Executive Summary
The fast food industry is the industry in which restaurants offering foods prepared in quantity by standardized, quick methods are categorized forming a part of the imperfect market as monopolistic competition. The South African fast food industry in particular comprises of restaurants such as Burger King, Kentucky Fried Chicken (KFC), McDonalds, Nandos, Domino’s Pizza, Debonairs Pizza, Steers, Fishaways, Krispy Kreme, Mugg and Bean and Starbucks, to name a few. Debonairs Pizza, Steers and Fishaways are all running under the famous brands umbrella.
25/8 News is a news feeding platform, particularly on commercial issues which in this particular article analysis provides a dynamic synthesis of the fast food industry research, examining the local fast food market from a holistic perspective with detailed insights into Human Capital related matters such as wages and salaries, training and skills development as well as retention.
Although the industry continues to grow as mentioned under the disparity section, it fails not to encounter challenges and downfalls. However strategies on how to implement essential procedures which will be beneficial to the growth of the business are identified, such as training and skills development programs. The analysis as a whole aims to identify the fast food industry as one of any other industry as they too are affected by economic factors which thus leads to failures. In contrast, the industry continues to grow extensively.
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Disparity: Threats of Substitutes in the Industry
News article sample 1
Taking a look at the Mail & Guardian post sourced from Financial24, the Uber transport service is looking at overtaking the food delivery service by restaurant through its new and improved mobile app which is highly effective and efficient. ‘UberEATS has the ability to change the way restaurants operate. Through partnerships given the scale, smaller businesses could expand to a wider customer base through UberEATS,’ Alon Lits, Uber general manager for Sub-Saharan Africa told Fin24.
Although UberEATS is identified as a threat to the many restaurants whom already have a food delivery service, this is an opportunity of growth to smaller franchises such as Domino’s Pizza who initially did not deliver and depended on other service providers which existed prior Uber such as Mr. Delivery. In comparison to Mr. Delivery, there are no limitations as to the amount that the order should be equivalent to, however they do charge a R20 fee on delivery. Mr. Delivery only delivers at a minimum of a R50 meal purchased however no additional costs are included. This creates fair competition amongst these two compatriots and thus brand loyal customer will still prefer being served by Mr. Delivery. Both service providers benefit as customers who prefer variation will in most cases be correspondent to the brand loyal customers.
Evidently, the newly developed UberEATS will not solely negatively affect the restaurants who deliver but will encourage the continuously growing fast food industry. Other factors such as employment rates are affected as well. Increased service provision requires proportionate increases in employees. UberEATS will in turn create employment opportunities but also increase the skills within the economy as this service requires workers how have acquired a driver’s license
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Issues Pertaining Human Capital
News article sample 1, 2 & 3
Remuneration and employee benefits: In reference to Morn” Cronj’s article on six challenges facing the franchising sector, Staff Writer article ‘Starbucks Is Coming To South Africa’ as well as the article by Country Report, ‘Fast Food South Africa: Trends’, a number of relevant issues have been raised such as decreased remuneration as a result of fallen disposable income, weakening staff motives and increasing competition. Generally, Imperfect markets which is where the fast food industry is categorized, faces extensively low remuneration and thus remuneration will continue to be low in the beginning stages of business operations which means only a minimal amount of employees should be employed to avoid high turn-over as well as premature retention.
The increase in the cost of living as a result of varied economic factors such as increased unemployment rates or deteriorating living standards results in consumers spending less of their disposable income (the amount of money left to spend on luxurious goods). This in turn entails the business encounters reduced remuneration due to decreased sales. However, this does not only appeal to the business as a whole but to the employees as well.
The waiters, waitresses as well as cashiers of the restaurant are too affected by deteriorating remuneration of the business as this means decreased wages or salaries. The South African (SA) fast food industry minimum salary lies at a median of R36,054 annually with a minimum bonus of R2, 035 and commission of R1,600. Salaries and wages are one of the largest operating expenses the business will incur however they are of high importance to both the employee and business along with the employee benefits.
The Salary and employee benefit keep the staff motivated to work and similarly keeps the staff satisfied. However it is essential to identify what exactly is meant by wages/salaries and commission. Wages refer to daily or weekly payments to the employee which is either calculated according to the output or the employees working hours. Salaries are fixed, pre-determined amounts paid to permanent employees monthly. Commission aims to motivate the worker whereby a percentage of the remuneration earned from sales is earned.
