Outline
- Problem
- Objective
- Opinion
- Areas of Strength
- Areas of Concern
- Recommendation
- Conclusion
Problem
The service and products that are to be offered in a food joint for college students is a problem, as it would require good quality diversified food variety. This is essential as college students form an amalgamation of people coming from various backgrounds with varied preferences.
Objective
The objective of the essay is to understand what are the popular preferences of the targeted customers and the viability of the business opportunity for this kind of a food chain in today’s market condition. Further, the paper will also present the expected market strength.
Opinion
As the market for food chain has always been a successful idea, a targeted food chain for college students is expected to be a success if all the marketing mix is decided upon clearly. Further demarcating the target market and the preferences of the customers would be key to the business. Another area, which must be considered, is the services provided apart from serving food, which will attract the students to the restaurant.
Areas of Strength
The fast food market in the US is a $68.2 billion industry and is growing at a rate of 5.6 percent in 2008 (Datamonitor). The main segments in the fast food industry are Quick Service Restaurants (QSR), Takeaways, Mobile & Street Vendors and Leisure (Datamonitor). The food chain that is presented in the case will fall in the first category i.e. QSR. According to industry report, this is the most lucrative segment in the industry with it comprising of 74 percent of the market.
In case of the proposed business, the key buyers would be students in colleges and universities. According to the U.S. Department of Education, in 2007 there were 13,782,702 students enrolled for full time and part time courses in the US colleges and universities and is expected to increase 10 percent by 2017 (National Center for Education Statistics). Further, the total population within the age group of 18 to 24 years is 29,435,332 (US Census Bureau).This shows that the number of target customers is very high.
The differentiation in the fast food market usually occurs through the food offerings. Further heavy brand building effort and visual layout of the stores too play an important role in making the business successful. For this, it is necessary to know what kind of ambience is most liked by students in restaurant. As the market on a whole is fragmented, entry barriers will be low (Datamonitor). Another aspect of the fast food chains are weaker buyer power and stronger brand loyalty, which can built through value added services like ambience, good service, ad special amenities like wifi.
Pricing must be kept low in order to sell high volumes and to keep costs low. According to the report by Datamonitor, “It is vital to maintain reliable upstream networks offering food of marketable quality, and in a generally low margin – high volume business, keeping food costs down is also important.” (Datamonitor 15)
Areas of Concern
The area, which is of concerns for the business, is that the industry is highly competitive and there are barriers made by existing players to prevent new player entry. Some entry barriers made by existing player are launch of a price war, especially when the new entrant moves in a concentrated segment. As in case of this plan, it is the most concentrated segment of fast food market that they plan to enter. This will definitely cause the competitors to retaliate.
The revenue growth in the market has been respectable and not dramatic, thus reducing its attractiveness due to the economic conditions. However, it will still attract new entrants.
Increasing criticism of fast food has made the business a risk, as customers are becoming more health conscious (Dolbeck). According to a report by Journal of the American Medical Association 30.5 percent of Americans, are obese and 64.5 percent are overweight. This report has increased the dislike for fast food and poses a serious concern for the industry.
Recommendation
The plan of a restaurant chain for college students is a very good idea. However, the positing of the food chain has to be in such a way that it can differentiate from the other players. Further the positioning should also consider that college students are a mix of people, some of whom like traditional, high calorie fast food, while others are more health conscious. Therefore, a variety of food offering must be presented in the menu in order to attract all kinds of customers.
Other offerings, like ambience, service, take home, or free delivery must be accounted for. This is to provide convenience for customers. This will increase customer base.
Customer loyalty for restaurant business is very important. Therefore, restaurant chains must offer customer loyalty schemes like the airlines frequent flier club. Here the regulars to the restaurant must be made members of a club wherein they enjoy certain privileged benefits and discounts.
Conclusion
This business provides immense opportunity as the target market is niche and they mostly eat out. Mostly college students enjoy their food out and hence a restaurant, which caters only to college crowd, will have a different attraction.
Reference
Datamonitor. “Fast Food in the United States.” 2009. EBSCOHost. Web.
Dolbeck, Andrew. “A quick taste of the fast food industry.” 2002. Weekly Corporate Growth Report. Web.
National Center for Education Statistics. “Digest of Education Statistics, 2008.” 2009. U.S. Department of Education. Web.
US Census Bureau. “Educational Attainment US.” 2008. 2005-2007 American Community Survey 3-Year Estimates. Web.