumer attitudes towards determining demand for fast food. By fast food and the importance of preparing food in advance and storing at maintaining a healthy lifestyle affect the desired temperature, fast food demand for a range of fast food. As fast retailers have been better equipped to food is not usually associated with cater to consumers with busy lifestyles. healthy eating, increased health Convenience varies depending on the consciousness has negatively affected type of fast food being purchased (pre- industry revenue over the past five years. made sandwiches versus pizza, which can Operators have therefore tried to provide only be prepared when ordered).
Major Markets Consumers are the primary market for However, health consciousness has fast food. Trends in household increased among this demographic over discretionary income, and consumer the past five years, leading to substitution tastes and preferences drive fast food with products outside the industry, such expenditure. Many industry operators as home-cooked meals. Increased have added health-conscious choices to demand for premium products among their menus, broadening the appeal of fast this demographic has also constrained food. For consumers under the age of 15, demand for industry products, with consumption of fast food is considered younger consumers increasingly choosing part of their parent’s or guardian’s to eat at cafes or restaurants. spending. This factor inflates the spending of consumers in higher age brackets. Consumers aged 25 to 34 Consumers aged 25 to 34 are the Consumers aged 15 to 24 industry’s largest market. This market Consumers aged 15 to 24 comprise high comprises young professionals, school and university students, and tradespeople and young parents. This individuals that have recently entered the market has increased as a portion of workforce. This market has declined as a revenue over the past five years, largely share of revenue over the past five years. due to a rise in discretionary income These consumers tend to be less health among this age segment. Furthermore, conscious than older demographics and consumers in this age segment are more likely to prefer fast food over home- health conscious than their younger cooked meals for its convenience. counterparts, and are therefore attracted
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Products & Markets
Major Markets to healthier eating options offered by conscious. Traditional fast food continued some fast food operators. (hamburgers, pizza and chicken) purchases by this market are likely to be Consumers aged 35 to 44 viewed as a treat. These consumers are Spending on fast food by this age group is more inclined to purchase healthier strong and is driven by families with alternatives such as rolls, focaccias, young children. Fast food offers a quick salads and soups. Increased offerings of and easy alternative to home-cooked these healthier options have supported meals, which makes it appealing to growth in this market over the past five time-poor consumers. The industry’s years. This market has also increased as a major players promote family value packs share of industry revenue as it has grown that target consumers in this market. in relative size due to Australia’s ageing This age segment has fallen as a population and rising discretionary proportion of industry revenue, due to incomes among this demographic. stronger growth in other markets. Consumers aged 65 and over Consumers aged 45 to 54 Consumers aged 65 and over are mainly Consumers aged 45 to 54 account for a retirees and account for the smallest significant share of industry revenue. share of industry revenue. Consumers in This market mainly includes health- this market are more likely to make conscious but often time-poor parents home-cooked meals than purchase fast with children. This market has declined food. This age group purchases fast food as a portion of industry revenue over the as a treat rather than as a diet staple. past five years, largely constrained by Although this market is not traditionally a growth in demand for restaurants among major consumer of fast food, it has grown this demographic. as a proportion of industry revenue over the past five years. An ageing population Consumers aged 55 to 64 has significantly increased the relative Consumers aged 55 to 64 include adults size of this demographic, which has near or at retirement age, and these supported growth in its proportion of customers tend to be more health- industry revenue.
Major market segmentation (2018-19)
6.9% Consumers aged 65 and over 12.9% 22.2% Consumers aged 55 to 64 Consumers aged 25 to 34
19.0% Consumers aged 35 to 44 19.6% Consumers aged 15 to 24
19.4% Consumers aged 45 to 54 Total $20.1bn SOURCE: WWW.IBISWORLD.COM.AU
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Products & Markets
International Trade Industry operators do not import or majority of visitors arriving into export goods. As a result, international Australia purchase fast food at least once trade does not occur in the Fast Food during their stay. The popularity of fast and Takeaway Food Services industry. food among tourists is largely due to However, the industry does benefit from lower access to cooking facilities and the international tourists that frequent ready availability of fast food at popular Australian fast food operators. The vast tourist locations.
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Products & Markets
Business Locations 2018-19
NT 0.9
QLD 18.9
WA 10.4
SA 6.6
NSW 31.1
ACT 1.5
VIC 28.8
Enterprises (%) Cold Zone (<10) TAS 1.8 <25 <50 Hot Zone (<100) Not applicable
SOURCE: WWW.IBISWORLD.COM.AU
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Products & Markets
The geographic spread of industry Business Locations Distribution of enterprises vs. population enterprises is closely correlated with the population’s distribution throughout 40 Australia. High population densities support the dominance of fast food operators in the eastern states. The 30 number of establishments operating in the Northern Territory and the Australian 20 Capital Territory is considerably lower, Percentage due to the more dispersed population of 10 these states. This factor is particularly relevant to the industry as convenience is 0 SA a key factor in demand, and consumers NT WA VIC TAS ACT QLD are unlikely to travel long distances to NSW visit industry establishments. Industry establishment numbers have grown over the past five years due to an Enterprises increase in store networks and franchised Population sites. Larger and more populated states SOURCE: WWW.IBISWORLD.COM.AU are popular launching sites for new players entering the industry. With a perception and market acceptance. greater number of consumers to target, Larger states are better equipped to new entrants to the industry have support franchised fast food operators, benefited from opening stores in more and benefit from mass advertising and populated states to better gauge public growth in market acceptance.
Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 20 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalisation
Market Share The industry is characterised by of competition for larger players. Concentration moderate market share concentration, Increased demand for premium fast with the industry’s four largest players food products among consumers has accounting for just under 45% of also contributed to a decline in market Level industry revenue in 2018-19. Many of share concentration, with many new Concentration in this the major players, such as McDonald’s, entrants providing higher quality food. industry is Medium operate as franchise networks. While Moderate barriers to entry and capital larger operators account for a requirements have supported the entry significant portion of industry revenue, of new operators. the industry is highly fragmented Over the next five years, major beyond these major players. players will look to strengthen their Concentration in the industry has positions by growing their store declined over the past five years. As networks. Larger operators will look to demand has shifted from traditional fast maintain market share by reviewing food towards healthier options, many their menus and implementing new smaller players have entered the products to meet demand for healthier, industry and have been a strong source premium fast food options.
Key Success Factors Easy access for clients Ability to control stock on hand Industry players benefit from offering Operators require tight stock-control ample parking and easy store access, systems to minimise operating costs and IBISWorld identifies making the fast food experience as keep produce fresh. 250 Key Success convenient as possible. Factors for a Ability to alter goods and services business. The most Proximity to key markets produced in favour of market conditions important for this Fast food operators benefit from being Operators need to be flexible, and adjust located in high-volume traffic areas, to changing food trends to maintain industry are: maximising exposure to impulse shoppers. market share.
Cost Structure Players in the Fast Food and Takeaway and chicken have reviewed and Benchmarks Food Services industry have operated in a expanded their product ranges to competitive environment over the past maintain profit margins and generate five years. Consumers seeking convenient new sales. As the range of premium fast and healthy options have driven industry food has increased, some traditional profitability, while increases in rent, operators have sacrificed margins to advertising and wage costs have affected compete on price. operating expenses. Purchases Profit Purchase costs represent the industry’s Industry profitability has increased over largest expense. Purchase costs have the past five years. Profit margins have decreased as a share of revenue over the varied among industry segments. past five years as industry operators, Operators selling food such as sushi, especially larger players, have negotiated wraps and noodles have exhibited better supply terms with wholesalers to strong profit growth, reflecting the avoid mark-ups and support profitability. increasing popularity of these products. However, the rising cost of fresh produce However, companies selling traditional and a growing focus on quality over the fast food such as pizzas, hamburgers period have limited declines in purchase
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Competitive Landscape
Cost Structure costs. As consumers have increasingly premises for a business. Rental costs Benchmarks demanded higher quality fast food, have increased as a portion of revenue continued operators have shifted purchases towards over the past five years, due to strong premium ingredients, seeking to replicate competition for prime locations. Industry restaurant trends. These factors have operators require prime real estate in affected the final price paid by consumers. locations with high population density Volatile weather across Australia has also and passing traffic, as consumers require influenced purchases over the past five convenient access to industry stores. years, due to limited availability of livestock These requirements result in high and fresh produce. industry rent costs. The proliferation of cafes and coffee shops has also Wages contributed to rental costs increasing over The industry’s labour-intensive nature the period, as many of these businesses results in wage costs accounting for a compete for the same locations and significant share of revenue. The number customers. Competition for better of casual staff employed by the industry locations is projected to drive further rent has increased compared with part-time or increases over the next five years. full-time staff over the period. This has ensured greater flexibility in working Other conditions and meet seasonal staffing The industry also incurs expenses needs. Minimum wages have grown at a related to advertising, depreciation and faster pace than prices charged to utilities. Advertising costs vary greatly consumers over the past five years, depending on the operator’s size. In causing wages to rise as a share of general, smaller operators cannot revenue and placing pressure on profit for afford TV advertising and rely on industry operators. cheaper mediums such as fliers and local newspaper ads. The major players, Rent such as McDonald’s and Subway, Rent reflects the cost of leasing regularly use TV advertising for mass
Sector vs. Industry Costs
Average Costs of all Industries in Industry Costs sector (2018-19) (2018-19) 100 6.6 7.0 n P r o fi t n Rent 8.7 n Utilities 2.9 15.0 80 n Depreciation 3.9 n 2.6 3.3 Other n Wages 22.1 15.7 n Purchases 60
17.4 25.3 40 Percentage of revenue Percentage
20 39.0 30.5
0 SOURCE: WWW.IBISWORLD.COM.AU
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Competitive Landscape
Cost Structure exposure. Advertising expenditure has technology and systems. Utility costs have Benchmarks increased as a proportion of industry also increased as a portion of revenue, in continued revenue over the past five years, line with rising energy costs. Other particularly as major brands have industry expenses include insurance, adjusted their branding in response to administrative and bookkeeping costs, increasing health consciousness. and vehicle and maintenance expenses. Depreciation costs have risen as a share Overall, these costs have remained fairly of revenue over the past five years, due to steady as a proportion of industry revenue store upgrades, and greater investment in over the past five years.
