Impact of External Factors on HR Practices in Fast Food Industry

This report explores the impact of external factors on HR practices in the fast food industry, including political, economic, social, and technological factors. It discusses the importance of understanding these factors and developing strategic practices to ensure sustainability and growth.

Running Head: BUSINESS ENVIRONMENT 0
HUMAN RESOURCE MANAGEMENT

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Executive Summary
Fast food business environment is constantly changing due to various factors in the external
environment which cause significant impact over the HR practices. This report outlines some
of key aspects in these external environments with the help of PEST analysis tool to develop
necessary strategic practices.
It was found that political factors such as various compliances country to country,
immigration policies, labour laws and legislation influencing the dynamic HRM practices in
the fast food industry. In the same way, economic aspects such as recession, wage rates,
remunerations and bonus, and other economic downturn also contributing the same.
Social aspects include employees working conditions in the fast-food industry, gender
discrimination, large scale disparity and cultural diversity are some of the aspects impacting
fast food industry. In last, several technological factors also influence HR practices in fast
food industry due to advancement in technology, training and educations initiatives and
various change management programmes.
Exploring all these factors will help the HRM department and managers to forecast various
necessary plans and actions that are required to be executed to ensure sustainability and
growth in this dynamic environment.

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Table of Contents
1 Introduction.............................................................................................................................3
2 Political Factors.......................................................................................................................3
3 Economic Factors....................................................................................................................4
4 Social Factors..........................................................................................................................5
5 Technological Factors.............................................................................................................6
6 Conclusion...............................................................................................................................8
7 References...............................................................................................................................9

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1 Introduction
The fast-food industry is one of the largest money making industries in the world and it is
composed of restaurants where customers pay for quick food and services. The demand for
fast food remains high and demonstrated steady growth over a long period of time (Ritzer and
Nathan 2010). With more young people entering the workforce daily, growth in the economy,
and increased mobility among consumers, the need for diverse HR practices is also increasing
(Bannon, Kelly and Linda 2011). In addition, the external environment is also having a
significant impact on the HR practices of fast food industry. To understand and gain various
understating regarding these impacts, PEST analysis tool is being used in the report which
stands for Political, Economic, Social and Technological analysis (Gupta 2013). Therefore,
the report will explore various key factors having significant impact on HR practices in
context of external environment.
2 Political Factors
Political factors are the law in a particular country or society that industry or organisation has
to follow. Workforce demand and supply in fast food industry is impacted by various
political frameworks and policies. Globally, fast food generates more than $570 billion
(Ayres 2019). Its size and present make it an important part of the industry. Despite the
changing trends, the fast food industry has shown healthy growth in respect to political
scenario.
The HR requirements in fast food industry vary from country to country. Set of compliances
are consider to be utmost significance and all fast food brands are required to comply with
these requirements (Preuss, Axel and Dirk 2009). With the rising trend of globalisation in
present times, there is a balance maintained between the demand and supply of fast food
industry personnel in various countries. However, there are nationwide rule depend on the
direct political control of that country. For example, Fast-food chains barred from using
foreign workers on 457 visas and with this Fast-food outlet such as KFC, McDonald’s and
Hungry Jack’s will no longer be able to bring foreign workers into Australia on 457 visas to
work in their stores (Doherty 2017). This means that Australians workers, particularly young
Australians, will be given priority. However, it may cause create issue in future with relation

