As more and more fast food chains are mushrooming across the world, especially in the Philippines, it is important to understand the business model that most fast food corporations operate under. While fast food companies are large conglomerates, most fast food branches operate as small businesses that are run by local business owners or franchises. Here's how fast food chains maintain high profits while branching out and keeping food prices low.

Fast Food Industry - Photo by Shaafi Ali on Unsplash

While fast food enjoys global popularity and several industry giants have established franchises across the world, understanding the workings of the industry as a whole remains a challenge for consumers. When there is a new fast food outlet in town, consumers automatically assume that the parent company or owners of that particular food chain are initiating and managing the branch and its core functions. In fact, most fast food chain stores are set up as small businesses that belong to local business owners who are responsible for providing a certain return on investment for the fast food brand. This is what allows local businessmen to hire staff members to dictate daily operations at fast-food hubs and even determine how much the workforce is paid.

It is also important to understand that not all of the fast food stores and branches in various cities are franchises as there are a percentage of stores that are managed directly by the corporate HQ of any fast food company. If there are 2000 Jollibee fast food outlets only half may be run by the Jollibee Food Corporation headquarters. This means that the remaining 1000 will be counted as franchises and this will be corroborated by the food industry financial statements issued by the company.

Fast food fans must also comprehend that the parent company of several fast food chains in their country or city might be one and the same. In some states in the USA, Taco Bell, Kentucky Fried Chicken and Long John Silver’s are owned by the same restaurant company that may or may not own other restaurants in different territories and countries around the globe. One of the main food brands and its parent company in the US earned over US$6 billion with profits of US$812 million in the early 2000s. So it's easy to see why restaurant companies want to manage more than just one fast food brand.

If there's one element that's essential to the success of nearly every fast food brand in the world, it is targeting marketing campaigns. Fast food chains of global and local origin spend millions of dollars on television advertising and will continue to do so for the foreseeable future. Billboards, hoardings and other campaigns that attract diners are crucial to fast food outlets that offer meals at affordable rates in spite of inflation and fluctuations in the economy. Their business model is reliant not on selling a limited number of high-quality products at a premium price but selling an exorbitant amount of average-quality products at a low price. It's a formula that's worked for decades as fast food chains thrive on the brand recognition and loyalty it has garnered over the decades to maintain its customer base.

Fast food chains also provide unskilled workers in various regions of the world a chance to earn a daily wage. Although the minimum wage in fast food chains is anything but ideal, fast food restaurant owners must also factor in the fixed costs that are part and parcel of running an outlet. This not only includes franchise fees, lease payments on rental spaces but also product purchase expenses from suppliers approved by the parent company.