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What challenges will local fast-food franchises face in 2013?


It’s earnings season. Use the fast-food market as a springboard for local business stories.

The coming weeks are big ones in earnings season. In the week ahead most analysts eyes are focused on the many tech firms expected to report fourth-quarter and full-year sales.  Apple and Google are the biggies, as CNBC reports, but other big players like Verizon and IBM also are on deck.

While these companies are bellwethers for the national economy, stories about their earnings are a little bit difficult to localize, unless they are headquartered in your backyard, or you approach it from a consumer angle in the gadgets and technologies markets.  You also can try to relate trends in earnings and sales to capital spending among area businesses. Are more companies upgrading telecom or computer equipment, and what’ driving that?

Still, it’s all a little vague. Looking over the week’s earnings calendar I spotted a much better prospect to use as a platform for local business stories: McDonald’s Corp., which will release its fourth-quarter results on Jan. 23.  According to its own profile page, the company’s 34,000 restaurants serve 69 million people each day in 119 companies.  With that sort of reach, chances are you can find some way to put Mickey D’s earnings, which are expected to be affected by factors ranging from competition to nutrition concerns to consumer spending into a local context.

If Big Macs aren’t your thing, Wendy’s recently reported some results. Chipotle has issued preliminary guidance. Also,  Yum! Brands , parent of KFC and Taco Bell among others, is reporting Feb. 4. Reading analysts comments about all of their forecasts and reports will help inform you about the industry.

Point being, when it comes to many fast-food chains, the stores are locally owned and operated. McDonald’s, for example, says 80 of its locations are franchised or licensed.  Using earnings as a peg, just about any beat reporter could find a fast-food angle, from technology (software that monitors order-fulfillment efficiency, robotics that could replace kitchen workers) to health care (the much-discussed effects of the Affordable Care Act to menu changes related to nutrition/obesity concerns to food-safety issues to trends like gluten-free fast food options) to the real-estate and retail development sectors.

If you cover agriculture or green business, look into the latest in sustainable production and local sourcing of fast-food raw ingredients. And don’t forget green packaging. Are the initiatives by global chains feel-good Band-Aids or are they really making a difference to the environment and local growers?  Is there an airport on your beat, and if so, what’s the latest there in terms of service models, menu items and portability for on-the-go travelers?  Same for gas stations and truck stops.  Obviously looking at fast food from a personal finance perspective, either as a worker or consumer, is another possibility.  What is the career path at a typical franchise, and what are the hurdles to moving up from entry-level jobs, and wages?

Don’t forget the supplier angle to all of these stories, too.  What happens to growers when French fries are replaced by apple slices, or to vendors when the specs for degradable packaging change?  How much of a typical fast-food store’s inventory is provided by local companies and how much is dictated by corporate contracts?  What’s the spin-off effect of a single store? How many vendors are on their accounts payable roster?

And of course, the franchise model as a small-business profile would be of interest to a lot of readers contemplating (or wishing they could contemplate) a career change.  While the barriers to entry of a McDonald’s franchise are pretty steep – about $750,000 in non-borrowed assets, the company says – other chains are more affordable.  Entrepreneur magazine lists the biggest franchise trends of 2013. See how your area reflects their forecast.

Google “franchise attorney” with a geographic terms and you’ll likely turn up a few hits for a different perspective on the industry; another good source of information is QSR, the magazine for the quick-service restaurant industry.




In 2014, Beats, Featured, Investing | Banking, Personal finance, Retail | Lifestyle, Small | Private | Non-profit, Story ideas.

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