Basis of Competition Fast food retailers have faced high levels Convenience in online ordering and of competition over the past five years, delivery has also been a growing source and this trend is intensifying. Retailers of internal competition in the industry. Level & Trend have been affected by changing consumer Industry operators compete based on Competition in tastes and preferences, and growing delivery times, the convenience of this industry is consumer awareness about the fat ordering and access across devices. Over High and the trend content of fast food. the past five years, major players in the is Increasing industry have created apps for ordering Internal competition online through mobile devices, including Traditionally, price has been the main Apple Smart Watch compatible ordering, basis of competition. As a result, the and streamlined their websites. These industry has focused on upsizing, where companies have also introduced one-click larger quantities are offered at little cost ordering systems and delivery time to the operator. An emphasis on value for guarantees. For example, Domino’s has money has resulted in many promotions rolled out a 20-minute delivery guarantee centred on providing meal deals or in its stores in Australia. dinner packs. However, consumers looking to avoid unhealthy products are External competition often happy to pay a premium for Fast food retailers have faced strong healthier options. Consequently, competition from supermarkets, which competition based on the perceived stock a range of ready-to-eat options that health benefits has increased. are direct substitutes for fast food. These Convenience is also an important basis meals are often healthier than fast food of competition, with consumers alternatives. Fast food operators have demanding speed and a minimum level also faced increasing competition from of service from operators. Convenience convenience stores, which have expanded has been particularly important for their product ranges to include healthier operators offering drive-through services. items such as yoghurts and fresh fruit. However, this competition has been Consumers seeking quick and easy limited to the traditional fast food alternatives to fast food, with the added market. Consumers are generally willing convenience of purchasing household to wait for freshly prepared healthier staples such as milk and bread at the foods, with products often more time- same time, have driven demand for fast effective than home cooking. food from convenience stores.
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Competitive Landscape
Barriers to Entry The Fast Food and Takeaway Food Services industry is subject to moderate Barriers to Entry checklist Level & Trend barriers to entry. While operators are Competition High able to enter the industry with relative Barriers to Entry Concentration Medium ease, gaining a sustainable market share in this industry are Life Cycle Stage Mature is more difficult. Capital intensity is Capital Intensity Medium Medium and Steady moderate and the rate of technological Technology Change Low change in the industry is low, which is Regulation and Policy Light an incentive for new entrants. Ongoing Industry Assistance Low
investment in equipment is minimal for the industry compared with the daily SOURCE: WWW.IBISWORLD.COM.AU labour input and associated wage costs. Prime locations for fast food short-to-medium term and can carry operators are becoming more difficult to significant risk. find as the industry moves towards New entrants may be deterred from saturation. High competition for joining due to the industry’s mature life locations has led to increasing rental cycle, moderate level of market share costs over the past five years, making it concentration and high competition. The difficult for new entrants to locate industry’s well-defined product market themselves close to customers. Most and established consumer markets suggest major business districts with high that new players face strong competition passing traffic are relatively saturated, trying to differentiate themselves from meaning that new entrants will have to existing operators. This factor is compete with incumbent businesses, particularly relevant as familiar brands posing a significant barrier to entry. make the decision-making process easier While urban sprawl in major cities for consumers that value convenience. across Australia provides opportunities New entrants in growth product segments for new operators to set up in developing such as sushi may be encouraged to areas, this strategy may require compete in terms of product freshness and sustaining significant losses in the perceived health benefits.
Industry Globalisation in the industry is low and Australia Pty Limited, which operates Globalisation has remained steady over the past five KFC in Australia and is owned by Yum! years. Most operators are Australian- Brands, Inc. Both companies are based in Level & Trend owned, deriving their revenue from the United States. domestic operations. However, Globalisation is also influenced by Globalisation in this globalisation is present to a degree due to growth in the number of Australian- industry is Low and several large internationally-based based operators expanding into the the trend is Steady operators in the Australian fast food international market. While some brands market. Key examples include have succeeded in expanding abroad, McDonald’s Australia Holdings Limited, such as Oporto, fast food retailers tend to which is owned by McDonald’s face a challenging environment when Corporation, and Yum! Restaurants trying to establish global operations.
Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 24 Major Companies McDonald’s Australia Holdings Pty Limited | Competitive Foods Australia Pty Ltd Yum! Restaurants Australia Pty Limited | Domino’s Pizza Enterprises Limited | Other Companies
Major Players Domino’s Pizza Enterprises Limited 5.1% Competitive Foods Australia Pty Ltd 8.6% (Market Share) 55.2% Other
McDonald’s Australia Holdings Pty Limited 25.1%
Yum! Restaurants Australia Pty Limited 6.0% SOURCE: WWW.IBISWORLD.COM.AU
Player Performance McDonald’s Australia Holdings Pty Limited entered the Australian market McDonald’s Australia Holdings Pty in 1971. Since then, McDonald’s Limited - fi nancial performance* McDonald’s Australia has expanded rapidly to over Australia Holdings 970 stores and over 100,000 employees Revenue Year** ($ billion) (% change) Pty Limited (including management and head office Market Share: 25.1% employees). Globally, McDonald’s 2014 5.13 N/C operates over 36,000 restaurants in Industry Brand Names 2015 5.15 0.4 more than 120 countries. McDonald’s 2016 5.00 -2.9 The company’s product range has 2017 5.08 1.6 changed significantly since the early 2000s, with the addition of cafe-style 2018 4.98 -2.0 items including coffee, muffins, salads 2019 5.06 1.6 and wraps. Growth in the company’s product range reflects a concerted effort *Estimated income from all stores, excluding franchise fees **Year end December to provide healthier fast food. Key SOURCE: IBISWORLD initiatives include reducing the sugar and salt content of foods, including nutritional labelling on packaging and adding Taste range in March 2017, replacing it kilojoule labelling to menu boards. with a similar range of burgers using Despite these improvements, many of the same ingredients, called McDonald’s is projected to face increased Gourmet Creations. Unlike Create Your competition as the number of companies Taste, customers cannot customise the selling healthier and premium fast food burgers in the Gourmet Creations range. continues to grow over the next five years. In June 2017, the company launched This trend will likely increase pressure on McDelivery, a delivery service in McDonald’s to promote and expand its partnership with UberEATS, aiming to healthier meal options and improve the provide more convenience for consumers. nutritional content of its food. In the burgers segment, McDonald’s is Financial performance also projected to lose market share to McDonald’s Australia’s revenue is expected premium providers such as Grill’d, which to fall at an annualised 0.3% over the five are becoming more popular. Premium years through December 2019, to total $5.1 burger restaurants are placing extra billion. This decline represents an pressure on McDonald’s, as consumers underperformance of the industry over the are seeking higher quality products. In period. McDonald’s has faced strong response to competition from popular competition over the past five years from boutique burger chains, McDonald’s premium fast food burger operators such rolled out its new Create Your Taste as Grill’d, which has reduced the company’s touchscreen kiosks in late 2014, where market share. Rising health consciousness consumers could design and order has also constrained sales growth for custom gourmet burgers. However, McDonald’s, while a range of cheaper McDonald’s discontinued its Create Your options has decreased profitability.
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Major Companies
Player Performance Competitive Foods Australia Pty Ltd operates in the industry through its Competitive Foods Australia Pty Hungry Jack’s brand. Hungry Jack’s Ltd - industry segment Competitive Foods stores are operated through a master performance* Australia Pty Ltd franchise agreement with the Burger King Corporation. Competitive Foods Revenue Market Share: 8.6% Year ($ billion) (% change) Industry Brand Names also previously operated a chain of KFC 2013-14 1.20 N/C Hungry Jack’s stores in Western Australia and the Northern Territory, but sold them to 2014-15 1.35 12.5 Collins Foods Limited in 2014. Hungry 2015-16 1.45 7.4 Jack’s has operated in Australia since 2016-17 1.58 9.0 1971, when it opened its first store in Perth. Hungry Jack’s currently has more 2017-18 1.63 3.2 than 400 stores nationally. 2018-19 1.73 6.1 The company operates as a traditional *Estimate based on all franchised stores, excluding franchise fees fast-food chain, focusing mainly on SOURCE: IBISWORLD burgers. Hungry Jack’s has largely ignored healthier menu trends, contrary to its main competitor McDonald’s. The through 2018-19, to reach $1.7 billion. company instead provides fast food This growth represents an targeting the price-conscious consumer. outperformance of the industry over the Hungry Jack’s has differentiated itself period. The company’s industry-specific from competition through revenue has benefited from strong advertisements highlighting its flame marketing efforts to increase its brand grilled burgers. The company has also exposure through different media forms. made use of digital marketing initiatives, Hungry Jack’s has also supported such as its Shake & Win smartphone revenue growth through regular app, which involves consumers using discounting and voucher use, which few their smartphones to win free meals. industry competitors have embraced. This initiative has helped boost However, rising health consciousness customer numbers. and increased competition from premium burger shops will likely affect demand for Financial performance the company’s offerings over the next five Competitive Foods’ industry-specific years. Increasing industry competition revenue is expected to grow at an has prompted company profitability to annualised 7.6% over the five years fluctuate over the past five years.
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Major Companies
Player Performance Yum! Restaurants Australia Pty Limited operates in the industry through its KFC Yum! Restaurants Australia Pty brand. The company is a subsidiary of the Limited - fi nancial performance* Yum! Restaurants US-based Yum! Brands Inc., which Australia Pty operates over 45,000 restaurants in more Revenue Year** ($ billion) (% change) Limited than 140 countries. Yum! Restaurants Market Share: 6.0% Australia previously also operated Pizza 2014 1.17 N/C Hut in the industry until it sold its master Industry Brand Names 2015 1.19 1.7 franchise agreement for Australia’s Pizza KFC 2016 1.25 5.0 Hut restaurants to private equity firm 2017 1.16 -7.2 Allegro in September 2016. KFC commenced operations in 2018 1.16 0.0 Australia in 1968. The company 2019 1.20 3.4 currently operates over 430 stores in Australia. In addition to the KFC stores *Estimated income from all stores, excluding franchise fees **Year end December that Yum! Restaurants Australia owns SOURCE: IBISWORLD and operates, over 220 KFC stores are owned and operated by Collins Foods Limited. Collins Foods acquired another through December 2019, to reach $1.2 28 KFC stores from Yum! Restaurants billion. This growth represents an Australia in June 2017 for $110.2 million. underperformance of the industry over In August 2017, Yum! Restaurants the period. The 2017 revenue decline Australia sold another 10 of its KFC sites reflects the company’s sale of stores to to New Zealand’s Restaurant Brands for Collins Foods and Restaurant Brands $27.5 million. that year. Over the past five years, consumer demand has shifted towards Financial performance healthier fast food, restricting the Yum! Restaurants Australia Pty Limited’s company’s growth. Due to a lack of revenue is expected to increase at an financial information, no relevant profit annualised 0.5% over the five years figures are available.
