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Data Envelopment Analysis - Fast Food Restaurants

Introduction

Fast food restaurants are everywhere every major highway has signs listing the various fast

food restaurants located off every exit you pass, highway rest stops are loaded with different fast

food restaurants, and airports have food courts lined with fast food restaurants. In todays ever-

changing, fast-paced society the ability to get a satisfying, sometimes sort-of healthy, a meal in

the blink of an eye is an always growing opportunity (Stowe 55).

The fast food industry, also known as Quick Service Restaurants (QSR), is a segment of

the restaurant industry which generates revenues of over $570 billion dollars. Many people in

the U.S. eat at or work at fast food restaurants. There are over 200,000 fast food restaurants in

the U.S., and its estimated that over 50 million people eat at one each day and they employ over

4 million people (Heide 90). Buyers of fast food put emphasis on several main areas taste,

price, location, and quality, while the restaurants themselves focus on providing regular service,

affordability, and most importantly speed. However, while speed may not be a primary area of

interest specifically listed by consumers of fast food restaurants the fact that so many people dine

at these establishments implies the fact that the speed with which the food is prepared and

delivered is important (Heide 95). The decision maker is trying to identify the best franchise

opportunity from a multitude of various fast food restaurants.

The growth of various industries has seen the focus on environmental impacts become

very critical. The growth of the fast food industries has seen the needs to focus on their impacts

on the environment. It is the place and the time that we are living right now everywhere in the

whole universe. The environment is the treasure that God gave humans, to help them to enhance
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their knowledge and skills. In ancient times until now, people learn from the environment things

that they were ignorant about which makes it important, grapple their attention, and their

inspiration. Environment encourages humans to improve their skills and knowledge by things

happening in front of them unintentionally, and people did not give it any attention, but it is

useful

Besides, environment gives human beings resources to stay alive and continue their

learning by providing them with food and water, which is their lifeline. Furthermore, the

environment force human to learn more and build advanced future for their-selves because

pasting every day from our life the environment became harder and harder. For instance, the

number of people increases daily and the natural sources decreases daily, so humans should find

other resources to make up for the sources that are already gone. Moreover, the environment is

consistent with education because the environment is an extract and an integral part of education.

There are three reasons why the environment is consistent with education: People can use

natural resources to help get a good education, supply of learning materials and provide avenues

for research. Natural resources increase the ability and the capability of people to learn because

some people like to discover more than they do from the books, so they will be passionate about

learning more about natural resources. Moreover, they will start inviting others to experience

what they are doing and studying. Advanced and developed countries that have safe environment

have a strong education and strong military capabilities, which allow her to fight for itself

without the need for other nations. Other scared to fight those countries because they have

advanced weapons and military facilities. Besides, those countries will have many alliance

countries because it serves the world with the researchers and products.
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On the other hand, some countries are unsafe despite having a rich base of natural

resources. The aspect of environmental studies is diverse in human behavior, composition,

qualities, and thoughts. They follow different aspects from region to another. The nature of

people in those areas constitutes life in which they are living. For instance, if the people there do

not like education and do not want to learn they will reflect on other individuals who want to

learn by making it hard to learn. People influence is one of the problems that some countries

have because it delays the success of humans even if they are very talented people.

On the other hand, individuals who want to learn and do not know how to start from one

of the problems in our societies, which tried and confused the people who are looking forward to

learning because they want to learn many things simultaneously. Furthermore, humans are

curious beings, so they want to learn faster and advanced in many things albeit simultaneously.

For example, they want to learn speed-reading, someday they want to learn another language,

and eventually they want to advance in what they are doing. However, what is happening, people

are quite transiting with their objectives, which they are phony about, and they do not want to

learn. Learning does not happen someday it happen consistently. Moreover, you have to know

your goal in life, what you want to be in the future will help you to decide what you have to

learn.

Survival of the next generation depends on greatly on the current measures undertaken

concerning the environment. This means providing quality EE to young people guarantee a

secured future since the young would implement the lifelong lessons learned. The concept of EE

entails educating the masses about sustainable use of the available natural resources. In essence,

over-exploitation of natural resources such as oil resources risks placing future generations at

risk of the oil crisis. To ensure sustainable use, the current generation should develop alternative
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sources of energy and implement measures, which reduce present wastages. For instance,

manufacturing fuel-efficient automobiles, and switching off electricity when not in use. In sum,

environment constitutes an imperative aspect of the universe, the dwelling place for all living

things. An environment is a resource, which fosters human development in term of education

acquisition. In fact, since the ancient times, people have used the environment to learn new

things. The same is happening now where we depend on the environment and its natural

resources on research projects. Humans can learn a lot from the environment by examining its

various features. For instance, some important features of the environment materialized

accidently such as gravity, rain, oil resources, and flow of the wind, which all mesmerizes people

(Jeffery 90).

