Ingredients for Success of Five Guys Burgers and Fries Essay

Ingredients for Success of Five Guys Burgers and Fries Essay.

Determine how Five Guys’ philosophy sets it apart from other fast-food chains. In my opinion what makes Five Guys’ Burgers and Fries different from other fast food chains are the following characteristics: a) Quality: Ingredients such as meat which cannot be frozen, bread which has to be made at least the night before and potatoes produced in locations that allow them to keep their richest nutrients, do not come cheap. But, the fact that Five Guys’ Burgers and Fries decided to make their food only out of fresh products, regardless of the cost, indicates that their target market is people who care about taste, which is why Jerry Murrell focus on “NO cut corners, but the best is priceless”.

(Welch. 2010) b) Options: The customers have the opportunity to customize their burgers to their preferences, choosing from seventeen toppings without extra charge.

This is also an example of a new strategy used to capture higher market share in the industry, in which companies are force to come up with, constantly, due to the intensive competitive characteristic of the fast food industry.

(Hussein, Et all. 2011) c) Dedication: At Five Guys they take their time to prepare everyone’s meals according to their particular preferences even though it demands extra time and dedication. It is this dedication and time what separates them from common fast food chains where time is measured and food is already prepared or frozen, thereby losing its original flavor. (Burke, Monte. 2012) d) Their type of Marketing: Based on what Jerry Murrell said about treating the customer right and he will sell for you. (Campbell. 2011), I believe that the Five Guys’ Burgers and Fries focus their marketing on customer service and the word of mouth. While others expend a lot of money in marketing, they take certain amount of money and encourage their employees to earn it by successfully complying with the company’s standards of customer’s satisfaction. (Welch. 2010)

Analyze the Original Values for the Start-up company and how it remains strong today. The Values of Five Guys’ Burgers and Fries for start-up were: a) Make good food with good Ingredients: Michael Murray (Manager of Five Guys’ Burgers and Fries at Mabry Village location) said “We are not a fast food restaurant we are a casual dining place where we offer 100% fresh food, we have no freezers”. (Odish. 2012). They consider their food good because by working with fresh ingredients they can keep the original flavor and its value. (Heffern. 2002). Things like frying their potatoes with peanut oil as a way to reduce cholesterol and control the consumption of fat, is a considerable way to differentiate them from the fast food industry. As it is described in the vol. 8 of SJ Magazine, the fries are hand-cut; the potatoes sticks keep their skin and are soaked in water then partially cooked and sunk into hot peanut oil in order to get the golden brown color.

They then come up crispy, creamy, sweet and are seasoned with salt or Cajun spice mix and shaken in a cup that is placed in a paper bag. (Palermo.2007) About the meat, this magazine also mentions that it is different because it is crunchy at the edges and tender inside (SJ Magazine, 2008, Vol. 8) which happens because the meat is prepared from fresh ground beef, not frozen. Also, the bread is made every day from the same bakery and distributed to the closest stores. The owner of one of these bakeries was once an employee of the Five Guys’ Burgers and Fries until the Murrell family made him part of their business. Taking this into account, the bread will have the same quality for every store. (Sailors. 2011) a) Family oriented business type: The Five Guys’ Burgers and Fries treat their employees with respect and also encourage them to keep the values of the business by expending 1.5% of their revenues in bonuses for their best employees instead of expending 3% on marketing. Michael Murray also said: “They come and visit us, they know who we are”. (Odish. 2012).

Furthermore, in my opinion, the fact that the Murrell family keeps the control of the franchises by making the rules the same for everyone has busted their success. Wherever you go, you will find the same quality of food and the same flavor. The aim to make franchising work on their terms. (Rosenwald. 2006). Janie Muller explains the way her family sees and manages their business when she said: “We are a family and we have gone in this journey together”. (Rosenwald. 2006). Jerry Murrell also explains that it is important to have the employees feel a sense of ownership and accountability (Wiley Plus, 2012). This behavior toward the employees is also a good strategy because when the employees feel that they are treated like partners, they act with consideration and respect for the business and the one those who have given them the opportunity. a) Quality and Care: Overall, these qualities have made of The Five Guys’ Burgers and Fries special and different from others in the fast food chain. “Whoever cares for its customers received appreciation in return” Murrell said (Welch.2010).