Player Performance Domino’s Pizza Enterprises Limited is an Australian company that operates as a Domino’s Pizza Enterprises Limited franchisor and operator of Domino’s – industry segment performance* Domino’s Pizza Pizza fast food outlets. The company operates in Australia, New Zealand, Revenue Enterprises Limited Year ($ million) (% change) Market Share: 5.1% France, Germany, Belgium, the 2013-14 560.9 N/C Industry Brand Names Netherlands and Japan through a Domino’s network of over 2,400 Domino’s Pizza 2014-15 623.6 11.2 stores, with close to 700 located in 2015-16 775.9 24.4 Australia. The company’s business model 2016-17 894.4 15.3 relies on high product turnover at the 2017-18 945.2 5.7 lower end of the market. In Australia and New Zealand, the 2018-19 1,024.9 8.4 company increased its store network *Estimate based on all franchised stores, excluding franchise fees from 585 in 2012-13 to 819 in 2017-18, SOURCE: IBISWORLD through a combination of new store establishments, acquisitions, and sales of licences to new franchisees. The of June 2018 (latest available data). Domino’s Pizza store network in The company has sought to improve Australia and New Zealand is made up of its worldwide store network sales by 733 franchised stores, 86 corporate- adopting new digital ordering methods owned stores and 10 stadium outlets, as and improving its delivery service. Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 27
Major Companies
Player Performance Several programs were rolled out in industry-specific revenue is expected to continued 2015 to improve the quality of delivery increase at an annualised 12.8% over services, including GPS driver-tracking the five years through 2018-19, to reach technology, SMS ordering systems, $1.0 billion. This represents a online ordering services compatible significant outperformance of the with the Apple Smart Watch, and a overall industry over the past five years. 20-minute delivery guarantee. Domino’s The company’s strong revenue growth Pizza Enterprises also launched its first has been largely due to its aggressive 10-minute delivery guarantee store in store expansion and improved delivery New Farm, Brisbane. Over the past five services, which have encouraged a years, the company has broadened its rising number of consumers to menu range and refurbished many purchase pizza from Domino’s. The stores in Australia and New Zealand in company’s focus on innovation and an effort to boost sales. convenience in its delivery services, combined with effective cost controls, Financial performance has improved profit margins over the Domino’s Pizza Enterprises Limited’s past five years.
Other Companies The industry exhibits significant chains dominate the industry, many sole fragmentation outside of the major traders and small businesses also operate players. While prominent large and small in the industry.
Player Performance Craveable Brands Limited is an for approximately $450.0 million. Australian company that is majority- Craveable Brands operates in the owned by Archer Capital. In June 2011, industry through three fast food Craveable Brands the company was acquired by Archer restaurants brands: Red Rooster, Pty Ltd Capital from Quadrant Private Equity Chicken Treat and Oporto. Market Share: 4.0%- 5.0% Industry Brand Names Red Rooster Chicken Treat Oporto
Player Performance Collins Foods Limited is a locally owned KFC restaurants in 2016 for $25.3 company that participates in the million, and another 28 stores from industry through the operation of over Yum! Brands for $110.2 million in 2017. Collins Foods 220 KFC restaurants throughout As at November 2018, the company Limited Australia. Collins Foods has expanded also participates in the industry through Market Share: its market share over the past decade the operation of four Taco Bell fast food 3.0%- 4.0% through multiple acquisitions. The most restaurants in Queensland. Following the noteworthy of those acquisitions was in success of a test store in Brisbane in Industry Brand Names KFC March 2014, when the company 2017, Collins Foods has announced plans Taco Bell purchased 44 KFC restaurants across to launch 50 new Taco Bell restaurants Western Australia and the Northern between January 2019 and December Territory from Competitive Foods for 2021. This expansion is anticipated to $55.6 million. Other notable acquisitions boost the company’s industry revenue over the last five years have included 13 and market share over the next five years. Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 28
Major Companies
Player Performance Subway Systems Australia Pty Limited market in 1988 with its first store in Perth. operates in the industry as a submarine Since then, Australia has become one of sandwich retailer. The company owns the Subway’s largest markets outside the Subway Systems Subway brand, acts as the franchisor and United States. Over 1,400 Subway stores Australia Pty assists with restaurant design and local operate in Australia. Globally, Subway has Limited marketing. Subway entered the Australian over 44,000 stores in over 110 countries. Market Share: 3.0%- 4.0% Industry Brand Names Subway
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Capital Intensity The Fast Food and Takeaway Food Services industry exhibits moderate capital Capital Intensity intensity. For every dollar spent on capital Capital units per labour unit Level costs, an estimated $5.27 is spent on wages. 0.5 The level of capital Labour costs are a significant part of daily intensity is Medium operations. Players require employees to 0.4 undertake a range of tasks including 0.3 customer service, food production and assembly, inventory control, clearing 0.2 tables, and handling and storing food in 0.1 accordance with health and safety 0.0 regulations. Wage costs are influenced by Economy Accommodation Fast Food and employee numbers, the minimum wage and Food Takeaway Food Services Services and the company’s trading hours. Dotted line shows a high level of capital intensity The majority of capital investment is SOURCE: WWW.IBISWORLD.COM.AU required to initially establish and fit-out a new store. Capital requirements for intensive. However, depreciation costs ongoing businesses are minimal and have increased among major players that include the cost of depreciable assets such have sought to improve the quality of their as refrigerators, freezers, ovens, food online ordering facilities. Updated POS warmers and display cabinets. Despite systems, GPS trackers and servers for data some increased automation, particularly storage are capital expenditure among larger players such as McDonald’s, requirements associated with setting up the industry remains largely labour- advanced online ordering systems.
