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At the same time recession in the US food industry has creating the new opportunity for
the food sector in the US. In the recently released research report by RNCOS on 'US Fast
food market outlook 2010'even though there is gloomy economic condition in US, the
fast food industry in US is growing rapidly because of inexpensive fast food and
increasing number of working population. According to the report fast food market is
expected to grow rapidly in the coming years and will cross the US$170 billion by the
end of 2010. Because of economic downturn people has reduced their expenses of going
for dinner in the restaurant and fast food for the launch. Instead of going in the
restaurant they have started buying the food from street food vans which cost them less
as compared to the restaurant food and they can save that much money in this recession
time. This trend is becoming more common in the urban areas where the demand of
pre-packed food and readymade food has increased because of the fast life of their
people. This has become now new trend there because American people wants want to
have food which can provide instant energy without wasting more time and they can
also afford that. The new trend of franchising the existing brands to the mobile carts is
look refreshing and a new concept in the States. Through the research will able to judge
that 'will this trend will continue even after the period of recession?'
Street food is becoming very famous in the United States and till the date only smallscale outlets are driving the trend, but now large food maker have also started to enter
the market to get on board with this new trend. The market research organization's
Culinary Trend Mapping Report from the Centre for Culinary Development (CCD)
examined the booming street food trend, which has seen Americans reaching for a
variety of convenient, portable and affordable foods, often with globally inspired
flavours and eco-friendly preparation (foodnavigator-usa.com). In the recent time street
food has become very popular due to "a confluence of larger social trends", mainly
because of the economic downturn and the corresponding need for more affordable
foods, growing snacking habits, greater interest in ethnic flavours and in local,
sustainable foods.
1.2 Purpose
This research attempts to contribute to the study of the current prospects and growth of
the fast food industry on the wheel. The Food trucks in the NYC and other mobile food
carts started by famous restaurants have been introduced. This research aims to find out
what was the effect of recession on the food industry and how has it affected the
consumer behaviour in this regard. The eating habits and the change in the actual
income have affected the behaviour of the consumers and hence their frequency of
dining out and their expenditure on food has been affected. So this research will throw
light on this change as well. With the intention of exploring the possibility of the Food
trucks endorsed by the restaurants that have seen a reduction in the number of
customers due to recession, we will also study how these trucks are working and how do
they cater to the needs of the people in the current situation. Whether the management
and the way they are operating is different and how similar their ways of operations are.
In addition this research will study the advantages of the mobile food carts and if they
can be a competition to the conventional style of dining and eating out. Or if these food
trucks can add to the brand name of the existing restaurants and chains that have
otherwise seen a decline in their business.
Mainly technological change has made huge contribution in decreased price of the food
price which eventually provides opportunity to the restaurant and fast food service
provider to offer the food at cheaper rate and increased their business growth. The
analysis draws on data from the Bureau of Labour Statistics (BLS) between 1971 and
1974, the BLS food price in real terms increased from 1.012 to 1.134, an increase of
12.04%, followed by a decrease of 11.02% between the years of 1974 and 1986, when it
reached a low of 1.009. This is reflective of the behaviour of food prices in that period of
time (Food prices, 2007). Due to decreased in the food prices percentage of people has
decreased and expenditure on the food away from the home increased and increased in
working class people is also another reason for growth of the restaurant and fast food
business. According to the survey data of the county business pattern number of
restaurant provides full services increased to 213550 in 2006 from 193024 in 1998 and
restaurant which not provide service like cafeteria and bar increased to 204311 in 2006
from 172695 in 1998. Data from the Census of Retail Trade highlight the steady increase
in the number of full service and fast-food restaurants since the early 1970s; between
1972 and 1997, the number of restaurants per 10,000 population increased 61% from
884 to 1427 (Chou et al., 2004; Rashad et al., 2006).