Encouraging their employees to keep their stations clean, auditing them twice a week from two different third parties, guarantees that the employees will comply with their duties not only for responsibility but also for bonuses. Enumerate three factors that contributed to Five Guys’ Burgers and Fries success in such a short time and what effect, if any, external markets had on these factors. Rogers (1995) refers to innovation as a new idea by someone and diffusion as a process through which an innovated idea is delivered, however Schumpeter, (1939); Tidd, Besant, and Pavitt, (1997) explain that Innovation is a process that includes the creation of a new idea into a product or process that is marketable. (Hussein, et all. 2011). The three factors that have contributed to their success in a short time would be: a) No extra charge for the toppings, 3 refills for their 24 oz. drinks, Customers get to eat peanuts while they wait for their meal to be done. (No cut corners). (Sailors.2011) b) High performance in customer service which produces good word of mouth and eliminates the need for marketing. (All of the money goes into the food).

(Wiley Plus) c) Fresh food for the consumer and incentive for their employees to maintain a good customer service standard. (Quality). Five Guys has perfected the art of the burger, by keeping its beef fresh [never frozen] and cooking your meal while you wait. (Palermo.2008).This is the way many people picture the Five Guys and their business. How external market has influence on the Five Guys success would be the differentiation between the types of products the rest of the market provide (fast food chains), and the way Five Guys does it. “We carry the burger alternative to fast food” said Todd Stalling. (Michael Rosenwald. 2006). Assess how ethical and social practices are part of the Five Guys’ culture and provide examples to support your choices. The fast food industry is everyday more competitive due to a large number of fast food chains joining the market and expanding with new ideas. That is why information, ethic, and quality, are important issues.

However, some studies have demonstrated that in certain regions some of these issues are more important than others. For example, in Malaysia the information of the product can influence on the consumer’s preferences and therefore, on their shopping behavior, so packaging, for Malaysians, is very important rather than innovation or advertisement. (Hossein; et all. 2011). This competition in the fast food industry has forced companies to develop marketing strategies to approach and capture higher market share. (Hossein, Et All.2011). But, innovated ideas and products are still failing because they haven’t reach the right target or found the right channels of communication to get to the right customer. That is where certain companies like the Five Guys’ have successfully broken the schema of modern marketing buy focusing on the conventional word of mouth.

To be able to choose the word of mouth as a marketing strategy, the company must be sure that its products and services have no equal comparisons with other companies, Five Guys’ show this confidence when they put out a board indicating that there is good fast food around the corner if you are in a hurry. (Liz Welch. 2012). The Five Guys’ Team basically believes that once you treat a person right, that person will do the marketing for you and that is why they also focus on putting all of the money in the food instead of décor or marketing.

For example, they only use potatoes from Idaho, where they grow slowly and therefore, more solid. They also based their prices on the margins, the price is raised or lowered to reflect their costs. For instance if the tomatoes are scarce and the price is high they will raise the price of the burger instead of eliminating the tomatoes or minimizing the amount of it. (Welch.2010) As explained above, their ethic in keeping quality of their product is so strong that they even made sure that all of the franchises are regulated by the same policy of quality, before they sign a contract with any franchise buyer. The Business Plan is sell a really good, juicy burger on a fresh bun, make perfect French fries, and do not cut corners. (Sailors Jimmy. 2011)

Burke, Monte. (2012). Five Guys Burgers: America’s Fasted Growing Restaurant Chain. Forbes Magazine. August 6, 2012. Retrieved on October 18th from

Campbell, Twyla. (2011). Five Guys’ Burgers and Fries: The American Invasion. It’s a Weird, wild, and wonderful Life. Retrieved October 20, 2012 from

Five Guys Burgers and Fries: A recipe for Success. Economic Challenges Facing Contemporary Business. WileyPlus. Retrieved on October 15, 2012 from

Heffern, Rich.(2002). Dinners and Dining; Ethics; Food; Aesthetics.The Ethics of Eating. Vol. 38 p 13.

Hossein, Nezaki; Noor, Ali; Shaheen, Mansori; & Amirhossein, Noghondari. (2011). Adoption and Diffusion of Innovations in Fast Food Industries. Australian Journal of Basic & Applied Sciences, 833, INSInet Publications.

Hossein, Nezaki; Noor, Ali; Shaheen, Mansori; & Amirhossein, Noghondari. (2011). Market Value; Convenience Foods;Food Industry; Australian Journal of Basic & Applied Sciences. P 1271-1276. INSInet Publications.

