UNIVERSITY OF THE PHILIPPINES Diliman Extension Program in Pampanga Clark Freeport Zone, Angeles City
Country Opportunity Assessment Management 236 ― International Marketing
PART 3: CORPORATE SUCCESSES & FAILURES
I.
COMPANY #2- A&W RESTAURANT
INTRODUCTION:
A&W Restaurants, Inc. is a chain of fast-food restaurants, restaurants, distinguished by its draft root bee beer r and roo roott beer flo floats ats.. A&W A&W was was argua arguabl bly y the the first first succes successf sful ul food food franchise company, starting franchises in 1921 in California. Today it has franchise locations throughout the world, serving a typical fast food menu of hamburgers and french fries, fries, as well as hot dogs. dogs. A number of its outlets are drive-in restaurants with carhops.. The company name was taken from the last name initials of partners Roy Allen carhops and Frank Wright. The chain is currently owned by Yum! Brands. Brands. The company became famous in the United States for its "frosty mugs", where the mug would be kept in the freezer freezer prior prior to being filled with root beer and served to the customer.
HISTORY:
A&W began in 1919 in Lodi, California, California, when Roy Allen took on partnership with Frank Wright to help him with the root beer business he had started that year. They branded their product A&W Root Beer after their last names. Two years later in 1921, Allen bought out Wright and began franchising his product, arguably the first successful food franchising operation. His profits came from a small franchise fee and concentrate sales. By 1960, they had 2000 stores stores.. In 1971, a beverage divisi division on was starte started, d, supplying bottled A&W products to grocery stores. The soft drinks sold under this brand are root beer and beer and cream soda, soda, made by Dr Pepper/Seven Up, Inc. For some time in the 1970s, 1970s, A&W A&W had had more more locat locatio ions ns than than McDonalds McDonalds,, Oshkosh, Wisco Wisconsin nsin franchise mana manager ger Jim Jim Brajd Brajdic ic said: said: "Prob "Proble lems ms back back then, then, inclu includi ding ng a laws lawsui uit, t, fran franch chis isee ee discon disconten tentt and inconsi inconsiste stenci ncies es in the operati operation, on, caused caused the chain chain to flound flounder er and branches to close. In 1989, A&W made an agreement agreement with Minnesota Minnesota-based -based chain Carousel Snack Bars to convert that chain's 200 locations (mostly kiosks in shopping malls) malls) to "A&W Hot
Dogs & More".[2][3] Some A&W Hot Dogs & More locations are still in operation today. In late 2000s, A&W started adding some new franchises with a nostalgic look and modern technology inside. They have a carhop design with drive-thrus and some have picnic tables. In the United States and Southeast Asia, A&W is currently a Yum! Brands, Inc. company.[1] Most A&W locations that have opened in the U.S. in recent years have been co-branded with one of Yum!'s other chains—Long John Silver's, Pizza Hut, Taco Bell, or Kentucky Fried Chicken. Yum! Brands Advantage: Porter’s Competitive Advantage Paradigm Analysis Entry of New Competitors – New companies trying to enter into a similar type of venture to that of YUM! Brands Incorporated will find it somewhat difficult. This is due to the saturation of the restaurant market and barriers of entry, such as economies of scale, cost of entry capital, time it takes to develop a clientele, already established supply chains. The Threat of Substitutes – As I stated above the restaurant sector is nearly completely saturated in the US, and is rather hard to just start a restaurant chain. The real threat exists in those companies that are already large, in the same market, and have the resources and experience similar to that of YUM!. It is important for corporations in the food industry to apply fair pricing, new innovative products, and establish for themselves a strong brand identity; all of which Yum! Brands Incorporated has done. The Bargaining Power of Suppliers – With YUM!, their suppliers have some bargaining power, since beef, chicken, vegetables, and soda (Pepsi) are the primary components in their most profitable products. These products have somewhat variable prices and are subject to mild fluctuations based on market demand and location. Rivalry Among Existing Competitors – The restaurant industry is one of the most competitive of any market, because it is so saturated and competition is so fierce. It is absolutely necessary for a new and developing restaurant chain to establish for itself brand identity. Market advertising and promotion is essential, to actually gaining profits. Firm Positioning Analysis The soft US economy has resulted in a nearly zero growth environment for the restaurant industry. Yet, Yum! has actively overcome this by vigorously expanding into foreign countries in the past five years. Nearly one third of its profits now come from overseas. Cost Leadership - Yum! possesses very well-developed supply lines and uses relatively cheap ingredients that have many substitutes. Additionally, their suppliers are very interchangeable. This flexibility in supply chains, variety of foods being served, and the ease at which their foods can be produced gives them a competitive edge over their competitors.