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Operating Conditions
Technology and Industry retailers exhibit a low level of demand during different periods. Systems technological change. Advances in The internet is a future growth area technology and systems have had varying for the industry. Many fast food outlets Level effects on the industry. While fast food have established websites for online giants such as McDonald’s and KFC use ordering over the past five years. More The level of computerised systems to process recently, fast food outlets with technology customer orders, the use of technology is established delivery operations have change is Low virtually non-existent among smaller sought to improve the convenience of retailers such as charcoal chicken delivery by using new technology. For establishments. Unlike industries in the example, Domino’s Pizza has established Retail Trade division, fast food has not an ordering app for smartphone users, been affected by the growing popularity made its ordering website compatible and domination of scanning technology, with the new Apple Smart Watch and as most food is prepared on the spot employed GPS technology to provide and does not require exterior packaging real-time driver tracking. and barcoding. Smaller retailers have increasingly Larger industry players have embraced online ordering through employed more sophisticated services such as Menulog and EatNow, technology at the point-of-sale. Major which allow consumers to choose a players use these systems to facilitate small takeaway store nearby and order transactions with clients and transmit online. This technology has allowed information for analytical purposes. smaller businesses in the industry that Tracking sales in this manner allows cannot afford a website and ordering companies to improve business through system, to provide consumers with the targeted marketing. Operators such as convenience of online ordering. The McDonald’s have introduced discounts importance of online ordering and differing menus based on the time of platforms will be driven by the day. Detailed sales information also increasingly widespread use of allows operators to monitor staff and smartphones and consumers’ desire for ensure that staffing levels respond to greater convenience.
Revenue Volatility The industry exhibits a low level of contributed to volatility over the past five revenue volatility. Growing competition years. Consumers are becoming from cafes and restaurants has increasingly discerning regarding their Level The level of volatility is Low
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Operating Conditions
Revenue Volatility food choices, with many turning away operators are altering their menus to continued from fast food in favour of more gourmet reflect restaurant trends. options. Burgers from some fast food Fluctuations in revenue are affected by operators are becoming less popular, trends in household discretionary while gourmet equivalents at income, consumer sentiment and restaurants are in high demand. This competition among players. Fast food is pressure is expected to continue as largely discretionary, as consumers can other hospitality industries benefit from choose cheaper home-cooked meals when increased demand. The expanding range economic conditions are tighter. of takeaway options at restaurants has Movements in discretionary income have also contributed to volatility. In an caused demand for fast food to change effort to retain customers, fast food over the past five years.
Regulation and Policy The industry is subject to a low level of has faced significant criticism about the regulation. The key regulation affecting poor health content of many products. the industry is the Competition and As childhood obesity has risen, health Level & Trend Consumer Act 2010, which regulates groups and media outlets have called for The level of trading standards, including pricing and bans on fast food advertising targeting Regulation is deceptive conduct. Operators are also children. While no regulation has been Light and the required to comply with the Fast Food passed at this point, the issue will likely trend is Steady Industry Award 2010, which sets receive more regulatory attention as the minimum wage requirements across the prevalence and cost of obesity rises. The industry. This award has encouraged Australian Food and Grocery Council many operators to focus on employing has sought to establish a voluntary code younger workers, due to lower award under which quick service restaurants wages for younger age groups. would self-regulate their marketing Fast food operators require a food activities. However, the establishment business licence to operate. These of the Quick Service Restaurant licences are generally issued by the local Initiative for Responsible Advertising council in the area where the operator and Marketing to Children (QSRI) in plans to open the store. Operators are 2009 has been labelled unsuccessful. also required to adhere to appropriate Some operators have turned to other food safety standards, as stipulated by ways to reach younger consumers, such Food Standards Australia and New as social media, to bypass the code, Zealand (FSANZ). These relate to food while others such as Competitive Foods poisoning, personal hygiene, cross- have been accused of consistently contamination, receiving food, storing breaching the rules. food, preparing food, transporting food, The focus on obesity has encouraged cleaning and sanitation, displaying food greater regulation regarding the labelling for sale and serving food safely. FSANZ is of fast food in Australia. Over the past an organisation established to protect the five years, several states, including health and safety of the people in Victoria, have passed laws that require Australia and New Zealand by large chain fast food restaurants to maintaining a safe food supply. FSANZ is provide nutritional information on their an independent statutory authority that menus. This regulation has not been develops food standards for composition, evenly legislated across Australia, as labelling and contaminants, including Western Australia, Tasmania and the microbiological limits. Northern Territory are yet to introduce Over the past decade, the industry kilojoule labelling.