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to demand and supply of international personnel in the various fast food outlets. In addition,
these will also create issue of labour shortage and increasing wages that will directly create
issue on restaurant industries. For example, restaurant, a major job sector in California
accounts for 10% of state employment in 2018 found challenge with high demand of
employees, tight unemployment rate and also increasing wages (Mehlinger 2019).
As per the U.S. Department of Labour, more than 7.7 million employees are working in food
and beverage industry and many of them age 16 to 19. In this industry, employees are often
exposed to hazards that may threaten their life and safety. Fast-food chains are required by
state and federal laws to have inside policies to secure the safety and health of workforce.
Some of these regulations include Occupational Safety and Health Act 1970, Hazard
communication standards, Employee Hygiene regulations and many more (Howard 2017).
All these regulations related to workforce health and safety is important to be undertaken by
the HR department of various fast food outlets as it is considered as a basic legal requirement
that everyone is required to adhere.
Hence, these are some of the political framework and policies, which govern fast food
industry in perspective of their workforce. These key political factors related to HR practices
in fast food industry play a major role in the success of failure of a business enterprise.
3 Economic Factors
There are various economic downturns that have a significant impact over the HR practices in
the fast food industry such as financial crises, constraints and economic recessions. In 1970,
the fast food industry was worth only $6 billion and today as per report by statista.com, it is
worth $198.9 billion and is set to grow to more than $223 billion by 2020 (lwelko 2017). The
trends and environmental factors impacting fast food industry is changing at a rapid rate. The
fast-food industry has responded well, however, it seems to conquer these challenges.
In fast food industry, many fast food workers receive hourly rates at or slightly above the
national minimum wage. In various countries including US, several activist groups across the
nation are struggling to raise the minimum wage by stating that staff cannot live on such low
pay even working 40 hours a week. If new amendments reinforced, the economy of fast food

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industry can take a drastic turn resulting in show negative effect on profits of fast food
outlets, their menu price or both.
It is also true that economic downturns impacts restaurant industry, however, fast food
restaurants are less impacted and same as their employees. Several economics reported in
2010 that fast food outlets were able to handle the 2008 recession better than price
competitors. According to the U.S. Bureau of Labour Statistics, food and beverage serving
and related workers earned a median annual salary of $19,710 in 2016 (Woods 2017). On the
low end, food and beverage serving and related workers earned a 25th percentile wages of
$18,170 implying 75 per cent earned more than this amount.
There is also a significant increase in the demand for workforce competition in the fast food
industry. Since 2010, fast foods employment has grown nearly twice as fast as compare to
other industry, however, rapid growth has created new issues as some restaurant has grown
faster than demand leading to glut of competition that is another source of pressure on
business owners.
Considering bonus and remuneration to the fast food outlets workforce, it also influences HR
dynamics and practices with various regulations such as wages, extra pay, fixed salary and so
on (Askenazy et al. 2012). For instance, fixed salary provides a sense of security to the
employees towards their job role and determination. The average pay for a Fast Food Worker
is AU$12.30 per hour as they are responsible for ensuring customer satisfaction depending on
the establishment and position.
Hence, it is important for an HR manager to deal all these aspects concerning to economic
environment so as to develop appropriate method for dealing with human resource of an
organisation.
4 Social Factors
This aspect of PEST analysis refers to the social conditions that support fast food industries
and their practices. According to Bloomberg report, fast food industry is engaged in a “full-
on food fight” over workers (Derrick 2017). Moreover, due to the scarcity of qualified
workers, many candidates are being paid above the minimum wage without considering
government lawmakers. Moreover, changes are taking place throughout the food industry to

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address an increasingly important generation – the millennial. Since millennial are strong
influencers in today food service, it makes good business sense to understand what drives
their food services. Considering, all these significantly impact HR practices with creation of
preferable working environment and generation specific HR policies.
The other issue in Fast food industry is related to gender discrimination. Although most of the
countries have various laws against gender discrimination, however, there is still a gender
bias in several countries. Gender discrimination in fast food industry can be seen in various
forms such as wage discrimination, sexual harassment, unfair distribution of the work and
several other inequalities (Pager and Hana 2008). As per various studies, it is also being
found that fast food industry is one of the major drivers of large-scale pay disparity and it is
an ongoing problem in various countries. All the dynamics are important to be considered by
the HR management so as to drawn on relevant conclusions considering employee
capabilities.
In fast food industry, there can be also be seen cultural diversity due to rise of globalisation
era and international recruitment. For instance, workforce in Indian culture is not allowed to
serve beef in the restaurant while in European culture, it is certainly not a big issue. Hence,
HR management needs to ensure these practices while operating in specific workplace. This
will lead to conflicts minimization, between both the employees and the customers.
Participating fast food restaurants are being asked to implement new safety procedures to
prevent injuries to workers in fast food restaurants. It is somehow related to slip and falls,
cuts, burns and sprains. The poor work condition not impact employees but indirectly
customers will also be influenced. One of the incidents can be seen in a larger fast-food chain
i.e. McDonald where employee has slammed the fast-food chain for “unbearable” working
conditions after temperature in kitchen hit 37C (Evans 2017). These come under ‘no
tolerance’ policies in an organisation as it is the responsibility of an organisation to take
various necessary measures in relation to these issues.
All such practices come under HR dynamics whereby there is need to be a strong relationship
between manager and customer required.
5 Technological Factors