Differentiation – Yum! is the first restaurant to offer more than one of it’s concepts at one location (multi-branding). An example is the KFC and Taco Bell in Olean, and the A&W and Long John Silvers in DuBois, PA. This increases revenues because a group of people with varying tastes is more likely to eat there, than say, a McDonalds because they provide something for a wider variety of preferences. Focus – Yum! strives to provide its customers with quality, good-tasting food at highly competitive prices. Its typical customers are middle-class families looking for affordable meals on the go. As stated above, multi-branding appeals to many groups of people who would otherwise dine somewhere else. SWOT Analysis Strengths – The Company’s continuous expansion into Asia and other regions. – Well-developed restaurant brands and exceptionally efficient and ever-improving restaurant operations. – The idea of multi-branding which causes one establishment to appeal to varying customers. – Strong advertising campaigns. – Constant updating of menus and “specials” to appeal to current trends and fads. Weaknesses – Some brands (concepts) may weigh down profits of top performing ones. – Sensitivity to market fluctuations. Opportunities – International expansion and growth. – In domestic markets, turning one-brand units into multi-brand units to appeal to more customers, which will cut into competitors’ revenues. – Improvement of operations. Threats – The highly competitive nature of the restaurant industry. – Entry of competitors into foreign markets first. – Menu appeal.
How Yum Can Use Its Strengths and Opportunities to Minimize Threats and Weaknesses:
With Yum!’s multi-branding strategy it can minimize the threat of competitors gaining market share in domestic markets by bringing in customers with varying tastes. Also, its aggressive expansion and high level of approval in China and other nations will serve to buffer against competitors seizing market demand before they do. In addition, their strides to improve their operations can, and will, influence customers to dine in their restaurants as opposed to those of their competitors. When improved operations are combined with their extensive advertising and constantly updated menu, Yum! can expect substantial growth over the next few years.
II. The Product
TIMELINE FOR THE PRODUCTS: •
• •
A&W Sugar-free Root Beer was introduced in 1974, and reformulated as Diet A&W in 1987. A&W Cream Soda and Diet Cream Soda were introduced in 1986. A&W Floats and Sunkist Floats were introduced in 2008.
PRODUCTS: •
A&W Restaurant- Beverages, Burgers, Chicken, Desserts, Hot Dogs, Ice Creams, Sandwiches, Sides Beverages: A&W Diet Root Beer (Large) A&W Diet Root Beer (Medium) A&W Diet Root Beer (Small) A&W Regular Root Beer (Large) A&W Regular Root Beer (Medium) Burger: Cheeseburger Double Teen Burger Extra Burger Patty (Side) Hamburger Mama Burger with Cheese Chicken: 3 Chubby Chicken Fingers Chicken Grill Deluxe Grilled Chicken Sandwich Desserts: Hotdogs: Ice creams Caramel Sundae Caramel Sundae Hot Fudge Sundae M&M's Polar SwirlOreo Polar Swirl Sandwiches: Bacon N' Egger Crispy Chicken Sandwich Grilled Chicken Sandwich Sides: Cheese Curds (Side) Cheese Fries (Side) Chili Cheese Fries (Side) Fries (Regular) Large Breaded Onion Rings (Side) • • • • •
• • • • •
• • •
• • • •
• • •
• • • • •
III. The Market
A. Describe the market(s) in which the product is to sold
A&W is indirectly a wholly-owned subsidiary of Yorkshire Global Restaurants, Inc. Currently, A&W operates restaurants and grants licenses to operate restaurants under the names A&W® and A&W All American Food. The Restaurants are located both in the United States and internationally and offer A&W draft Root Beer® and food products such as hamburgers, hot dogs and fries. The Restaurants are usually located in an area with high traffic volume and typically are open for lunch, dinner and evening business. There are different locations where A&W are placed such as airports, at gasoline stations, and Malls. Different market is targeted per location, but they succeeded on the location on Malls and Gasoline stations where students or the young are the bulk or the consumers. a. Geographical region(s)
Here are the countries with A&W restaurants: 1. Australia- Until 2003, Tasmania did not have any A&W stores. However, a trial run was tried, with A&W being combined with KFC stores, offering both store menus in the one location. The trial ended in late 2004, with the A&W branches closing down. In March 2005, A&W opened a joint-branch with Long John Silvers in Kings Park, New South Wales. All Australian A&W restaurants closed in early 2007, due to poor sales. 2. Bahrain- There is an A&W restaurant located in the Desert Dome of the U.S. Naval Support Activity Bahrain. 3. Bangladesh- An A&W outlet in Gulshan 1, Dhaka, Bangladesh. A&W opened its first outlet in Bangladesh on 15 December 2004. This 170-seat outlet is located at Gulshan 1, Dhaka is the largest A&W outlet in South Asia. The food served is 100% halal and is very popular with the local youth population, with root beer being the driving force of the large number of sales. A&W Bangladesh serves an "All you can eat offer" during the Muslim holy month of Ramadan and "Baishakhi Bonanza" during the Bengali new year. As of August 2008, the restaurant was closed due to unknown reasons and has reopened in mid 2009 at new location very near to Gulshan 1 circle . 4. Canada- The Canadian chain of A&W restaurants are operated by a separate company, called A&W Food Services of Canada Inc. While originally part of the American operation, the Canadian company no longer has any corporate connection to the American chain. There are approximately 700 A&W restaurants operating in Canada. The first A&W drive-in restaurant in Canada opened on Portage Avenue in Winnipeg in 1956.