In the rapid development of the restaurant and fast food business taking fist mover
advantage through franchise has played very important role. The main of using
franchise is to assemble resources making long chain and to get first mover advantage
(Micheal, 2003). By giving franchise restaurant and fast food business try to create a
premium on rapid expansion of geographic areas. In USA strategy adopted by
restaurant and fast food business owner to expanding units rapidly through franchising
has created superior outlet share which eventually lead them to have high market share
and profitability. Therefore, franchising is one method of securing first mover advantage
(Micheal, 2003). Franchising overcomes the moral hazard problem associated with the
operation of a chain of dispersed units (Caves and Murphy, 1976; Rubin, 1978; Brickley
and Dark, 1987). McDonald's, a famous fast food supplier, opened its first franchised
restaurant in the US in 1955. Now it has become a phenomenally successful enterprise
in terms of financial growth, brand-name recognition, and worldwide expansion by
using franchise concept aggressively. Currently fast food franchise in the United States
generates income of more than $125 billion per year. According to latest numbers there
are over 2000 fast food franchise in USA and more than 5,00,000 franchisor operated
outlets in USA. McDonald's, KFC, Pizza Hut and Subway are among the more popular
fast food franchises worldwide that rake in millions of dollars per year in profits.
During the last four decade fast food industry has grown very speedily in American
society. An industry that starts in south California has spread in every corner of the
USA. Fast food is served not only at restaurants but also at stadium, airplanes, school
and college in every part of the USA and it has brought the rapid change in the USA
economy (Schlosser, 1998). Fast food business has overcome the restaurant business in
last few years in USA and it has benefited from the demographic change, supplying the
food at cheaper price and hiring people at lower rate of wage. One of the ironies of
America's fast-food industry is that a business so dedicated to conformity was founded
by iconoclasts and self-made men, by entrepreneurs willing to defy conventional
opinion (Schlosser, 1998). Now fast food has become the operating system of the today's
service industry in USA and it has created millions of job opportunity for the people in
the country
when the other businesses have been firing the workers.
dairy and grain prices entering in to the year 2007.By the end of 2009 the economists
announced the rising unemployment. As a result Restaurants were also hit as hard as
any other industry as the consumer stopped dining out and spending on food as
compared to earlier. Hence the cost of living was cut on the cost of eating and dining
out. Nearly two third of the restaurant operators reported a decline in their business in
the end of 2008 as compared to the sales in the year 2007 (National Restaurant
Association).
Golden Gate Restaurant Association's (GGRA) presented a study of the economics of the
San Francisco Restaurant industry looking at the conditions of the food industry in the
recession in the year 2002 and 2003.According to the reports the hotel occupancy in
San Francisco was dropped by 20% and the average daily room rates came down by
16%.The city lost 80,000 jobs nearly 14% of the total city employment (Kent Sims).
However with time, the economy of San Francisco has improved with respect to the
conditions in 2002-03. But there are areas where it remains well below the level where
it was in 2000. Over all the economy is smaller than what it was before recession. Hotel
occupancy in 2004 was 4% above its low point in 2002, but still 20% lower than in
2000.
In 2005, the city driven US restaurants recovering from the recession in 2004
confronted the fact their customers were back again and their sales were back, but the
profits did not come back. As the operating costs have raised at a greater pace than the
gross margin on sales, despite the higher menu prices. According to a confidential
survey conducted by GGRA (2006) the results mainly pointed out that half of the people
considered San Francisco and other cities in the USA as the major culinary centre and
half of the population also said that the stature of such cities as culinary centre is either
diminishing or marking time. 'Business at traditional business-lunch spots, including
the Capital Grille, Morton's, and McCormick & Schmick's, is down dramatically' this was
reported by Chicago tribune in 2008.
These researches have shown that Recession is a hard time for food industry as well as
more and more people are finding it tough to stay in one job and they want to change
their job and add to their income. But even in Recession the people can't avoid food so
they started looking for cheaper options and the food industry tackled this by cutting out
the middle man. This gave rise to the trend of fast food and the US fast food market
started to rise. As people has started looking for less expensive. The Consumer
expenditure on fast food rose sharply in these years, accounting for around 30% of total
restaurant industry sales in 2008. With the busy life style, cost advantage and increasing
demand of convenience food, the total fast food industry in the US is expected to grow at
a CAGR of nearly 5% till 2010.(US fast food market outlook 2010, PR log press release).
