Economic Factors

Macro environment analysis includes a number of factors in its ambit such as Demographic, Economic, Socio-Cultural, Technological, Ecological, and Political. All these elements in terms of Mr. Empanada are defined below.

As per the recent 2018 data published by the Centers for Disease Control and Prevention, almost 48 million people in the U.S. get sick, 128,000 are hospitalized, and 3000 deaths occurred each year because of the diseases occurred from food (FDA). In terms of dealing with this issue,  the Food Safety Modernization Act (FSMA) is used to transform the food safety system of the country by imposing a number of obligations on the organizations engaged in the fast food industry. Following are the regulations which are introduced by the FSMA in terms of ensuring the health and safety of the people of the U.S. All of these regulations impose extra burden on Mr. Empanada-

• Accredited Third-Party Certification- FSMA introduced this rule in November 2015, and though this a voluntary program it is established for the accreditation of third-party certification bodies which are also known as third-party auditors in terms of conducting the food safety audits (FDA).
• Risk based preventive controls- Usually, facilities related to domestic and foreign food need to be registered with section 415 of the Food, Drug, & Cosmetic Act. This section imposes obligations on the organization to comply with the requirements related to the risk-based preventive controls. All these controls are mandated by the FSMA and modernized Current Good Manufacturing Practices (CGMPs) (FDA).

Some other regulations are laws related to wages, quality of food, packaging of food, etc.. Packaging regulations related to the food are other factors which impose extra burdens on Mr. Empanada and this regulation is introduced by the FDA in Food, Drug, and Cosmetic Act 1958. This act introduces the basic regulations related to the food contact materials and other relevant acts.

There are number of economic factors which directly affect this industry such as inflation rates, unemployment rates, wages, prices, spending, etc.. Tampa experienced the average inflation of 2.44% each year, and this rate of change reflects the significant inflation. In other words, $20 in Tampa (year 2000) would cost $30.13 in the year 2017 in terms of equal purchase. In comparison of the overall inflation rate of the U.S. that is 2.10% during the similar period, it can be said that inflation in Tampa was higher. Because of this high inflation, price of the ingredients increased and this automatically enhances the price of the food products and leads to a decrease in their margin of profit (Florida Inflation 2017).

Another economic factor which affects the business of this industry is the unemployment rates, as people do not have as much money to spend on the restaurants. The unemployment rate in Tampa was 3.7% in the year 2016-17 and 2.9% in the year 2017-18. Because of this, individuals preferred ready-to-cook meals and packed foods in comparison to the food offered by restaurants (BLS).

Another economic factor is tax rate, which directly affects the operations of Mr. Empanada. Recently, bill has been passed which reduced the corporate tax rates from 35% to 21%, and this affects the fast food industry in a similar manner like any other industries in the U.S. This bill is also welcomed and appreciated by the food and grocery industry. This lower rate of tax allows the organizations to invest more money on other operations of their business and ensures effectiveness (Liem).

Socio-Cultural Factors

As stated by the National Restaurant Association, the total sales of this industry in 2017 are almost $799 billion. This industry gives employment to almost 16.3 million people in the United States. The main issue in this context faced by the organization is the increase of wages of employees, however, the prices of the food remain same. In other words, organizations are pressured to not increase the price of the food because of the immense competition (NRA).

The size of individual spending on fast food options has always been dependent on the economic conditions of particular markets. In the U.S., almost 50 million people are fed by 200,000 restaurants on a daily basis.

Social factors affect the organization in an indirect manner, as customers are adopting a healthy lifestyle and becoming educated, as this makes them conscious about the food products. Florida has the lowest adult obesity rate that is 10 to 17. Currently, Florida adult obesity rate is almost 28.4% which is high in comparison of the 18.4% in the year 2000. There are a number of individuals who are adopting the healthy lifestyle and food habits for getting away from these issues (The State of Obesity). Currently the existing customers of this organization are those people who are young and more health conscious (Jack).

Obesity increases the risk of heart diseases, diabetes, high blood pressure, and other health issues. This directly affects the purchasing power of the organization because their existing customers are avoiding the food with high calories and fat. In other words, customers are avoiding junk food and unhealthy food. This industry was held liable for increasing the childhood obesity rates and because of this, the industry needs to adopt measures like showing the nutritional content on the label and reducing the calories in the items. Cultural factors may also a play very important role in the society even though some cultures in the U.S. do not encourage the consumption of fast food.

The average American spends almost $1200 each year on fast food. Children in America consume almost 12% of the calories from fast food. Another change which affects the fast food industry is the changing household structure, as consumption behaviors in the USA have become less household oriented and more individualized in comparison to the previous generations. More than 50% of occasions related to eating and beverages happened at the time when consumers are alone. Also contributing to the consumers dining alone, almost 27% of households now only consists only one person  (Smartfem Magazine). This enhances the consumption of fast food over the healthy food, and somehow gives benefit to the fast food industry.