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Operating Conditions
Industry Assistance The level of assistance in the industry is Retail Association, which provides advice low. Tariffs are not applicable to the and research various retailers, and The industry as it does not compete directly Franchise Council of Australia, which Level & Trend with imported products. The industry provides advice and legislative advocacy for The level of receives some assistance from the National franchisees and franchisors in the industry. Industry Assistance is Low and the trend is Steady
Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 33 Key Statistics
Industry Data Industry Revenue Value Added Wages Domestic ($m) ($m) Establishments Enterprises Employment Exports Imports ($m) Demand 2009-10 15,142.5 4,637.1 34,121 23,228 205,212 -- -- 2,885.2 N/A 2010-11 15,006.7 4,504.2 34,552 23,603 203,333 -- -- 2,810.1 N/A 2011-12 15,268.3 4,442.1 34,401 23,654 197,268 -- -- 2,777.9 N/A 2012-13 16,025.2 4,496.4 32,652 22,641 182,595 -- -- 2,760.0 N/A 2013-14 17,104.4 4,545.1 34,220 24,035 187,228 -- -- 2,907.8 N/A 2014-15 18,377.2 5,215.6 34,834 24,675 185,429 -- -- 3,216.1 N/A 2015-16 19,273.4 5,373.0 36,670 25,210 189,449 -- -- 3,372.9 N/A 2016-17 20,145.4 5,519.7 37,185 25,583 186,697 -- -- 3,449.9 N/A 2017-18 20,043.7 5,532.6 37,287 25,739 191,249 -- -- 3,463.8 N/A 2018-19 20,139.9 5,576.1 37,984 26,194 188,655 -- -- 3,494.6 N/A 2019-20 20,184.2 5,597.0 37,606 26,048 192,920 -- -- 3,494.8 N/A 2020-21 20,317.4 5,615.6 37,894 26,132 190,415 -- -- 3,508.4 N/A 2021-22 20,423.1 5,643.2 38,191 26,353 194,751 -- -- 3,534.0 N/A 2022-23 20,525.2 5,672.7 38,405 26,516 192,187 -- -- 3,552.8 N/A 2023-24 20,656.6 5,710.5 38,584 26,641 196,527 -- -- 3,573.4 N/A Sector Rank 1/11 4/11 1/11 1/11 1/11 N/A N/A 5/11 N/A Economy Rank 63/501 74/501 28/501 28/501 18/501 N/A N/A 66/501 N/A
Annual Change Industry Domestic Revenue Value Added Establishments Enterprises Employment Exports Imports Wages Demand (%) (%) (%) (%) (%) (%) (%) (%) (%) 2010-11 -0.9 -2.9 1.3 1.6 -0.9 N/A N/A -2.6 N/A 2011-12 1.7 -1.4 -0.4 0.2 -3.0 N/A N/A -1.1 N/A 2012-13 5.0 1.2 -5.1 -4.3 -7.4 N/A N/A -0.6 N/A 2013-14 6.7 1.1 4.8 6.2 2.5 N/A N/A 5.4 N/A 2014-15 7.4 14.8 1.8 2.7 -1.0 N/A N/A 10.6 N/A 2015-16 4.9 3.0 5.3 2.2 2.2 N/A N/A 4.9 N/A 2016-17 4.5 2.7 1.4 1.5 -1.5 N/A N/A 2.3 N/A 2017-18 -0.5 0.2 0.3 0.6 2.4 N/A N/A 0.4 N/A 2018-19 0.5 0.8 1.9 1.8 -1.4 N/A N/A 0.9 N/A 2019-20 0.2 0.4 -1.0 -0.6 2.3 N/A N/A 0.0 N/A 2020-21 0.7 0.3 0.8 0.3 -1.3 N/A N/A 0.4 N/A 2021-22 0.5 0.5 0.8 0.8 2.3 N/A N/A 0.7 N/A 2022-23 0.5 0.5 0.6 0.6 -1.3 N/A N/A 0.5 N/A 2023-24 0.6 0.7 0.5 0.5 2.3 N/A N/A 0.6 N/A Sector Rank 10/11 6/11 4/11 3/11 11/11 N/A N/A 6/11 N/A Economy Rank 262/501 239/501 93/501 96/501 350/501 N/A N/A 199/501 N/A
Key Ratios Revenue per Share of the IVA/Revenue Imports/Demand Exports/Revenue Employee Wages/Revenue Employees Average Wage Economy (%) (%) (%) ($’000) (%) per Est. ($) (%) 2009-10 30.62 N/A N/A 73.79 19.05 6.01 14,059.61 0.33 2010-11 30.01 N/A N/A 73.80 18.73 5.88 13,820.19 0.31 2011-12 29.09 N/A N/A 77.40 18.19 5.73 14,081.86 0.30 2012-13 28.06 N/A N/A 87.76 17.22 5.59 15,115.42 0.29 2013-14 26.57 N/A N/A 91.36 17.00 5.47 15,530.80 0.29 2014-15 28.38 N/A N/A 99.11 17.50 5.32 17,344.10 0.32 2015-16 27.88 N/A N/A 101.73 17.50 5.17 17,803.74 0.32 2016-17 27.40 N/A N/A 107.90 17.13 5.02 18,478.60 0.33 2017-18 27.60 N/A N/A 104.80 17.28 5.13 18,111.47 0.32 2018-19 27.69 N/A N/A 106.76 17.35 4.97 18,523.76 0.31 2019-20 27.73 N/A N/A 104.62 17.31 5.13 18,115.28 0.31 2020-21 27.64 N/A N/A 106.70 17.27 5.02 18,425.02 0.30 2021-22 27.63 N/A N/A 104.87 17.30 5.10 18,146.25 0.29 2022-23 27.64 N/A N/A 106.80 17.31 5.00 18,486.16 0.28 2023-24 27.64 N/A N/A 105.11 17.30 5.09 18,182.74 0.28 Sector Rank 11/11 N/A N/A 8/11 11/11 10/11 10/11 4/11 Economy Rank 308/501 N/A N/A 472/501 271/501 296/501 488/501 74/501
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM.AU
Provided to: RMIT Library (2133773121) | 19 August 2019 WWW.IBISWORLD.COM.AU Fast Food and Takeaway Food Services in Australia April 2019 34
Jargon & Glossary
Industry Jargon FOOD VAN A mobile food establishment that sells food POINT-OF-SALE SYSTEMS Computerised systems used at events or in high consumer traffic areas. in retail sales to complete transactions. FRANCHISE Permission granted by a brand owner to a franchisee to sell the brand’s products.