Palermo, Jennifer. (2007-2008). For a Great Hamburger: “Five Guys” In Somers Point. SJ Magazine. 8th Annual Best Of SJ. July, 2008. Vol.8. Issue 7. Retrieved on October 16th, 2012 from

Rosenwald, Michael. (2006). Five Guys, Taking a Bigger Bite.Washington Post. Staff Writer. Retrieved on October 15, 2012 From

Ingredients for Success of Five Guys Burgers and Fries Essay

Five Guys Burgers and fries: Ingredients for success Essay

Five Guys Burgers and fries: Ingredients for success Essay.


The purpose of analyzing the success story of Five Guys burger is to examine the milestones covered by Five Guys to establish the successful business in private enterprise system. The perfect business plan that Five Guys has includes drivers of change on the system, the ethical and social responsibilities that Five Guys developed towards its employees. Furthermore, a unique strategy of marketing “word of mouth” which helped Five Guys in establishing more than 1000 outlets across the nation instead of spending millions of dollar in advertisement.

Overall, this case study helps how an entrepreneur can run business by using out of box and simple solution to gain success in market. Five Guys’ philosophy setting apart from other fast food chains By careful reading of the Five Guys’ case study, I think quality product and customer satisfaction is the main philosophy of the Five Guys burger. According to Jerry Murrell “We need to concentrate on the quality of our product, and the satisfaction of the customers”.

Five Guys maintained its philosophy of quality product for instance freshly prepared bun, fat free meat and no corner cut fries. As mentioned in the case study “The meat for the burgers – 80 percent lean- is always fresh, never frozen and their plants so clean, you could eat off the floor”. While focusing on customer satisfaction, people use to come by and eat Five Guys burger because they think; the place where burger is made is very clean and tidy. Kitchen of Five Guys is always open to customer and if someone wants to see how his/her burger is being made, (s)he is more than welcome. Landlord of a franchisee admired Five Guys by saying that we have Five Guys clean, friendly storefront and quality food in neighbors (Neil Janowitz, 2007). Secondly, customer like waiting for Five Guys burger because of its quality food.

Five Guys improved its customer satisfaction by serving peanuts to its customers. Five Guys started to distribute free, unshelled peanuts to placate waiting customers. The peanuts have become a Five Guys trademark (Roger, Y, 2009). I must say that above mentioned philosophy helped Five Guys a lot in developing such successful burger’ food chain that it clearly making a competition to all other renowned fast food chains like McDonalds, Burger King and Wendys. Original Values of Five Guys burger and how it remains strong today Two Original values which I found after a careful review of case study, I assume (a) quality food and (b) no advertisement. Mentioning the standard of quality food, Five Guys burgers are as fresh and juicy as they were when the first restaurant was opened in 1986.

They have same freshly baked bread every day since its opening. Similarly, potatoes are cut fresh every morning and fried in peanut oil; never greasy served in Styrofoam cup. Five Guys hired the person that baked the bread/bun for their first store, and made him a partner in the firm. They ensure that every store gets fresh bread every morning. Five Guys burger had a belief that people want to know that their money is used in providing quality food. A word of mouth strategy worked really well for Five Guys That’s why Five Guys don’t advertise to sell its product. Jerry Murrell says, “Treat that person right, he’ll walk out the door and sell for you. We were going to use our food to market our products”. (Roger, Y, 2009).

Three factors contributed Five Guys’ success
There are numbers of factors involved in contributing success to Five Guys business. I am going to mention only three of them.
* Quality food
* Simple menu
* No advertisement.

First factor plays an important role in the success. Simple menu, I think, is the key to success. Although, Five Guys tried to enhance or increase its menu by serving coffee and a chicken sandwich but it did not work, so they stop serving coffee and chicken sandwich. Likely, franchisees put pressure to add items, such as milkshakes but Five Guys did not accept it. “We’re the only burger chain that doesn’t have milkshakes. But we couldn’t possibly have a milkshake that comes of out of the machine” Jerry says (Roger, Y, 2009). Second factor quality of food is the heart core factor that contributed to the success of Five Guys burger. “Five Guys’ burger is better than McDonald’s,” says Tristano.