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With advancement in technology, the HR practices in fast food industry are influenced on a
great extent causing both positive and negative impact. The move towards increased
automation at fast-food restaurants is ramping very fast and it is found that automation
displacing more workers in the fast food industry. Moreover, the super high minimum wages
that are being implemented by government will definitely accelerate the increased use of
technology. For instance, various fast food outlets are using mobile order and pay system that
will reduce employee work and responsibilities. Moreover, it also decreases the time it takes
for employees to do things such as schedule shifts. Recently, McDonald is planning to roll
out “Create Your Taste” touchscreen kiosks that will allow customers to build their own
burgers as per the menu list. Hence, as automation ramps up and technology advances, more
and more employees displaced from their low-paying jobs even down from the executive
level. All these reducing HR practices at various level and impacting workforce on a negative
extent.
As per a survey by NRAEF, 75 per cent of employees believes that fast food outlets are
offering training and education initiatives to invest in the employees for matching up with
latest technological requirements such as virtual reality onboarding, kiosks tablets, digital
table, Bluetooth temperature sensors and so on. Moreover, the HR team also emphasising to
reinforce their hiring strategies so as to recruit skilled and competent employees that can
effectively match up with their new technological programmes (Caliskan 2010).
On the other hand, the new HR practices also include change management programmes that
will help the employees to effectively adopt this technology. It includes HR efforts towards
supporting the staff with offering relevant information and coaching in perspective of change
management. For instance, KFC is testing new forms of technology where one is voice-
activated training test where the program uses an Amazon Echo show to help train
employees, by allowing them to ask question and watch videos while they are performing
tasks. It helps employees to learn on job and thus provides a big opportunity to them in align
with developing team morale within the stores.
Like these, there is need for new HR practices that help the industry to adopt these rapid
technological changes. The external environment is full of opportunities and threats leaving
positive and negatively impacting HR practices from various perspectives.

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6 Conclusion
Considering all, it can be said that HR practices and functions in fast food industry are highly
influenced by fast food industry. These external factors influence HR roles and functions to a
significant extent that is required to be adhered by every firm in the industry. It is important
for HR practices in the fast food industry to explore current projections as it will help them to
proactively design the future plans that will help them to gain higher productivity from the
available resources considering various external environmental factors.

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7 References
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Chris Tilly. 2012. "Working in large food retailers in France and the USA: the key role of
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Ayres, Crystal. 2019. “14 Biggest Advantages and Disadvantages of Fast Food.”
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food
Bannon, Shele, Kelly Ford, and Linda Meltzer. 2011. "Understanding millennials in the
workplace." The CPA Journal 81(1): 61.
Caliskan, Esra Nemli. 2010. "The impact of strategic human resource management on
organizational performance." Journal of Naval science and engineering 6(2): 100-116.
Derrick, Jayson. 2017. “Fast-Food Workers Are Now In High Demand.” benzinga.
https://www.benzinga.com/general/restaurants/17/01/8896173/fast-food-workers-are-now-in-
high-demand
Doherty, Ben. 2017. “Fast-food chains barred from using foreign workers on 457 visas.”
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Evans, Tara. 2017. “BIG MAC AND FRIED McDonald’s worker slams ‘unbearable’
working conditions after kitchen temperature hit 37C.” thesun.
https://www.thesun.co.uk/money/3836182/mcdonalds-worker-slams-unbearable-working-
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https://www.integrityfranchisegroup.com/chew-on-this%EF%BB%BF/

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