From the past few recent years McDonald's, Burger King, and other fast food
restaurants have been scooping up the customers. Both of the big burger chains are
taking market share from competitors with higher price points, building on reputations
for low prices and revamped dollar menus (Mary Turck).
The Recession has brought about a trend in the menu cycle of the food industry as well.
( Stages of the Industry Life Cycle (1919-1988) H.G Parsal). The preferences have
changed from the formal full course dinners to quick food which is better known as the
fast food. There has been a growth in the fast food business in after the recession
(Industry research journal). In the phase of recession, fast food sales in US have
increased. This is due to the fact that fast food in the country is comparatively
inexpensive than the traditional food and thus, more and more people are shifting to
fast food in this economic crisis. Also, hamburger and the Rools are one of the most
preferred food items in the country. This represents the growth of around 5% in 2009
over 2008, and the same trend is expected to be seen in the coming years also.
2.4 Consumer Behaviour in USA food industryConsumer behaviour is very important to know in any business to make it successful.
It's very important to take proper care of the issue like consumer's like dislike their
health issue and consumer satisfaction. Consumer behaviour potentially deals with all of
the ways people may act in their role as consumers (Schiffman and Kanuk, 1991) and it
also include to focus on behaviour related to searching, buying and using product and
service in the market. Generally restaurant and fast food business providers divide
consumers in the groups based on the geographic characteristics, common attitudes,
and behaviour so that they can provide better services to them. Food industry is closely
concerned with food choice and quality, but at the same time has long been considered
to offer a rich meal experience to which many other factors contribute (Campbell-Smith,
1967). Every customer has different perspective to rate the service of the restaurant and
fast food service. Customers rate the service on the basis of the food quality, service
quality, ambience of the place, price of the food and facility provided by the restaurant
and fast food providers like free home delivery. Becker-Suttle et al. (1994) and Williams
et al. (1997), respectively, identify the dining preferences of older customers, and the
factors that inhibit this group from using full service restaurants. Consumers behaviour
is more important in service industry as if customers are not happy with the happy than
it will become very difficult to sustain in the competition.
In the development of the restaurant and fast food business globalisation has played
very major role with respect to food supplies, food habits, and population health and
food consumption behaviour. In this fast developing world consumers have adopted to
save time and get job done in time. Changes in working and social life of the people have
played very important part in the very high growth of the food industry in USA. In social
context, gradually the numbers of families where both parents are working are
increasing worldwide (Stamoulis, Kostas G. et al., 2004). Due to busy schedule of the
people they are getting less time to make food and eat at home so they are diverted to
the restaurant and fast food more in the recent years. In recent years the living standard
of the people of USA has also changed before few years they used to take dinner together
with the family on the dining table now most of the family likes to sit against the TV and
watching programme. Number of gathering programmes like birthday parties,
anniversary parties has increased in last few years and people tend to arranged these
parties in restaurants instead of at home which has also increased the demand of
restaurant food in USA. This new trend has provide opportunities to the restaurant and
fast food service business to offer varieties of the services to the people and which
attracts more people to come to their place for the dinner and launch.
Increase in earning of the people has also contributed to the rapid development of the
restaurant and fast food industry in USA. According to the research data Americans
spent about $6 billion on fast food in 1970, they spent more than $110 billion in 2000.
Americans now spend more money on fast food and restaurant instead on higher
education and new cars. National restaurant association has reported that Americans
are buying 5.8 times average per week form a restaurant and per person spending on
restaurant food is $1078. Now a day's consumers are giving more importance to the
quality of the food with respect to the health safety. Henson and Traill define food safety
as the inverse of food risk-the probability of not suffering some hazard from consuming
a specific food (Henson & Traill, 1993). Consumer's attitude towards food safety and
practice related to it is more important for the restaurant and fast food service providers
to take into consideration. Even government of USA has also formed very strict
regulation and food policy which is necessary for the restaurant and fast food providers
to follow. In May 1997, US President Clinton launched a National Food Safety initiative
to enhance surveillance, improve risk assessment, inspection and compliance, educate
the consumer and conduct important new research (Tent, 1999). Food quality
awareness has made more responsible to the restaurant and fast food business towards
people's health issue and which has benefited them as they are offering low calorie food
to the people.