5. China- There were several restaurants in Beijing under the name "艾德熊". 6. Cuba- There is a combined KFC/A&W Restaurant located on the Guantanamo Bay Naval Base. 7. Egypt- During 2006, all A&W outlets closed. Before that, there were at least 4 outlets in Egypt; Mohandessin, Giza; Heliopolis Sporting Club, El Sherouk City; Nasr City, Cairo, and Green Plaza Mall, Alexandria 8. Germany- Former co-branded KFC/A&W location 2003-2005, Cologne, Germany. Closeup of aforementioned location November 2003, Cologne, Germany. There were 3 combined KFC/A&W Restaurants. All of them have since been closed (Cologne in 2005, Garbsen (picture of former KFC/A&W co-branded location in Garbsen) near Hannover in 2005, Berlin in 2007 (Pic of former Berlin A&W). Both of the Berlin and Cologne locations reverted to KFC-only franchises locations. The Garbsen location closed at the same time as the A&W portion of the restaurant. This example shows the same difficulty faced by A&W in Australia and in the UK. 9. Indonesia- The Great Root Bear outside an A&W Restaurant in Jakarta, Indonesia (July 2009). A&W has a large presence in Indonesia, operating over 200 outlets. Business appears to be growing stronger in Indonesia market. Like in Bangladesh and Malaysia, the A&W outlets in Indonesia are 100% halal. The A&W outlets in Indonesia are the only A&W outlets that sell rice, instead of mashed potato, due to strong customer preference. A&W outlets are spreading all over the malls in major and minor cities to compete with 2 giant competitors, KFC and McDonald's. 10. Japan- First opened in 1963 in Tokyo, A&W drive-in restaurants were the first fastfood franchise to appear in Japan. Currently, they are found in Okinawa Prefecture, the southernmost prefecture of Japan, at Yokota Air Base in Tokyo, and at the Misawa Air Base Base Exchange food court. A dining room outlet opened in the Festival Gate amusement park in Osaka in 1997, but closed within a year. 11. Kuwait- There were three A&W outlets in Kuwait up until 2003 when all were sold and closed. 12. Malaysia- A&W's first store in Asia Pacific opened at Kuala Lumpur 's Batu Road (now known as Jalan Tuanku Abdul Rahman) in 1963, and still exists today. It was also the first fast food corporation from the United States to set foot in the country. However, A&W had a declining business era from 1997 - 2000. The most famous A&W outlet in Malaysia is undoubtedly the drive-in outlet near Taman Jaya, Petaling Jaya, a satellite city of Kuala Lumpur. It opened in 1965 and quickly became a favourite gathering place for students, especially from the nearby Assunta and La Salle Secondary Schools. The unique A&W root beer mug was often "collected" by these young customers. It was also a favorite filming location for Malaysian movies during the 1970s and early 1980s. Customers from the 1970s will recall Tuesdays as Coney Dog Day.
During the mid-1980s, A&W also operated a second Petaling Jaya outlet at the Atria Shopping Complex in Section SS22 Damansara Jaya. In Penang, A&W had an outlet at KOMTAR and Penang International Airport and has since been closed down,
but new stores have been opened at malls around Penang. During the 1990s, A&W operated an outlet at Terminal 3 of the former Subang International Airport. This outlet ceased operations when the Kuala Lumpur International Airport shifted from Subang to KLIA in 1998. To date, several more A&W outlets have been opened in Malaysia, mostly in shopping malls. The largest A&W mall outlet is located in Suria KLCC, the most prominent shopping complex in Malaysia. An A&W outlet opened for a number of years in Likas Square, Kota Kinabalu, but was closed down in 2004. Just like in Bangladesh, the food at Malaysian A&W outlets is 100% halal. 13. Philippines - The Philippines had a number of A&W outlets starting in the 1960s.[6] These were all located in Metro Manila, and all were closed by 2004. 14. Qatar- At one point there were three A&W restaurants in Qatar's capital city Doha, but two were shut down. The last is still running in Doha International Airport but is a faint image of what other international A&W are like. 15. Singapore-The first A&W store opened at Dunearn Road in Singapore in 1966 as the first fast food restaurant from the U.S.A. in that country. The chain expanded in the later years, including one at Singapore Zoo which closed in 1999. The chain's Singapore operations dwindled by the beginning of the 21st century, and by 2002 it had only 7 outlets around the island. A&W finally closed in 2005.
