Term Paper on "Fast Food Industry Changes: 1950s to the Present"

Term Paper 7 pages (2451 words) Sources: 1+

[EXCERPT] . . . .

Fast Food Industry from the 1950s to the Present

The past 55 years have witnessed a number of history-changing events, but one of the most enduring to have emerged from the political and social turbulence has been the propensity of people around the world to eat fast food. While the critics of "McDonaldization" point to the low wages and adverse cultural implications inherent in the industry, the fact remains that the fast food concept has taken a firm hold in the United States and continues to spread around the world with the potential for profound but largely unknown consequences for the future. To this end, this paper provides an overview of the changes experienced in the fast food industry from the 1950s to the present, including an analysis of what social effects were caused by and reflected in the industry. An assessment of the marketing and advertising changes that have taken place in the industry during this period is followed by a discussion of current and future trends and a summary of the research in the conclusion.

An Analysis of Changes in the Fast Food Industry from the 1950s to the Present

The last 50 years or so have been turbulent ones for America. Millions of Rosies may have quit riveting but they did not quit working, and the Civil Rights Movement resulted in fundamental changes in American society that have leveled the playing field for most workers today. A costly police action was fought in Korea that is still smoldering today, and the last vestiges of the Vietnam War were finally played out in the most recent presidential election. During the last 50 years or so, America succeeded in landing a man on the moon and safely returning him to the Earth, and winning a costly Cold War. During this turbulent period in U.S. history, life has become faster-paced and more women have joined the workforce, all of which have been to the detriment of "traditional" American family meals, but all of which has been to the enormous advantage to the fast food industry. People around the world today may criticize America's politics, but the fact remains virtually everyone loves American fast food and the industry has become firmly established around the world. This paper provides an overview of the fast food industry from the 1950s to the present, an analysis of what social effects were caused by and reflected in the industry, what marketing and advertising changes have taken place in the industry during this time, followed by a discussion of current and future trends. A summary of the research is provided in the conclusion.

Review and Discussion

Background and Overview.

It would seem that the explosive growth of the fast food industry in the United States was an inevitable event. The powerful combination of automobiles, open roads and an increasingly fast-paced modern society all contributed to the phenomenon, but almost no one could have foreseen just how pervasive and influential the fast food industry would eventually become, or the global implications that it would carry with it. According to Zanello (2005), "Many of us can't imagine our lives today without the convenience of fast food... fast food has touched and changed all of our lives in some way or another. And to think it all started back in 1936" (p. 1). The event that is credited with establishing a multi-billion dollar industry today was both a humble and tragic one, and involved the vehicular death of one Hank McDonald who was killed in his truck on his way to work one day. McDonald's fiancee, Maria del Gray, used the settlement money from McDonald's death to "start her own restaurant, naming it after the man she had loved, the Burger King himself, Hank McDonald" (Zanello, p. 2). As history has shown, the concept was enormously popular and others quickly adopted the business model with only variations in names, restaurant themes and individual recipes.

Social Effects. Social shifts in America have been played out in the fast food industry just like the larger society, but with some surprising twists. Much like other low-wage, low-skilled interactive service jobs, fast food employment is still largely regarded as being "women's work"; however, this has not always been the case. According to Talwar, "The fast food industry in the 1950s and 1960s was dominated by men" (p. 90). In his autobiography, the founder of the McDonald's franchise system, Ray Kroc, described employees of the very first McDonald's as being "all men, dressed in spiffy white shirts and trousers and white paper hats" (in Talwar, p. 90). According to John Love's comprehensive study of the McDonald's Corporation in the 1980s, the key to the industry at that time (before 1960) was the "all male crew"; further, Kroc initially decided not to hire young women to work behind the McDonald's counter because, he claimed, "They attracted the wrong kind of boys" (in Talwar, p. 90). Since the 1970s, though, more and more women have been employed in the fast food industry, with their numbers largely increasing to parallel the adoption of more advanced technology, the subsequent emphasis on service, and the social and monetary devaluation of fast food jobs; in fact, since the early 1970s, the buying power of minimum wage (the wage for entry-level fast food jobs) has dropped by almost 50% (Talwar, 2002).

Today, some workers are able to work their way into the lower managerial ranks of the fast food industry where wages are marginally better; some are even promoted into higher management, a career path that has been made facilitated by long-standing internal promotion programs. According to Newman, though, "As in any industry, senior management opportunities [in fast food] are limited. Hence most workers, even those with track records as reliable employees, are locked inside a low-wage environment" (p. 24).

Structural Changes in the Fast Food Industry. Today, the fast food industry has evolved in a number of important ways from the early days of Maria del Gray's McDonalds. The fast food industry is highly competitive, but remains fairly homogeneous and nonunion; however, some restaurant outlets are owned and operated by parent companies while others are owned and operated by individual franchisees (Krueger, 1991). In a typical franchise agreement, the franchisor (known as the parent company) grants the franchisee a license to operate a standardized restaurant with a specified technology and widely recognized trademark; in exchange, the franchisee pays the parent company a fixed fee and a monthly royalty on gross sales (Krueger says this is generally 8%). In some instances, the franchisee will be required to post an explicit performance bond as well. The total start-up cost of a franchised restaurant in a major chain is ordinarily between $400,000 and $600,000 (Krueger, 1991).

The franchise agreement generally involves securing a commitment by the franchisee to play an active role in the day-to-day operations of the enterprise, including management and supervision of the restaurant. "Burger King, for instance, requires an on-premises operating owner, while McDonald's, Wendy's, and Kentucky Fried Chicken do not permit absentee franchisees, and McDonald's will not sell a franchise to a partnership" (Krueger, p. 37). Further, franchisees generally select their own restaurant sites; however, the franchisor retains the right to disallow certain locations. This author reports that the majority of franchise contracts expire after a period of 20 years, after which the parent company may renew the contract, sell the franchise to another franchisee, or elect to operate the restaurant itself.

Besides granting franchise outlets to individual entrepreneurs, franchisors frequently own and operate several establishments in their own rights; these so-called company-owned units follow the same quality standards that are established for franchisee-owned units (Krueger, 1991).

Approximately 30% of fast food restaurants in the franchise system are company-owned, but this percentage has varied considerably across the industry; for example, in 1991, as shown in Figure 1 below, 12% of Arby's restaurants, 15% of Burger King restaurants, 18% of Kentucky Fried Chicken restaurants, 25% of McDonald's restaurants, and 35% of Wendy's restaurants were company-owned:

Figure 1. Franchise Percentages Owned by Parent Company as of 1991 [based on data in Krueger, 1991].

Marketing and advertising have also changed in fundamental ways since the early days of the fast food industry in the 1950s and 1960s. According to Gershman (1990), during the late 1950s and early 1960s, "It cost $25,000 to open the doors [to a fast-food restaurant], and most people made back their investments in the first month of operations" (p. 176). Referring to this period of American history as the "bricks-and-mortar phase" of fast food, Gershman reports the next step was the entry of advertising into a business that had needed very little marketing help. The fast-food industry in the 1970s "was so successful, so right for the times, that it was almost impossible to make a marketing mistake" (emphasis added) (Gershman, p. 176)

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