Mc Donald has already implemented its strategy for the consumer preference since last
many years. McDonald's has pursued two strategies since 2003. To keep up with rapidly
changing consumer preferences, demographics, and spending patterns, McDonald's has
introduced new items Premium Chicken sandwiches and the Angus Beef Burger and
also doing campaigns to create more healthy foods like Premium Salads in USA. The
strategy reflects the philosophy that novelty, as opposed to loyalty to traditional
products, is the key determinant of sales in the fast food industry . In the recent years
consumers have started to give more importance to the nutrition food and salads due to
awareness of their health and increasing obesity. The growing epidemic of childhood
overweight and obesity is a major public health concern. Currently 15% of US youth are
overweight, a prevalence nearly twice as high in children and three times as high in
adolescents compared to 1980 prevalence rates (Rockville, 2001).In USA size of the
family has also played major role in development of the restaurant and fast food service
and specially Hispanic American families. Hispanic purchasing power has influenced
the marketplace. Hispanic shoppers spend more on food purchases because their
families are usually larger. So consumer behaviour and consumer preference has played
very vital role in the rapid growth of the fast food and restaurant business in the USA
and they also got support from the economic development of the USA also.
(Mahadeo), a migrant from North Maharashtra, 10 started the lunch delivery service.
(Paul S Goodman ,2003)
This service started with around 100 dabbawalas (workers) and cost the client INR 2 per
month. There are around 5,000 dabbawalas in Mumbai today delivering around
200,000 Tiffin-boxes amounting to 400,000 transactions every day - first delivering the
Tiffin boxes and then delivering the empty boxes back home. (The Economic times
2008)Here nobody is an employer and none are employees. Each dabbawala considers
himself a shareholder and entrepreneur .The entire system depends on teamwork and
meticulous timing. Tiffin boxes are collected from homes between 7.00 am and 9.00 am,
Various tiffin services also provide the service of cooked food and not just the
transportation of the boxes. After the collection, these boxes are taken to the nearest
railway station. various intermediary stations, they are hauled onto platforms and
sorted out for area-wise distribution, so that a single Tiffin could change hands three to
four times in the course of its daily journey..( Pradeep Thakkar,2005).
Even in the economic crisis, Dabbawalas have been serving and are providing a
necessary and recession-proof service - as even in the tough economic times, people will
always need lunch -- the dabbawalas are a cooperative that can boast a business record
of reliability that would have any operation salivating with envy.(Dean Irvine,nov
2008)In the year 2008, Forbes gave the six sigma efficiency title to these dabbawalas.
This six sigma rating the dabbawalas that was received by Forbes magazine precipitated
a rush of interest from management supply companies and the various business schools
searching for the secrets of its success. The rating means that these dabbawalas have a
99.9 percent efficiency rate.(Dean Irvine,2008)The concept of providing the food to
their workplaces, without any need of going to the restaurants and wasting the time that
can be otherwise saved for working is very suitable for the working class people of today.
This is why these dabbawalas are serving well in the time of recession and people find it
much better to get their food from them than going out and eating.
The concept of mobile food service is not new to the countries outside India now. The
Food trucks in the USA are the biggest example .The restaurant concept in the Country
is going mobile! With the changing trends in the food and catering industry, the concept
of moving food vans can be seen in the places like New York in the US.(Katherine
Marginally., Dec 2009)
''Whether it's because of the economy, cultural exchange, or plain demand, street food is
making its culinary mark'' (International Chefs congress) A young chef Josh Ozersky
calls these food trucks as'' one of the most definitive moments of this generation. It's not
a fad like pet rocks or hundred dollar burgers. It's a great way for young chefs to get into
the business without having a wealthy backer. 'Recently the savvy entrepreneurs and the
chefs are getting to the streets with their culinary training and experience. This is
partially fuelled by recession and a changing trend which is more inclined towards
casual dining. The chefs have found more adventure and satisfaction in Global Street
food in respect to the factors, cuisine as well as the concept. The new wave of mobile
food vans are proving that you don't need a brick and mortar place for producing and
providing high quality and high concept food for people.