5 years after its closure , Singaporeans are Petitioning online via social media for the fast food outlet to re-open its outlets in Singapore 16. Thailand- There are more than 30 A&W restaurants in Thailand. After a recent expansion, most locations are found at petrol stations on major highway routes. This includes 18 at PTT stations, six at Petronas stations, and four at Shell stations. Locations in shopping complexes include Pantip Plaza, Siam Square, and the Silom Complex. A full location list is available here: [1] 17. United Arab Emirates- There used to be at least 3 A&W outlets in UAE, however they have all recently been replaced with Marrybrown restaurants. To date, it is unknown why all the A&W outlets were replaced. The very first A&W outlet was opened in 1996, at a large shopping mall called Bur Juman Centre, located in Dubai. Two other outlets were opened soon after at the Um Sequim Spinneys, and at the Thunder Bowl. It is believed that business was doing well in these outlets, until they started to be replaced in 2006. This situation is very similar to Egypt (above) where all 3 A&W outlets there also closed down in 2006. 18. United Kingdom- There were a few A&W outlets in the United Kingdom, all of which shared retail space with KFC such as Ashton-under-Lyne, Derby, Glasgow, and Clayton. An A&W shared space with a Long John Silvers outlet in Walsall opened in 2004. These outlets have all now closed.
Here are the stores of A&W in the Philippines:
A & W Restaurant - Offices/Branches A & W Restaurant Address: Ever Grand Central, Rizal Ave. Extension, Caloocan City, Metro Manila, Philippines Telephone No: (632) 364-0375 Fax No: Email: A & W Restaurant Address: , Julia Vargas Ave., Mandaluyong City, Metro Manila, Philippines Telephone No: (632) 633-5549 Fax No: Email: A & W Restaurant Address: SM Cubao, , Quezon City, Metro Manila, Philippines Telephone No: (632) 912-2060 Fax No: Email: A & W Restaurant Address: , Perez Blvd., Dagupan City, Pangasinan, Telephone No: (6375) 515-5567 Fax No: Email: -
b. Transportation and communication big taste nutrition- location of stores in certain ares; shown is map facebook- showcase the restaurants youtube- video of some comments and testimonials cruising nights- the promos where customers can enjoy the trip gift shop- where there are gift checks
c. Consumer buying habits
According to the ACNielsen survey, 30 percent of Asia Pacific consumers eat at take-away restaurants at least once a week, closely trailed behind fast food fans in the US (33%). At the other end of the scale, however, only one in ten European adults eat take-away once a week. On a market-by-market basis, nine of the top 10 markets in terms of frequency of fast food restaurant visits hailed from Asia Pacific. No European markets had made the list. Despite a 12 percent of people in Asia Pacific claiming never to eat fast food, the region has the most take-away addicts with Hong Kong ranks the world’s No. 1 in terms of frequency of fast food restaurant visits with 61 percent visiting fast food shops at least once a week to as frequent as more than once a day. In Thailand, 46% claimed to eat take-away food at least once a month and the addicts account for 12% who would eat everyday or more than once a day. In the analysis of consumer buying behaviour, the sample is divided into three groups based on the rate of buying fast foods: (i) very frequently (those who purchase fast foods, on the average, once a week or more often), (ii) frequently (once in two weeks to once a month), and (iii) occasionally (once in two months or less often). The buying behaviour of fast food consumers was examined from various aspects. Table I shows that while slightly more than half(51.5%) of the sample do not choose an particular day(s) to patronise fast food outlet almost an equal proportion (44.5%) tend to do so during weekends. This is supported by observations of crowds during weekends. T. persuade customers to patronize during weekdays, A&W has come up with its Cone Day on Tuesdays when this item is charged at lower price. Among the various groups, frequent buyers are the most likely to purchase on a weekend. Advertising campaigns will tend to increase weekend buyers. To produce a more even number of customers throughout the week, it is perhaps worthwhile considering organizing promotion offers during weekdays. The most popular meals for which respondent consume fast foods are lunch or dinner (55.9% ni Table 2). This is true across all groups of respondents. Furthermore, about one-quater (24.7%) consume these foods as a snack, define as a light, casual or hurried meal. The menu offered include items such as fried chicken burgers, pizzas (a dough- based product) an porridge; these could be taken as a substantial meal or snack. A majority (75.7% in Table 3) of respondents eat fast foods at the restaurant from which the purchase whereas only 18.7% pack it for consumption elsewhere, such as at home or in the workplace. Thus the decor and physical comfort (air-conditioning) of the restaurant can contribute towards enhancing customer satisfaction and encouraging repeat purchases Respondents usually patronise fast food outlet with their families (59.1% in Table 4), relatives friends, colleagues or business associate (38.1%). These visits are regarded as family or social outings or as a place for meeting clients Table 5 shows that, except for the actual purchasing, respondents and their children play a major role in every stage of the buying process by way of suggesting, influencing the final decision as well as determining what and where to buy.