The capital for businesses can be contributed by the owners or equity ownership or

borrowed from financial institutions. Bonds as a source of capital represented acquired resources

in which the owner is paid from the regular coupons paid. Economic factors are those linked to

the finances generated by a company and may include the following; interest rate, the cost of

capital, taxes, and inflation among others. The interest rate is the cost of borrowing which the

borrower is expected to pay for the money, or capital one is advanced. The more the percentage

of interest the more the cost of capital thus implying profit will be lower. It is important for the

managers of the hotel to take note of how the interest rate is expected to change and hence take

necessary precautions. Taxes are levied by the government and other authorities to the revenue

generated by companies and are different in different authorities. The higher the rate of taxes, the

more expensive it is to operate a business within a particular jurisdiction.

There are some different things also which one needs to consider in connection to

working capital venture necessities. If an association's present liabilities are more than its present
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resources, then it demonstrates an inadequacy in the working capital venture and may lead now

and then to a business related obligation. A shortage in working capital venture damagingly

affects the picture of an association it demonstrates that the firm is confronting liquidity issues

and can't pay for costs identified with fleeting periods. In this occasion, the financial specialists

may haul out of making ventures of any sort in the firm. Thus, money related arranging, which

incorporates arranging of working capital venture necessity is critical for maintaining a business

speedily. On the off chance that there are exorbitant money and stocks indebted individuals and a

couple of loan bosses, then there would be an over the top interest in current resources by the

firm. Working capital speculation would be exorbitant, and the firm would in this regard be over-

promoted. The degree of profitability (ROI) would be lesser than it really ought to be and besides

long haul assets would pointlessly be locked in when rather they can be contributed elsewhere to

pick up benefits (Mercer and Harms 78).

The International Accounting Standards Board's (IASB 2010) framework declares that;

"The objective of financial statements is to provide information about the financial position,

performance and changes in financial position of an entity that is useful to a wide range of users

in making economic decisions." Financial analysis recognizes a companys particular strengths

and weaknesses and proposes a course of action the company may perform to take advantage of

its strengths and rectify its shortcomings in the future. Financial statement analysis is not only

significant for the management; it also is significant for the firms creditors and investors.

Information presented by financial analysis used internally and externally; for internal use,

financial managers use information to assist make financing and investment decisions to

maximize the value of the firm. For the external use, creditors and stockholders use financial
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statement analysis to assess how attractive is the company's investment by investigating its

ability to meet its current and predicted financial obligations.

Financial statement analysis for as Quick Service Restaurants (QSR) engages examining

the relationships between income statement items and balance sheet accounts in the sense of how

these relationships vary over time that refers to a trend analysis, and how a specific firm

compares with other firms in the same industry that refers to benchmarking or comparative ratio

analysis. However, there are limitations with financial statement analysis; but when used with

great caution, it can offer valuable information about the firm's operations. Annual report of a

company presents two significant types of information to shareholders; the first is a verbal

statement of recent operations of the company and its expectations for the future year, the second

includes a set of quantitative financial statements that report the financial position of a company

including dividends and earnings, for the last few years (Jeffery 89).

The information included in annual reports will assist shareholders to form a clear picture

about the future dividends and earnings of a company. Annual report of a company includes the

income statement that summarizes the revenues and expenses of a company during the

accounting period and the balance sheet, which lists assets and liability, and shareholders equity

of a company during the accounting period. Financial statements used to assist forecasting future

financial position of a firm and to ascertain predicted earnings and dividends. For investors, the

financial statement analysis is important for future predictions. For management, financial

statement analysis is helpful in planning and forecasting future circumstances of a firm. The

primary phase of a firm's financial statement analysis is ratio analysis. Ratio analysis refers to the

analysis of financial statements and the interpretation of financial data for a particular period of

operation.
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Therefore, ratio analysis employed to discover the financial well-being of as Quick

Service Restaurants (QSR) should be able to review the correct position of the company. The

outcome of ratio analysis would offer benefits to stakeholders such as investors, debtors,

managers, and creditors. Furthermore, ratio analysis is significant in developing a sound

relationship between two accounting figures and segments and presents the results to the

management and other interested users to make an informed decision about the organization's

financial performance.

Market analysis

When dealing with as Quick Service Restaurants (QSR) shares and focus investments, time is an

imperative factor. Patience therefore on the side of the investor is required. Warren argues that

provided all other management aspects of a company remain constant that is management is

effective, the return of shares over time is expected to increase. In short term periods, other

business factors like interest rates and inflation are bound to affect the share prices, but as time

lengthens, this economics of business dominate and stabilize the stock price.