Lunch trucks also called as food trucks are mobile food courts which sell food items at
different locations. They reap more benefits than the restaurants which are stationary as
they have very limited number of customer base which provides limited amount of
revenue. They can also be called as restaurant on wheels. There are different lunch
trucks available in the markets which are specifically targeted to cater to the needs of
different varieties of food items. From the daily breakfast to the dinner, desserts to
juices you have wide variety to choose from.(Yew Chin)
These trucks have more variety than any other stationary cafe or restaurant. From coffee
to puddings, waffles to rolls and Indian curries to Arabic Falafel. They have it all. There
are Coffee trucks, Snacks trucks, Dessert Trucks, Chinese food trucks and proper
restaurant trucks that have a kitchen inside and have the same menu as in any other
restaurant be in Indian or Italian. The cost of operating an established restaurant often
handcuff's one's ability to go outside the box due to dcor and tabletop package expense,
high-end equipment in the kitchen that must be paid down and, in my case, our
reputation as a classic historic inn which has a presumed menu style that pays the bills.
The guerrilla trucks can much more easily think out of the box, since they are often
serving out of a cardboard box.(Patrick Byrne,2009) Known for their profits, when
compared with the stationary restaurants, these trucks have shown greater profit and a
very good customer base. They provide the customers with good quality of food that they
can afford. In return they get a loyal customer following in different locations that they
plan to go around. As they move from one place to other, they have this opportunity to
serve more people and with different menu options.
There are plenty of hurdles that are faced by these food trucks owner along with the
profits.The Initial investment consists of the vehicle followed by the Kitchen and the
appliances and accessories used there in. These vans also require a Mobile food service
license from the government before they can start their business. There are issues of
permissions which vary from city to city and mostly in cities like New York and
Manhattan allowing these food vans is not difficult.(Emilly Bell ,Dec 2009)However
these rest on wheels should pay attention to providing the food on proper health
standards and conditions.(Patrick Byrne,2009)
The pedestrian snackers on the streets of Manhattan and Brooklyn are accustomed to
mobile eateries, but these new gourmet food trucks take the street-food game to a higher
level. Unlike dirty-water dog stands, which often stick to the same corner, these meals
on wheels have the freedom of mobility, websites tracking their whereabouts, PR
representation and specialized offerings such as restaurant-quality desserts, tacos and
waffles. So just like the previously mentioned Dabbawalas of India Food trucks in the
USA are popular among the people who want to save on their time and money. Because
the obvious reason for the preference of these trucks by the consumers over the
stationary restaurants is the low cost food that has the same quality and the ease of
getting the food on the go. Also according to George Ebinger, (International House of
pancakes),'' It is unfair to its grossly unfair to allow trucks in close proximity to
established businesses trying to make it in this economy. You can't compete with a truck
when it comes to pricing and service''
And for the Owners The obvious appeal of bringing your food into a truck or cart is the
low overhead-there's no rent, no getting a restaurant up to code, no large staff to pay.
With the economic downturn, restaurateurs have struggled to find funding to open fullscale restaurants, said Tom Forte, an analyst at Telsey Advisory Group in New York City.
(Laura Isenzee ,2009) Jerome Chang of New York's Dessert Truck says that financially
"we absolutely would not have been able to open a restaurant." In fact, he went about
things backward, by starting out as a truck and moving into a traditional space (the
Dessert Truck shop is schedule to open in winter 2009 or early 2010).
While the lower heads are extremely low, these trucks charge prices that are lower. As
they are serving food on the trucks and it is served on the pavement. "Bread pudding is
sold [at Dessert Truck] for $5. In a restaurant it would be $9 or $10.'' Says the Chef
Chang; who works for the Kogi BBq truck In Los Angeles. These food trucks are a win-
win situation for many new Entrepreneurs who are unable to invest in the conventional
restaurant business in this heavy time of recession and for those restaurants owners
whose business is dying due to the expensive food as people stop dining out due to the
less incomes by cutting their expenses and avoid eating out.'' Every Thursday night,
Lonnie Bishop and Lisa Case have a dinner date. For $5 each, the couple dines on fancy
hot dogs served from a food truck parked outside their favorite wine shop in Los
Angeles''(Reuters)