In 2012, U.S. annual sales from fast food giant McDonald’s were equivalent to the GDP of Yemen. The $35.6 billion sum dwarfed all other fast food competitors by at least $15 billion.
According to the QSR 50, an annual ranking of fast food chains across the United States., the top 20 fast food companies each had yearly sales in the billions of dollars. While typically small in size, fast food joints pack a competitive punch with their low prices, speedy service and array of locations. For example, by the end of 2012, Subway had over 25,000 locations open in the United States.
According to the Merriam-Webster dictionary, the term “fast food” wasn’t coined until 1951. Before this, fast food joints were known as “quick service” restaurants for their unusually fast service. One of the first of its kind was White Castle in 1921. The restaurant was known for its five-cent burger, which set the trend for the future.
Today, fast food restaurants, both chain and locally owned, are dominating the food service industry. According to the Bureau of Labor Statistics (BLS), more than 2 million Americans are employed as food preparation and serving workers (which includes fast food). This means that in the United States, one in every 113 Americans work within the industry.
Criticism has surrounded the fast food industry as it continues to grow and prosper in the United States. Questions regarding the quality of fast food and its rapid growth have come with increased skepticism and endless debate. The answer behind understanding the steady growth of fast food lies within a city’s ability to support quick service restaurants.
Barbara Vinson is the director of real estate for Capriotti’s Sandwich Shop. Capriotti’s started as a small sandwich shop in Delaware in 1976 and has grown into a restaurant chain with 100-plus locations. Vinson explained that her role as director of real estate is to evaluate the benefits and drawbacks of a potential site.
Location is Key
The company tends to keep 90 percent of the restaurants franchise-owned and 10 percent as corporate-based restaurants. New franchisees must have fast food or service backgrounds,and plan to open restaurants in at least three separate locations. Once the sites are chosen, it is Vinson’s job to check the accessibility and visibility of the area to ensure a proper fit.
“When I go out and try to find a new location, the first thing I’m looking for is visibility,” Vinson said. “I want to make sure that no matter what, even if it has the greatest backup of businesses around it, it’s got retail, it’s got houses around it, it’s got good traffic around it. If they can’t see you, it doesn’t work.”
Take exit 141 for Huffman Mill Road in Burlington which is highly populated by fast food restaurants.
As the president of Supply Management Services, Daryl Still works closely with the food service industry. Still is on Popeyes’ leadership team and is involved with the franchisee selection and approval process. He said demographics are key when selecting quality real estate for Popeyes.
“We look at good real estate that matches the demographic of our core customer base,” Still said, “both from ethnicity [to] gender as well as median income.”
By the end of 2013, Popeye’s had 1,769 restaurants across the United States. Their year-end revenue was $206 million. In the 2014 annual report, Popeye’s listed its four pillars of the Company’s Strategic Roadmap: “build a distinctive brand, create memorable experiences, grow restaurant profits and accelerate quality restaurant openings.”
Popeyes’ intentions of increasing future store openings is similar to the goals of Capriotti’s Sandwich Shop. Vinson explained that as the company looks toward expansion, certain aspirations arise. With 200 currently committed locations across the United States, Vinson said the next two years Capriotti’s hopes to be in the range of 300 to 400 locations.
“If we are working the way we are supposed to, you should see about one every week to week and a half,” Vinson said. “If all the stars align and the cities don’t go crazy.”
As both companies strive for growth, Burlington can relate to the rapid growth of fast food in recent decades. With a population of just over 51,000, the city has experienced fast food expansion at an unprecedented rate.
According to the BLS, 2,700 people in Burlington were employed under the title of “combined food preparation and serving workers, including fast food” in 2013. That is, one in every 19 people in Burlington worked the industry.
Despite high employment numbers and a rapid growth rate, fast food chains have fallen under scrutiny recently for their low wages and poor salaries. According to the BLS, hourly workers have borne the burden of minimum wage. In 2012, 3.4 percent of North Carolina workers who were paid hourly salaries made the federal minimum wage of $7.25 per hour. If an hourly employee worked 40 hours a week each month for an entire year, they would make roughly $15, 080 before taxes, assuming holidays aren’t taken.
Figures like these represent a clear income disparity in Burlington. According to the U.S. Census Bureau, 32 percent of the 21,645 households in Burlington make less than $25,000 each year. This number is drastically different from the average per capita income of Burlington residents in 2012, which came to $32,929.
Despite low wages, high demand has created a plethora of fast food options in Burlington. Mike’s Deli is a single-shop quick-service restaurant located on Church Street, a high-traffic roadway packed with fast food chains. The owner, Mike Sculthorpe, originally opened shop in Graham in 1988 but later moved the restaurant to Burlington. He just celebrated 25 years in business.
Since closing shop in Graham, Sculthorpe admitted he has seen many local businesses close in the area. He explained that while moving to Burlington has its drawbacks, he thinks he made the right decision for his business.
Sculthorpe said Burlington has always been a fast food town, and the interstate has played a critical role in maintaining the status quo.
“It doesn’t hurt being next to the interstate,” Sculphorpe said, reiterating that Interstate 85 is key to the survival of many fast food chains in the area.
The same cannot be said for Popeyes, which does not consider highway access as prime real estate. Still explained that Popeyes’ customer base does not tend to gravitate near interstates and highways.
Sculthorpe attributed Mike’s Deli’s success to the nearby university, Interstate 85 and the quality of his store’s food. Sculthorpe has maintained the restaurant as a family business, and prides his restaurant on a dedication to quality sandwiches that makes him avoid labeling chain restaurants like Subway as competition.
“I don’t even think of [Subway], but I can’t beat their price,” Sculthorpe said. “But I’ve had customers tell me that after you go there and add extra meat, it’s about the same price.”
For many customers, price matters. With chains like McDonald’s constantly advertising low prices, their national average of 69 million customers per day makes sense. It is clear many factors have contributed to the rise of fast food chains, price just being one. As Vinson explained, restaurants must figure out how to pull people in. Ultimately, that is the bottom line.
“This is an age of convenience,” Vinson said. “So they have to have accessibility and visibility.”