Children could exert a considerable influence on parents by initiating the buying process (35.3%). Promotional offers and a variety of sales gimmicks (such as free gifts or sales of masks, watches, pouches, multi-purpose bags and mini cameras) form part of the strategies formulated to capture the children's market. Children are also influenced by television advertisements, which display colourful and catchy scenes with the chain's relevant mascot (such as Ronald McDonald, A&W Root Bear, Colonel Sanders of KFC). However, the final decision of buying is more likely to he made by adults (60.7% for respondents, 21.4% for their spouses). The reasons for patronizing fast foods are revealed in Table 6. Respondents were asked to rate the importance of a list of reasons for buying fast foods on a one-tofour scale in increasing order of importance. The mean ratings in Table 6 show that consumers generally place the most emphasis on cleanliness of the restaurant and the hygienic preparation of its products, followed by its physical comfort (air-conditioning). Thus, in contrast to the local hawker centres, these western fast food chains are generally perceived as being modern, clean, hygienic C comfortable. These restaurants also represent import convergence points for those who dine out M their family or friends, who are in the midst shopping, as a treat for their children, such as good behaviour, or who celebrate special occasions, such as birthdays. This is consist with the earlier findings in Table 4. The basics of fast foods, as implied by the name, are convenience (such as nobody has to cook or clean up) and speedy service. These factors are evaluated on the average, as important by the sample. Due to the short time lag between ordering and delivery of the food, fast foods go a long way towards fulfilling the needs of people who want a hurried meal or who may be compelled to eat while driving. Besides, the American fast food concept provides consumers with a convenient alternative to a home-cooked meal. Those who patronise fast food centres, on the whole, are seeking a change from home-prepared food rather than its nutritional value. This could have arisen from doubts that fast foods contain sufficient nutrients for either themselves or their children. Thus, efforts should be intensified to inform or reassure the public about the nutritional aspects of fast foods, for example, whether they constitute complete meals, contain high levels of saturated fats or provide sufficient nutrients such as vitamins and minerals. Playing facilities for children are rated as unimportant. Only a few outlets provide these facilities. The changing role of women as a result of more of them entering the labour force is also regarded as an unimportant reason for buying fast foods. This could be attributed to the availability of domestic helpers in preparing meals, availability of alternative sources of food in ready-to-eat form, or women's own efforts in coping with work and preparation of meals at home after work.
What are typically order from this establishment: The A&W Papa Burger, 1 large order of onion rings and, of course, a huge frosted mug of A&W Root Beer and an A&W Root Beer Float for dessert
d. Distribution of the product
Distribution through franchising. Franchise Offer: There are two types of franchise offered: a) Co-Brand Restaurant - A&W Restaurant that is to be operated in the same facility as another branded restaurant concept b) A&W express units - Based in so-called "captive audience" locations such as military bases, colleges and universities, airports, interior mall locations and similar venues. Financial Assistance: A&W does not finance any portion of the franchisee’s initial investment and A&W does not guarantee any of the franchisee’s indebtedness e. Advertising and promotion Advertising & Marketing - Yum! is committed to making A&W Restaurants even
bigger. Last year alone, Yum! and its franchisees spent more than $600 million in consumer advertising. National marketing news is communicated regularly throughout the year. Many markets have local advertising cooperatives to coordinate local marketing activity. Franchisees are encouraged, but not required, to participate in system promotions. Promotions and contests - A&W and Jim Belushi offered a trip to Los Angeles with a VIP pass to "A&W Ultimate All-American Cookout and Concert" at the House of Blues over eBay.
A&W's marketing budget this year will be spent primarily on print, radio, billboards and freestanding inserts. In-store materials also will promote the new burgers. A quarterpound single patty replaces the one-sixth-pound patty Double burgers still will consist of one-third-pound patties but will offer more toppings. In all, five standard sandwiches will offered on Kaiser rolls, which replace traditional hamburger buns.
f. Pricing strategy
Pricing strategy depends on the location but it is price just like KFC and Mcdonalds, its main 2 competitors. There are some combo meal introduce in the market.