Along with the standardized employee payments, extra working hours are to be included. However with the decreased sales, the businesses may not be able to attain these extra payments such as bonuses in the form of profit sharing as well as share options. These methods both attract the employee to put more effort in operations. Nevertheless, In relation to the article, employees are not guaranteed the extra benefits which either leads to retention or reduced levels of operations which leads to even higher reductions in remuneration. The business could either implement automation whereby machinery is employed in place of humans or external recruitment occurs whereby the tiny salary offer is accepted by the unemployed party.
According to the Basic Conditions of Employment Act (BCEA), the employer is not permitted to deduct any amounts from the employee’s remuneration unless voluntarily stated or deductions are under Unemployment Insurance Funds. This factor adds to the decreased remuneration of the business.
Retention: In every business, more so in the fast food industry, retention is a threat as employees realise better offers from the current company’s competitor and new entrants into the market. For example, when Burger King first opened in Rustenburg, better offers were offered to attract employees and thus the KFC, McDonalds and other participant employees were attracted to Burger King.
Other factors which elaborate on workers leaving a business include:
Depraved treatment by management towards the employee
Rivalry with the colleagues
Deprived access to skills and knowledge development or minimal opportunity of development and growth as individual.
Unfavourable working conditions.
Relocation due to spouse being promoted
As mentioned above, in the early stages of operations the business will encounter extensively low profits which may result in high employee turnover if the incorrect numbers of applicants are employed by the Human Capital Manager. This is an encounter of Burger King, Krispy Kreme and Starbucks to name a few. Particularly Starbucks as there are cheaper substitutes within the market. In addition, following retention reasons by employees, these discrepancies by the HR manager (Human Capital Manager) lead to retention whereby the business at fault. A number of reasons whereby retention results from business operations inaccuracies are as follows:
Reduced productivity levels
Low employee morale
Negative public image of the business
The Human Capital manager is thus required to keep track of reasons as to why employee’s resort to retention during the exit interview held prior the employee makes the final decision to leave the company. This way, the business identifies its weaknesses and strengths and thus is able to enhance the strong aspects and improve the flaws.
Training and skills development: When referring to training and skills development, there are diverse interpretations. Nonetheless, the main focus is employees developing and acquiring skills and conducts that are not necessarily in relation to the particular job as well as specific abilities to perform the job.
The fast food industry is a rapidly developing industry and thus regular training sessions are essential to keep up with the new inventions as well as the new techniques of operating the business. Although, in relation to the above mentioned article, this would not be attainable if total profits of the business are below the equilibrium. It may however benefit the business in such a way that employees will acquire skills on being more efficient and effective in practice. Business in this industry may invest in this aspect by developing a program which even though may be costly, will benefit the employee and the business
1. Available skills are identified and compared to required skills in order to identify skills gap
2. Training resources are identified. This results in the identification of training being outsourced or whether training takes place internally or whether there will be a collaboration
3. A description of the outcomes is out laid (what the employ should be able to complete and have knowledge of) as well as a decision on the most appropriate method to be followed identified through the following options:
a. On the job training ( experienced employees work with the inexperienced)
b. Classroom training where employees are taught in a lesson facilitated by experienced employees or at colleges or universities.
c. Workshops
4. The program is then implemented whereby the training and skills development physically occurs.
5. The program is then evaluated on its success once completed. This way the return on investment is identified. This way the new skills and knowledge acquired are utilized.
Although the programs may be implemented by franchises such as McDonalds, as they have been operating for quite a while in SA and may be beneficial, employees could choose to leave the work place for a better opportunity once they’ve received the training. The downfall is though the skills development and training cannot be neglected as new international franchises which operate in SA will arise just as mentioned in article 3 whereby Starbucks opened its doors in SA.
References
Six challenges facing the franchising sector
Accessed: May 22nd, 2017 [15:00]
http://www.fin24.com/Finweek/Entrepreneurs/six-challenges-facing-the-franchising-sector-20160211
The Fast Food Industry South Africa: Trends
Accessed: May 22nd, 2017 [15:07]
http://www.euromonitor.com/fast-food-in-south-africa/report
How Uber plans to disrupt SA's food delivery industry
News 24
Date posted: 29 Sep 2016 11:35
Accessed: May 22nd, 2017 [15:07]
Starbucks is coming to South Africa
By Staff Writer
Date Posted: July 14, 2015
Accessed: May 22nd, 2017 [15:07]
http://www.payscale.com/research/ZA/Job=Waiter%2FWaitress/Salary