IBISWorld Glossary BARRIERS TO ENTRY High barriers to entry mean that INDUSTRY REVENUE The total sales of industry goods new companies struggle to enter an industry, while low and services (exclusive of excise and sales tax); subsidies barriers mean it is easy for new companies to enter an on production; all other operating income from outside industry. the firm (such as commission income, repair and service CAPITAL INTENSITY Compares the amount of money income, and rent, leasing and hiring income); and spent on capital (plant, machinery and equipment) with capital work done by rental or lease. Receipts from that spent on labour. IBISWorld uses the ratio of interest royalties, dividends and the sale of fixed depreciation to wages as a proxy for capital intensity. tangible assets are excluded. High capital intensity is more than $0.333 of capital to INDUSTRY VALUE ADDED (IVA) The market value of $1 of labour; medium is $0.125 to $0.333 of capital to goods and services produced by the industry minus the $1 of labour; low is less than $0.125 of capital for every cost of goods and services used in production. IVA is $1 of labour. also described as the industry’s contribution to GDP, or CONSTANT PRICES The dollar figures in the Key profit plus wages and depreciation. Statistics table, including forecasts, are adjusted for INTERNATIONAL TRADE The level of international inflation using the current year (i.e. year published) as trade is determined by ratios of exports to revenue and the base year. This removes the impact of changes in imports to domestic demand. For exports/revenue: low is the purchasing power of the dollar, leaving only the less than 5%; medium is 5% to 20%; and high is more ‘real’ growth or decline in industry metrics. The inflation than 20%. Imports/domestic demand: low is less than adjustments in IBISWorld’s reports are made using the 5%; medium is 5% to 35%; and high is more than Australian Bureau of Statistics’ implicit GDP price 35%. deflator. LIFE CYCLE All industries go through periods of growth, DOMESTIC DEMAND Spending on industry goods and maturity and decline. IBISWorld determines an services within Australia, regardless of their country of industry’s life cycle by considering its growth rate origin. It is derived by adding imports to industry (measured by IVA) compared with GDP; the growth rate revenue, and then subtracting exports. of the number of establishments; the amount of change EMPLOYMENT The number of permanent, part-time, the industry’s products are undergoing; the rate of temporary and casual employees, working proprietors, technological change; and the level of customer partners, managers and executives within the industry. acceptance of industry products and services. ENTERPRISE A division that is separately managed and NONEMPLOYING ESTABLISHMENT Businesses with keeps management accounts. Each enterprise consists no paid employment or payroll, also known as of one or more establishments that are under common nonemployers. These are mostly set up by self-employed ownership or control. individuals. ESTABLISHMENT The smallest type of accounting unit PROFIT IBISWorld uses earnings before interest and tax within an enterprise, an establishment is a single (EBIT) as an indicator of a company’s profitability. It is physical location where business is conducted or where calculated as revenue minus expenses, excluding services or industrial operations are performed. Multiple interest and tax. establishments under common control make up an VOLATILITY The level of volatility is determined by enterprise. averaging the absolute change in revenue in each of the EXPORTS Total value of industry goods and services sold past five years. Volatility levels: very high is more than by Australian companies to customers abroad. ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than IMPORTS Total value of industry goods and services ±3%. brought in from foreign countries to be sold in Australia. WAGES The gross total wages and salaries of all INDUSTRY CONCENTRATION An indicator of the employees in the industry. Benefits and on-costs are dominance of the top four players in an industry. included in this figure. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
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