Technological Factors

These attacks on the junk food encourage the individuals to adopt the low calorie food, and these changes occurring in social trends directly impact the sales of the whole industry. This shift reflects across the nation, a large majority of individuals are adopting the healthy lifestyle and this directly affects the profits of the fast food industry.

Technology is the factor which directly affects the working of all the industries, and restaurant industry is no exception to this. Technology plays an important role in the shift occurring in the trends of the restaurant industry. Previously, the only focus of the restaurants is to get the customers and serve them food, but now things are completely changed. Now, restaurants need to focus on some other factors also, such as best experience and services to the customers, unique experience, best food, etc.

The most important aspect which affects the restaurant industry is the growing trend of social media platforms. Presently, social media platforms are considered as a basic requirement of society and it is not possible to escape it even for an hour. As per one research shows that in 2018 almost 68% of Americans are active on Facebook, 35% are active on Instagram, and 24% have a Twitter account (Single platform 2018). An average person in America uses three social accounts and accesses their social channels at least once per day.

The authority of social media directly affects the restaurant industry as well, as almost 171 million posts related to restaurants of America are trending on Instagram alone (Single platform 2018). Each individual follow at least 1-3 accounts related to food and restaurants, food magazines, bloggers or influencers. As there is trend to post the picture or comment of what they are eating, all these things increase the expectations of the consumers.

Marketing related to the restaurant industry in the U.S. also faced a major shift over the years, and they believe that traditional techniques of advertisements are not enough anymore. Digital technology needs to be used by the organization in terms of marketing, as social media is considered a big platform and used by many restaurants for attracting new customers (Single platform 2018).

The changing demographics of USA, including enhancing influence of millennial, changes occurred in the life stages of households, considered as major factor which drive the shift in the food habits of the consumers. The millennial generation is the most important factor which must be considered while framing the strategy, as it includes the group of 20-35 years old individuals. This group not only influences the technology trends but also culinary trends. Almost 22% of the population of the U.S., almost 68 million people, falls under this group. There are number of experts which state that, millennials generally preferred the healthy eating habits and desire more unprocessed, natural foods. However, there are some aspects which affect the food habits of millennials, such as recession (CS News 2015).

Recession is hard on millennials, as this generation commits the largest portion of their food expenditure on the food which they take away from home. Almost 45.2% of individuals between the ages of 25-34 years spent a large amount of money on the food which they take away from home. This is the major factor because almost 54% of fast food users who consume fast food at least once a day and 37% of fast food users who consume fast food almost 2-6 times in a week are between the ages of 18-34.

Another demographic factor which affects the fast food industry of USA is the changing household structure, as consumption behaviors in the U.S.  have become less household oriented and more individualized in comparison to the previous generations. This can be understood with the help of an example: more than 50% of occasions related to eating and beverages happened at the time when consumers were alone. Also contributing to the consumers dining alone, almost 27% of households now only consist of only one person (QSR).

References

Aaron Allen & Associates. Economic Factors Affecting the U.S. Restaurant Industry. eHow, https://aaronallen.com/blog/us-restaurant-analysis-2017.

BLS. Tampa Area Economic Summary. 2018. eHow, https://www.bls.gov/regions/southeast/summary/blssummary_tampa.pdf.

CS News. Demographic Changes Among Key Trends Shaping Foodservice. 2015. eHow, https://csnews.com/demographic-changes-among-key-trends-shaping-foodservice.

Emma. Liem. How the GOP tax overhaul could affect the food industry. 2017. eHow. https://www.fooddive.com/news/how-the-gop-tax-overhaul-could-affect-the-food-industry/513323/.

FDA. FDA Food Safety Modernization Act (FSMA). 2018. eHow, https://www.fda.gov/Food/GuidanceRegulation/FSMA/default.htm.

FDA. FSMA Final Rule for Preventive Controls for Human Food. 2018. eHow, https://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm334115.htm.

FDA. FSMA Final Rule on Accredited Third-Party Certification. 2018. eHow, https://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm361903.htm.

Florida Inflation. Tampa, Florida prices: $20 in 2000 → $30.13 in 2017. 2017. eHow, https://www.in2013dollars.com/Tampa-Florida/price-inflation.

NRA. News & Research. 2017. eHow, https://www.restaurant.org/News-Research/Research/soi.

QSR. Meet Your Consumer. 2012. eHow. https://www.qsrmagazine.com/consumer-trends/meet-your-consumer.

Single platform. 5 Ways America’s Restaurant Industry Has Changed Over the Last Decade. 2018. eHow, https://www.singleplatform.com/blog/5-ways-americas-restaurant-industry-has-changed-over-the-last-decade.

Statista. Restaurant industry in the U.S. – Statistics & Facts. eHow, https://www.statista.com/topics/1135/us-restaurants/.

The state of obesity. Florida. 2018. eHow, https://stateofobesity.org/states/fl/.

Smartfem magazine. Americans Spend $1,200 A Year On Fast Food. 2017. eHow https://www.smartfem.com/health/americans-spend-1200-a-year-on-fast-food/.