“Americans have always fallen in love with a better product “(Burke M, 2012). Speaking about quality food that offers Five Guys includes superior quality of meat, eighty percent lean, always fresh, never frozen at all. Potatoes always come from northern Idaho, because of weather condition they grow more slowly, solid and tasty in comparison to the potatoes grown in California or Florida, grow faster and are cheaper used by other fast food chains. Five Guys use anything but the best. Five Guys first soak fries in water so when the fries are per fried, the water boils, forcing steam out of the fry. This forma a seal so that when they get fried a second time, the fries don’t absorb any oil and so are never oily. “Fries are much harder than burgers” says Murrell. “We work day and night on them, all the damn time.” (Burke M, 2012).

Five Guys menu allows the chain to focus all its energy on executing its burger “perfectly” (Licata, E., 2009). Five Guys burger decided they would cook only in peanut oil, which cost five times as much as the oil, other burger restaurants were using (Lottie L., 2012). Finally, the factor is no advertisement, which I think contributed to the success of Five Guys. Five Guys burger had a belief that people want to know that their money is used in providing quality food. That’s why they don’t use advertisement to sell their product. Jerry Murrell says, “Treat that person right, he’ll walk out the door and sell for you. We were going to use our food to market our products” Jerry says. (Roger, Y, 2009).

Five Guys burger admits that they do things a little differently than most companies other fast food companies don’t, they put 3% of their revenue toward marketing or advertising. Five Guys burger simply don’t, they spent that money as a bonus to give their employees. “All of our employees at our stores, we pay them good money. I think that’s important” Murrell says. “Hire well-paid people and they’ll stay with you.” (Lottie L., 2012). Social and ethical practices of Five Guys burger

An organization is considered to be respectable because of its social and ethical policies it implemented within the organization. After a careful study, I think “No Marketing or advertisement” is one of the top social aspects of Five Guys. “He said anybody can be successful in the restaurant business if you serve a good product, (have a) friendly and clean atmosphere and reasonable price,” recalls Murrell (Lottie L., 2012). A word of mouth strategy worked really well for Five Guys. Five Guys used the strength of society in positive way and customer base is increased day by day on the recommendation of another customer. I think second aspect of social policy of Five Guys is selling its franchises.

This aspect helps middle class people to have their own small business which also helps in increasing the employment rate. More than 1700 stores reportedly been sold for future development into Five Guys outlets (Datamonitor, 2010) I think ethical aspect covers how an organization is beneficial for its employee. Most of the Organizations spent a fixed percentage of its revenue on marketing but Five Guys don’t do it. Five Guys spend that fixed percentage as bonus to employees. The Company has noted that it gives around $6m a year in bonuses to its employees. Murrell says its important to make employees feel a sense of ownership and accountability.

Five Guys has a policy to maintain high standard of customer service by employing mystery shoppers to regularly judge its outlets. This strategy positively appraises staff and keeps standard high. Five Guys send those secret shoppers twice a week to all locations, looking to catch staff delivering outstanding customer service. If they get a good score during the secret audits, they receive $1000 to divide amongst them, usually 5-6 people per crew. This is over and above the $8 or $9 an hour the crew makes, as a result crew feels happy and satisfied. Conclusion

This case study enables us to understand that business plan is very important in order to run a successful business. Business philosophy or company goal plays an important role in running the business successful. Businesses cannot flourish if higher management don’t have out of box solution or strategy. In this case study we have noticed that philosophy plays an important role along with the out of the box marketing strategy i.e. “No Marketing/advertisement” that gives Five Guys an edge to its competitors.


1. Janowitz, N. (2007). Five Guys sticks to burger-and-fries formula. Shopping Centers Today, 28(7), 32-33. 2. DATAMONITOR: Five Guys Case Study. (2010). Five Guys Case Study: Maintaining Growth in Fast Food with a Simple Menu & Quality Focus, 1-11. 3. Licata, E. (2009). FIVE
GUYS. Nation’s Restaurant News, 43(18), 58. 4. Lottie L., J. (n.d). Five Guys family keeps it simple. USA Today. 07/30/2012 5. Burke, M. (2012). Five Guys Burgers: America’s Fastest Growing Restaurant Chain. Forbes.Com, 26 6. Roger, Y. (n.d). Five Guys is simply successful. USA Today, 06/08/2009

Five Guys Burgers and fries: Ingredients for success Essay

Chipotle Market Essay

Chipotle Market Essay.

Chipotle was established in 1993 with the idea to demonstrate that fast food does not have to come with the typical “fast-food” experience. Chipotle’s niche market prefers high quality ingredients that’s healthy, tastes good, and uses classic cooking methods with unique interior design. Chipotle has changed the fast food market and uses the short and sweet mission statement to “forever provide food with integrity”. The company’s vision statement is “to change the way people think about and eat fast food” and its mission statement is to provide “Food with Integrity” (Chipotle, 2014).