B. Compare and contrast your product and the competition’s product(s).
1. Main competitors A&W All American Food , based in Louisville, Kentucky, began in 1919 when Roy Allen mixed up a batch of creamy root beer and sold the first frosty mug of his delightful beverage for one nickel. He took on a partner, Frank Wright, and the two named the brew after themselves: A&W Root Beer. After all this time, A&W Restaurants still serve the proprietary beverage in more than 500 locations (most in high-pedestrian areas) in the U.S.A. As well as for the delicious root beer floats, the brand has become well known for serving all-American hot dogs and pure-beef hamburgers, and it is the longest running quick-service franchise chain in the U.S.A. KFC, based in Louisville, Kentucky, is the world's most popular chicken restaurant chain specializing in Original Recipe®, Extra Crispy™ and Colonel's Crispy Strips® chicken with homestyle sides and freshly made chicken sandwiches. Since its founding by Colonel Harland Sanders in 1952, KFC has been serving delicious, alreadyprepared complete family meals at affordable prices. KFC has more than 11,000 outlets in 85 countries and territories around the world, serving some 8 million customers each day. Long John Silver's relocated to Louisville, Kentucky, in 2003. It is the largest quick-service seafood chain in the U.S.A. The company's first restaurant opened in 1969 as Long John Silver's Fish 'n' Chips when consumers were demanding quickservice seafood. As the concept has grown, the menu has evolved to meet the desire of consumers looking for more variety and great taste. Long John Silver's Restaurants serve 45 million pounds of fish and 15 million pounds of chicken annually. Each week, about 3.8 million guests visit more than 1,200 worldwide restaurants per week. Pizza Hut , based in Dallas, Texas, is the world's largest pizza restaurant company, with nearly 8,000 restaurants and delivery units in the United States and more than 4,100 units in 85 countries. The company is the recognized leader of the $25 billion pizza category. Menu items include popular choices such as Hand-Tossed, Thin 'n Crispy ®, Pan, Stuffed Crusts, and the complete Lover's® line. New pizzas that have also become favorites include The Big New Yorker, The Edge™, The Insider, and Twisted Crust. In 1958, Pizza Hut opened in Wichita, Kansas, and began selling what are still considered "the best pizzas under one roof." Taco Bell , based in Irvine, California, is the largest Mexican-style quick-service restaurant company in the world, a status quickly reached after the brand's 1962 beginning. Currently, more than 55 million people visit Taco Bell restaurants in any given week in the U.S.A., and they purchase 4.5 million tacos, as well other popular menu items such as burritos, nachos, chalupas, and gorditas, each day in our restaurants. Additionally, half the U.S. population sees a Taco Bell commercial at least once a week, which generates significant brand recognition. Competition The QSR segment is a crowded and intense environment. Yum's diverse portfolio of restaurants attracts competition from many different types of quick service restaurants. McDonald's (MCD) is Yum's largest global competitor. MCD is the leader in the US QSR segment and is growing in China. KFC is the dominant player in the chicken QSR
segment with its closest competitor as Popeye's. Although, increased chicken choices at burger joints like McDonalds, Burger King, and Wendy's are also grabbing sales from KFC. Pizza Hut has received significant competition from Domino's Pizza (DPZ) and Papa John's over the last few years and they have been keeping Pizza Hut's sale growth down. From a market perspective Yum faces its fiercest competition in the US. This is due in large part to the fact that US market is extremely saturated with QSRs. Overseas, Yum has a very strong position and plans to expand its already very successful International division into continental Europe, Russia, and India. The table below shows fiscal 2009 data for the largest publicly traded food service competitors by revenues. Subway and Dunkin' Donuts, also a major players, are privately owned. Company
McDonald's (MCD) Yum! Brands (YUM) Starbuck’s (SBUX) Darden Restaurants (DRI) Brinker International (EAT) Wendy's International (WEN) Burger King Holdings (BKC) Jack in the Box (JACK) CKE Restaurants (CKR) Domino's Pizza (DPZ) Panera Bread Company (PNRA)
Revenues (M) $22,745 $10,836 $9,775
Net Income (M) $4,551 $1,083 $391
Net Margin 20.0% 10.0% 4.0%
32,478 37,000 16,635
47%
$7,218
$372
5.2%
1,773
0%
$3,621
$79
2.2%
1,689
40%
$3,581
$4
0.1%
6,451
80%
$2,537
$200
7.9%
11,925
88%
$2,471
$131
5.3%
2,212
46%
$1,419
$48
3.4%
3,141
71%
$1,404
$80
5.7%
9,339
91%
$1,353
$87
6.4%
1,380
58%
Restaurants
Franchised % 81%
Data from company FY 2009 annual reports (CKE data from FY annual, ended January 31, 2010).
2. Direct competitors- Yum! Brands AFC Enterprises, Inc. (AFC) develops, operates and franchises quick service restaurants, bakeries and cafes (generally referred to as QSR's) in two distinct business segments: chicken and bakery. The chicken segment operates and franchises under
the trade names Popeye’s Chicken & Biscuits and Church's Chicken. The bakery segment operates and franchises under the trade name Cinnabon and franchises cafes under the trade name Seattle's Best Coffee. As of December 28, 2003, AFC's brands operated or franchised 4,091 QSR’s in 46 states, the District of Columbia, Puerto Rico and 36 foreign countries. In 2003, franchise revenues represented approximately 15.6% of AFC's total franchise revenues. In November 2004, the Company sold its Cinnabon subsidiary to Focus Brands Inc., an affiliate of Roark Capital Group. (Finance.Yahoo.com) McDonald's Corporation operates and franchises McDonald's restaurants in the foodservice industry. These restaurants serve a varied yet limited, value-priced menu in more than 100 countries around the world. The Company also operates Boston Market and Chipotle Mexican Grill, and has a minority ownership interest in the United Kingdom-based Pret A Manger. In December 2003, the Company sold its Donatos Pizzeria business. All restaurants are operated either by the Company, by independent entrepreneurs under the terms of franchise arrangements (franchisees/licensees) or by affiliates operating under license agreements. When granting franchises and forming joint ventures, the Company is selective and generally is not in the practice of franchising to, or partnering with, investor groups or passive investors. (Finance.Yahoo.com) Wendy's International, Inc. is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service and fast-casual restaurants. As of December 28, 2003, there were 6,481 Wendy's restaurants (Wendy's) in operation in the United States and in 21 other countries and territories. Of these restaurants, 1,465 were operated by the Company and 5,016 by its franchisees. As of December 28, 2003, the Company and its franchisees operated 2,527 Tim Horton’s (Hortons) restaurants with 2,343 restaurants in Canada and 184 restaurants in the United States. Of these restaurants open, for the fiscal year ended December 28, 2003, only 57 were Company operated. In addition, the Company and its franchisees operated 283 Baja Fresh restaurants in 25 states, of which 132 were company-operated restaurants and 151 franchise restaurants. (Finance.Yahoo.com) Sonic Corp. operates and franchises a chain of drive-in restaurants (Sonic Drive-Ins) in the United States. During the fiscal year ended August 31, 2004 (fiscal 2004), the Company had 2,885 Sonic Drive-Ins in operation, consisting of 539 Partner Drive-Ins and 2,346 Franchise Drive-Ins, principally in the southern two-thirds of the United States. Partner Drive-Ins are those Sonic Drive-Ins owned and operated by either a limited liability company or a general partnership. It owns a majority interest, typically at least 60%, and the supervisor and manager of the drive-in own a minority interest in each Partner Drive-In limited liability company or g eneral partnership. Franchise Drive-Ins are owned and operated by its franchisees. (Finance.Yahoo.com) C.