Price volatility is probably one of the common things in market prices. In traditional

active portfolios, a broad diversification in the market is necessary for averaging the shifts in

prices of individual stocks. The more diversified the management portfolio is, the less chance

that one share price will affect the overall financial statement. The key documents prepared are

substantial financial documents developed by businesses, and it is a financial statement that gives

information on the amount of cash that moved into the company and out of business within a

specified accounting period such a year. It provides information regarding cash received, cash

paid and net variation in cash as a result of operating, investing and financing activities of a
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company for a particular operating period. Cash flow statement is prepared for the business to

record the revenues and expenses at the time cash is exchanged. This is unlike the income

statement which records them when the transactions take place even when there is no exchange

of cash. Cash flow statement is used by investors in accessing the solvency of a particular

business and judging its potential to bring positive cash flows in the future, offer dividends and

finance its expansion (Anderson and David 188).

Statement of cash flows relates to the income statement in that both statements shows the

revenues generated by company and expenses paid if the transactions were carried on prompt

payment. This would show different figures if the transaction that generated income and incurred

expenses were not wholly or not at all paid in cash. In this case, income statement will show a

higher amount of revenue generated while the statement of cash flows indicate less cash paid or

no cash recorded (Heide 90). A business cannot go without a statement of cash flows because it

will not be able to determine the actual cash generated and which is necessary for a business to

meets its liquidity (Currie et al 33). For example, a business might be having a huge amount of

revenue on its income statement but lacks the actual cash to cater for its financial obligations as

they fall due. Thus the cash flows statement will help us to determine the real cash our business

has generated and paid out.

In measuring performances, a good budget for as Quick Service Restaurants (QSR) will

help in benchmarking or comparison of organizations performances with that of similar

agencies. To undertake to benchmark, we measure the entitys performances with those of

similar ones. This allows one to determine which of the organization does better than the rest and

such is regarded as the performance standards.

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Conclusion

Environmental analysis is very important for a new business or startup because it helps one to

evaluate competition and market potential. It is important for the managers of Quick Service

Restaurants (QSR) to systematically identify the environmental factors within business. Using

the details of the analysis, the managers of the fast food restaurants can now be able to develop

strategies to reduce or take advantage of them. There are sets framework for environmental

scanning, it is important that managers of Quick Service Restaurants (QSR) correctly understand

the business environment of fast food restaurants. Mangers should be able to analyze the

environment in which Quick Service Restaurants (QSR) is planning to do business. There is a

need to undertake environmental scanning to identify how the new business will be able to

develop its competitive strategies. The fast food sector is composed of diverse players located at

some of the most strategic places in airports, bus stations and busy streets in town.

For the Quick Service Restaurants (QSR), environmental scanning will entails

undertaking research on the key competitors, products they offer, customer services and

regulations in place. Proper environmental analysis is very important in understanding the

working conditions and how they can be improved. Managers need to scan both the micro and

macro environments and their impacts on the business operations. There is a need to compare

study the operating environment by looking at the competitors, suppliers and consumers. The

manager needs to know how the firm can be affected by different decisions and measures in

place.

The current changes in the businesses environments have called for changes in the way

businesses are undertaken. The scanning needs to look at the factors affecting operation and
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future competitiveness. It is important to ensure that the products developed by Quick Service

Restaurants (QSR) take into account different profiles of the customers and tries to meet their

needs. In order to undertake comprehensive environmental analysis, it is important to make use

of the available professionals and relevant parties. Analysis of the environment should help to

identify the strengths and weaknesses of the business and at the same time advice on the

available opportunities and threats. Such analysis helps to put in place appropriate competitive

strategies for Quick Service Restaurants (QSR) to become more competitive than the rivals. To

ensure successful analysis of the operating environment, it is important to involve the relevant

stakeholders in an organization. These should be able to gather appropriate resources so that the

scanning is done appropriately.

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Works Cited

Anderson, Michael L., and David A. Matsa. "Are restaurants really supersizing

America?." American Economic Journal: Applied Economics 3.1 (2011): 152-188.

Bond, E & Houston, M. (2003).Barriers to matching new technologies and market opportunities

Currie, Janet, et al. "The effect of fast food restaurants on obesity and weight gain." American

Economic Journal: Economic Policy 2.3 (2010): 32-63.

Heide, Marcel. Harvard Business Review Case Study: General Electric Medical Systems . GRIN

Verlag, 2008.

Jeffery, Robert W., et al. "Are fast food restaurants an environmental risk factor for obesity?."

International Journal of Behavioral Nutrition and Physical Activity 3.1 (2006): 2.

Pratt, Shannon P. Business valuation discounts and premiums. John Wiley & Sons, 2009.

Schreiner, Andreas. Equity valuation using multiples: an empirical investigation. Springer

Science & Business Media, 2009.