The vision statement has been successful in driving to its front door where it’s not unusual to see a line leading to the assembly kitchen within an hour of closing. The mission statement is short but the company constantly works to ensure the quality of the food is consistent and fresh and stocks from reliable vendors. The strategy Chipotle uses in its vision and mission statement is to ensure they are intertwined.

Chipotle exemplifies Michael E. Porter’s proposal that managers can make the organization more profitable and less vulnerable by using a differentiation strategy. Chipotle seeks to distinguish it’s food from all others in the industry. It uses the local grown and sustainable products differentiation and its ability to produce food that a good price and produces in high volume that allows the company to make a handsome profit. Even while new fast casual companies such as Noodles and company have come along, no national chains have come close to creating a threat in the type of food that Chipotle makes. One competitive advantage the company has is that the food it serves caters to health consciousness in consumers. This compliance to the healthy food trend comes from shifted consumer sentiment away from food that facilitates obesity. Another competitive advantage is that Chipotle sits somewhere between fast food and casual dining.

This is referred to in the article as fast casual dining. Chipotle offers the quality of food that many full-service restaurants serve and pair it with the speed and convenience of fast food. Chipotle prides itself in doing a few things really well. Chipotle only uses ingredients sourced from local suppliers. It is the only national restaurant that has a significant commitment to using local produce on a large scale. All of Chipotle’s ingredients come from within a 350 mile radius of the restaurant where it will be served. This local food supply provides a competitive advantage in the freshness and reliability of the ingredients it uses. Chipotle also works with local farmers to ensure they use sustainable operations. This sustainable operation in turn allows Chipotle to gain efficiency and ultimately better prices. Chipotle’s marketing strategy focuses on a narrow market segment through use of a differentiation strategy.

This focused differentiation strategy’s uses the company’s commitment to providing organic ingredients raised with respect for the animals, the environment and the farmers. This resonates to a large segment of the population who want to deal with companies that stress sustainability. This ultimately contributes to exceptional taste, wholesome nutrition and great value. In order for Chipotle to implement the strategy, consistent relationships with local suppliers is paramount. The assumption is that the less distance the food has to travel, the better. This is a benefit to all involved. The company benefits with being known by the market it serves as serving the local community. The suppliers benefit in that it can deal with a reliable and consistent partner for supplying the food. The local community benefits by improved economy and decent paying jobs.

The importance that Chipotle strategy has in industry is that it is a great example of Daft’s organizational goals that states “The best strategies come from systematic analysis of organizational strengths and weaknesses….” Chipotle does not have a desire to please all customers with every taste. While the average price of a Chipotle burrito is about $7, this is a similar price point as most food places, the company has a relatively narrow customer base of those who want fast casual Mexican food. This focus allows the company to reduce the ingredients and inventory needed. This allows the company to spend more time creating relationships with local supplies to ensure the freshness and integrity of the ingredients.

Another thing Managers can learn from the Chipotle model is that of Overall Performance. This is that the performance is expressed in terms of net income, earnings per share, and return on investment. Chipotle’s stock price has increased 600% in the past five years. So while increasing the number of stores in the system, the company has also increased the sales per each store while also improving net income. This in turn follows in the equation for earnings per share.


Daft, R. (2013). Organization theory & design (11th ed.). Mason, OH: South-Western, Cengage Learning. Article Link:

Chipotle Market Essay

Competing through Operation: KFC Report Essay

Competing through Operation: KFC Report Essay.


The report focuses on KFC – the leading chicken fast food restaurant in the world, and one of the largest players in the fast food market. By using five performance objectives and various research methods, the report aims to analyze how the restaurant perform and manage its operation capacity in order to provide qualified food and service to the customers.

Besides, the restaurant’s capacity constrains and capacity strategies are discussed base on the primary data from KFC Union Street, Bristol City centre.

It would link to the relationship between Capacity strategy and five performance objectives (Slack et al, 2004), as well as, how they support each other.


KFC first starts in 1930s, when Harland Sanders opened his restaurant in Corbin, Kentucky. KFC now spreads out to more than 100 countries with around 15500 outlets worldwide. Of these, there are more than 800 restaurants located in the UK.