Market size
A fast food consumer, on the average, patronises a restaurant frequently (between once in two weeks to once a month), during weekends, for lunch, dinner, and accompanied by family members. Both adults and children play an important role in the buying process. Reasons such as cleanliness. convenience, family outings and celebration of special occasions are considered important in buying fast foods.
Customers eat out for a change from home prepared food but they do not believe that fast foods provide good nutritional value. Hence, it is vital that efforts to maintain or increase a chain 's market share should be tailored according to the pattern of consumer behaviour. The multi-attribute image model is proven to provide with confidence valuable information for predicting and describing store image. By identifying the importance of relevant attributes and evaluating fast food restaurants on these attributes, a manager can better understand the market. He is better informed not only about the image of his store compared to that of other stores on overall measures and on various attributes, but also on how important these attributes are. He can subsequently develop effective marketing and operational strategies. Customers attach great importance to quality of food, cleanliness and consistency. Politeness of staff and type of service form the next important group. The remaining menu, environment, location and price form the lowest group. It is noted that price is given the least importance. Hence, for a fast food chain to do well, great attention should be paid to the first two groupings to enhance customers' beliefs of these attributes. For example, improving the nutritional value of fast food by providing a good balance of vitamins and minerals and by reducing oils and saturated fats (cholesterol) would encourage more customers to fast foods. It may then be j justified as an alternative to a home-cooked meal. It appears that the seven stores can be subdivided according to their image characteristics as follows: (a) McDonald's and KFC, (b) Pizza Hut and A&W (c) Grandy's and Shakey's Pizza, and (d) Wendy's. KFC seems to dominate the market, with the largest number of outlets (60) and claiming to capture about 70% of the market; the balance is shared among McDonald's, A&W etc. All of the A&W Brand products have sold well, with A&W root beer competing directly with Coca-Cola, Seven-Up, Dr. Pepper, and Pepsi. Although it is unlikely that A&W root beer will ever increase its share of the soft drink market, the 30 percent share of the root beer market that it retains is more than enough to keep management at Cadbury Schweppes happy.
D.
Government participation in the marketplace
There should have a support from government so that the franchise will be successful. The Philippine economy also benefits in this scenario since part of an international franchise’s profits is remitted into the country. This does not take into account the products, such as coffee and other raw materials, which the country exports to sustain the franchises.
Although franchises are not failure-proof, entrepreneurs favor the odds of better return on investment and profit, as well as tried-and-tested systematic business operations that they provide. While the country’s franchising sector can be considered to still be in its infancy stage, the time is ripe for Philippine brands to go global. In countries like Singapore and Malaysia, local franchisors enjoy the support of their government in terms of financing and even marketing. In Singapore, firms that are looking to franchise overseas receive incentives and financial aid from the government. Even embassies are told to promote Singapore franchises. In Malaysia, the government has a master plan for franchise development. Malaysian franchises receive support to establish themselves first in their country. Now, they are looking at the international market to expand their businesses.
IV. Executive Summary
There is a need for review the strategies to better penetrate the market. And there are the following: When we purchased A & W almost seven years ago, there was an article in the trade press that said something like--"Does Sid Feltenstein really know what he is doing? A & W hasn't been a factor in the restaurant business since Gerald Ford was President." That writer certainly had a point of view. Moreover, based on what A & W had done in the past, it was not an unreasonable point of view. However, my perspective on the restaurant industry over the last 30 years is that some of the greatest success stories are about brands that have been around for a long time, that have fallen on hard times, yet still possess great brand awareness and brand equity, who have, with the injection of the right management, the right strategy and capital to do what is necessary, come back to be bigger and better than they ever were. It is hard to kill an established brand. It was my feeling, when considering the acquisition of A & W, that this brand was a prime candidate for such a comeback. A & W Restaurants is the oldest fast-food restaurant chain in the United States; it began business in 1919. At its peak, it had 2500 restaurants, which, at the time, made it one of the top two or three largest restaurant chains in the world. Because of its prior market penetration, even though at the time we bought it they were down to 600 stores, it had enormous brand equity and brand awareness--something that we felt could be leveraged.
