Rising importance of risk assessment in the fast-food industry?
Growing economies, changing consumer preferences, rising prevalence of health and wellness, and new dietary trends have transformed the need for risk assessment in the food and beverage industry over the recent few years. The fast-food industry has grown exponentially and witnesses various challenges, drivers, trends, and risks daily. Industry players have become increasingly aware of the need for cautious and data-driven strategizing and have started investing in risk assessment and risk management strategies to decrease the impact of various factors and industry developments. The fast-food industry is highly competitive, easily impacted by external factors, and generates significant revenue if owners and professionals make well-informed plans and strategically execute them. In this challenging industry, being aware of and preparing for the current and upcoming risks can be the differentiator between industry leaders and companies on the other end of the spectrum. Risk assessment helps companies identify, evaluate, and strategize for potential risks and their impact within the market or on the supply chain.
Dissect all possible risks for your fast food business by exploring the importance of risk assessment and how can these steps help you minimize risks to fulfil your business goals. Gain a competitive advantage by staying ahead from peers with deep-dive assessments and actionable plans to overcome challenges being faced by your competitors.
What are the biggest risks in the fast food industry?
Certification and Licensing: Rising competition, costs, and demands have created a highly competitive environment within the fast-food industry, making it more challenging to invest and attain the regulatory needs to establish a business. Additionally, stringent regulations, constant scrutiny, and a plethora of laws to abide can make it difficult for smaller chains to keep pace with their competitors. Maintaining all relevant permits, including food handling, registering a business, liquor licenses in certain cases, and more requires vast knowledge and flawless execution. Failing to do so can lead to high costs, fines, penalties, and business loss, and repeated issues may lead to closure.
Contamination and Spoilage: The food industry is continuously faced with meeting food safety standards, protecting the food, reducing risks to customers, and avoiding losses to the company. Spoiled or contaminated food must be disposed of and can lead to major losses if sourcing, storage, and distribution are not carried out correctly. In the fast-food industry, purchasing and storing bulk is common, and contamination or lack of hygiene in any kitchen section can lead to further spoilage or contamination of food. Additionally, the inability to meet health and safety standards can lead to large fines and major losses for restaurant owners.
Supplier Issues: Potential challenges with raw material supply and inability to acquire bulk stock can lead to major losses for a fast food joint due to the high demand and challenges with storing food beyond a certain point. Issues with suppliers can be due to various reasons, including contract challenges, natural disasters, uncontrollable circumstances, price negotiations, or material shortage. Companies must have standby suppliers to avoid the risk of significant losses and account for these potential challenges. Issues with suppliers can also lead to wastage, fines, low customer satisfaction, and disappointed investors.
Transportation and Storage: The transportation and storage of food, particularly meat, vegetables, and bakery products such as bread, can be difficult and demanding. Therefore, most fast-food chains choose to use frozen products and mitigate the risks of spoiled fresh food. This leads to the need for proper temperature-controlled storage facilities and transportation that can hold cold storage units. These facilities require significant investment, and any issues or failures can lead to considerable food wastage and losses for the company. Additionally, transportation issues include the customs clearance, travel risks, potential contamination, and risk to health and wellbeing. These potential risks can cause delays, losses, health and safety fines, and detriment to consumer health.
Equipment Failure: The fast-food industry requires a range of equipment from production, packaging, transportation, storage, preparation, and service; every stage requires dedicated machinery, technology, and labor. Therefore, equipment failure, maintenance issues, breakdowns, and delays can lead to significant disruption of the supply chain, impact other stages of the process, and inability to meet consumers’ demands. Further, maintenance, management, and equipment procurement require substantial investment in terms of time, finances, and labor. Fast food companies need to understand the potential weaknesses, risks, or failures that equipment can have and ensure that they are prepared to continue production or service in case of any such challenge or while maintenance, repair, or replacement is taking place.
Understanding the risks associated within the fast food industry can give you a super-advantage over other players. SpendEdge helps you capitalize on the advantage towards rapid growth and optimal utilization of your procurement process. Connect with us to build a seamless business experience.
What are the five steps of risk assessment?
Step 1: Identifying the Risks – The first step in conducting an accurate risk assessment is evaluating the supply chain, all involved processes, parties, capital, and external factors, and identifying potential risks, whether current or upcoming. This step also involves reviewing old data, finding patterns, and preparing supply chain teams and managers for repetition or eventual impact of previously reported issues. Identifying the various risks and listing them out can also help specific groups develop systems to tackle more minor challenges, while the risk assessment solution targets major challenges.
Step 2: Quantifying the Risks – Once the risks have been identified, it is necessary to quantify them in monetary value, time, labor, or other more suited measurement metrics. This step also requires supply chain managers, owners, and risk management teams to prioritize the risks from major to minor and list them as they are to be dealt with. As the steps progress, all involved departments and managers should be privy to each risk’s importance and the order of priority. This step also helps companies understand the overall potential losses, fines, or challenges facing their supply chain and aim to improve efficiency by mitigating major disruptions.
Step 3: Evaluating and Determining Precautions – The third stage involves evaluating each risk, as per priority, and understanding the overall impact on the supply chain. External factors that pose potential risks must be thoroughly analyzed, and their effect on the supply chain, overall production, logistics, and service sectors of the company must be measured to mitigate. Similarly, risks of internal processes or factors must be measured and understood. This stage requires the relevant teams to determine possible precautions to be taken to mitigate the risks and develop a more efficient and safer workspace. For this step, formulating beneficial and targeted strategies and preparing to overcome these risks should be a process that meets all departmental needs.
Step 4: Implementing Improved Practices – Putting the determined precautions into practice often requires significant strategizing, planning, investment, and execution. Locating standby suppliers, developing bypass procedures in case of equipment failure, scheduling regular maintenance and repair for storage and transport units, and keeping abreast of changing laws and regulations are possible practices that can mitigate risks in the fast-food industry. Implementing these practices is crucial to mitigating risks, identifying other issues, or testing the risk management solution’s reliability. This stage also helps supply chain managers and departments to make other necessary changes, try their strategies and plans, discuss better alternatives, or bridge the gap before more permanent and concrete systems are put into place.
Step 5: Frequently Reviewing and Updating – Risk assessment and risk management cannot be conducted on a periodic and necessary basis to maintain continuity and efficiency. Experts advise regular reviewing, checking the impact or failure of precautionary practices, evaluating new risks or growing effect of previously identified risks, and acknowledging the successful mitigation of certain obstacles. As companies grow, supply chains become increasingly complex, and the need for proper risk management becomes imperative. This stage can also include establishing a risk management system or department to regularly ensure that all potential challenges are identified, quantified, evaluated, and mitigated through a risk assessment.
The value of risk assessment in the fast-food industry has been significantly undermined over the years, although the industry continues to grow exponentially. SpendEdge offered risk assessment solutions to a growing fast-food chain and provided them with highly required insights into their challenges, potential risks, and ideal risk management strategies. The fast-food industry client was suffering from frequent delays, equipment failure, and clients’ loss due to the sudden upsurge of issues within their supply chain. Our experts identified the lack of proper risk identification and mitigation strategies and helped the company establish a data-driven and well-equipped risk management department. This department enabled improved supply chain efficiency, helped restore functioning for various problem points, helped mitigate future losses, and improved customer satisfaction significantly, leading the company to faster expansion and significant growth.