The first thing after buying the chain was to establish a clear objective and specific strategies to support that objective--all of which needed to be designed to turn the business around. The major objective was that, by the year 2000, we, working with our franchisees, would improve average restaurant dollar profits by 50 percent. This was a key objective because, if our stores are not making above average profits, then nothing else matters; on the other hand, if franchisee profits are growing, anything and everything is possible. To support this objective, we established four inter-related strategies with our franchise community, as follows: Improve Our Operations In order to do this we had to take a centralized operating organization and put our store supervisors in the markets they supervised. We needed to improve our training, standardize our menu, improve the quality of our products and invest in a field operations organization to provide our franchisees better support. Re-Image Our Chain At the time we bought A & W, we had 600 stores with virtually 600 different images-most of which were old and tired. Our objective, by the year 2000, was that at least 75 percent of our chain needed to be to an image that we would create. This "to be created" image would capitalize on the nostalgia throughout America that the brand enjoyed; we called it contemporized nostalgia. A chain with a consistent, dynamic, retail image is very powerful. Market Our Brand More Aggressively All of our franchise agreements called for spending 4 percent of gross sales on advertising. As best we were able to tell, it wasn't being done principally because the franchisor was not providing sufficient leadership in the marketing arena to get these dollars spent. To improve this situation we also needed to provide additional field marketing support for our franchisees. Additionally, we charged our operations team with the objective of securing at least 85 percent of franchisee support of all marketing initiatives; we bonused them accordingly. Accelerate Distribution and Put A & W Back On an Aggressive Growth Curve To this end we established a goal to have at least 1000 points of distribution by the year 2000. This was, in many ways, the more difficult objective because there were an awful
lot of much bigger players with whom we had to compete, who also had much larger marketing budgets than we had. Thus, our distribution strategy was to create concepts ranging from 200 square feet to as big as one wanted to make it so that we could retail our brand and our core menu in non-traditional outlets where we were intercepting other people's traffic--or as I often say "wherever people live, learn, work, shop or play." In this way we were able to neutralize our lack of marketing resources vis-a-vis competitors. We made it very clear to our chain that, in order for us to be successful in achieving the goal of improving average restaurant dollar profits by 50 percent by the year 2000, each one of the strategies had to be executed brilliantly. It was not an "a la carte" choice because the strategies were totally inter-related. If all these strategies were not implemented, we would not be able to achieve our goals. Over the years, I have learned that if franchisees are not intimately involved in the execution of strategic initiatives, both in terms of what the tactics are and how the tactics get communicated and executed, the likelihood is that one will not succeed. Thus, in order to do all the things that we needed to do, we have to mobilize the franchise community through the national A & W Franchise Association. Our franchise association saw it was in their best interest to see the chain vital and healthy again and they were extraordinarily supportive and helpful. While we did not always agree on everything, we were always able to work out the differences because both of us had in mind the long-term success of each and every franchisee. Along the road, there were several issues that could have become very contentious, but with goodwill on both sides we were able to resolve those as well. We really did achieve all of our goals. First, by the year 2000, the stores that embraced our four inter-related strategies improved their dollar profits by 50 percent. Our operations improved quite dramatically, as we saw all critical measurements in terms of quality of food, cleanliness, speed of service, and much more--much higher than they were when we first purchased the company. We were able to achieve our goal of 1,000 units in operation by 2000 and, indeed, more than 75 percent of our chain was utilizing an exciting retail image that we created shortly after we bought the company.
Our marketing was executed on a far more consistent and aggressive basis which enabled us to enjoy same store sales growth in excess of chains that have far greater marketing resources than we have. Developing a very clear objective with simply understood, but difficult to execute strategies, supported by our franchise community, enabled us to achieve all of the goals that we and our franchisees set. It was a particular honor for our chain to receive, this year, Nation's Restaurant News "Hot Again--Hot Concept Award," which is the first of its kind given to any chain. The success we have enjoyed would not have been possible without the enthusiastic support of the A & W franchise community working as closely and constructively as possible with members of the A & W management team. It is these two groups of wonderful people who should be credited with "the successful remaking of A & W Restaurants." “We termed the new design ‘contemporary nostalgia’ — it’s a look that captures the history and heritage of our brand,” Bazner says. The new design features an updated logo, overstuffed booths and warmer lighting. Bazner says franchisees have accepted the redesign and used it as a vehicle to increase profitability.
V. Sources of information
A&W Restaurants From Wikipedia, the free encyclopedia