The restaurant has concentrated on fried-chicken-on-bone products under the name Original Recipe and expanded the offers with other items include chicken sandwiches and chicken wings, as well as, biscuits, mashed potatoes, corn, potato wedges and desserts.

The new line-grilled chicken with fewer calories, fat and salt than the Original Recipe- was launched in 2009. It was called “one of the biggest new product rollouts in the history of the company” by the KFC president Roger Eaton. Being tested in many regions included the UK; this new line has been well received as a healthier alternative which retains good in taste.

The following part will discuss about how KFC applies five performance objectives (Slack et al, 2004) into its operation and which of the five objectives is concentrated on.


The theory has been applied for many companies worldwide for over 10 years in order to manage operating performance. Due to the limitation of resources, each company tends to put only some of the five objectives in priority during particular periods. It is considered as one of smart methods to maximize profits.

Source: (Adapted from Slack et al, 2004)


Figure 1 explains the idea and meaning of five performance objectives (Slack et al, 2004) in general.

QUALITY is the responsibility to always provide the good product or service that company has claimed. It also requires doing the right thing at the right time and meeting customer specifications, which give customer satisfactions. In KFC, main factors listed as Quality objective are quality of food (delicious, tasty, fresh, healthy, etc), quality of service (clean, supportive, friendly, etc)…

SPEED is defined as how fast the company responds their customers. This is one of the most important things required in fast food restaurant, especially in rush hours. Applying to KFC restaurant, speed objective is considered as the elapsed time between customers’ placing orders and the food or services being delivered.

FLEXIBILITY measures how much variety in products, services, and solutions for a dynamic market environment in order to meet customers’ need. It is shown as KFC’s various menus, the launch of line “Grilled Chicken”, the more customization, etc

DEPENDABILITY is doing things on time as promises. It not only gains customer’s trust but also has an influence on cost, which are saving money, saving time and giving stability to improve the efficiencies (Strecker, Ulrich, 2011). In KFC, it is on-time deliveries.

COST is the product or service price that enables company compete the market, as well as ensure the return. The company aims to maximize their profit; therefore, reducing the cost is necessary. Cost objective in KFC is measured by the cost of food, cost of manager and staff’s salaries, etc.

The Polar diagram below shows how KFC restaurant performs in manager, staff and customer perspectives base on the data that was collected.

(Adapted from Slack et al, 2004, p58)


The Polar diagram is designed by the result of KFC manager’s interview, staff’s questionnaire and customers’ questionnaire (Appendix 1.0, appendix 2.0 and appendix 3.0).

According to KFC manager, the restaurant is performing quite well in quality, cost and dependability objectives while speed needs to improve, especially in rush hours (16:00pm to 20:00pm). Staff and customers have the same opinion about improving speed objective in KFC. “Although we have 8 queues” – as the manager – “it is hard to serve a large number of customers at 19pm. However, we tend to give the staffs more training sessions to increase their speed in taking order and cooking. Focusing on people will push up dependability, flexibility and speed all.” (Appendix 3.0) It is the fact that most of the customers want a lower price for their food and services. However, with a fixed price tag, the restaurant tries their best to prove that the food and service offered to customers are worth their paying.

The next part of report will focus on how the restaurant meets its customer’s fluctuating demand.


The capacity of an operation is the highest level of value added after certain period of time that the process would be able to achieve under certain conditions (Slack et al, 2001). It includes: actual output, design capacity and effective capacity.


Planned losses Avoidable losses Actual capacity 1929 people Planned losses Effective capacity 2331 people Design capacity 2680 people

(Adapt from Slack et al, 2001)

The figure is resulted from calculations below.


Design capacity is “the capacity which its technical designers had in mind when they commissioned the operation” (Slack et al, 2001, p335). The KFC restaurant on Union Street is the largest KFC outlets in Bristol which can serve maximum 100 customers a day (approximate number from KFC manager).

Design capacity


100 people


670 people (7 working days, less working hours on Sunday)


2680 people


While design capacity is “everything according to a plan”, effective capacity helps to show what might happen if something not goes as a plan. Effective capacity is calculated as design capacity minus planned losses, which is 13% (from KFC manager).

Effective capacity


87 people (100 – 100×13%)


582people (670 – 670×13%)


2331 people (2680 – 2680×13%)


Actual output is the amount of a product that a production facility actually produces, as opposed to the amount that it could produce if it were to run at full theoretical capacity. It is calculated as design capacity minus planned losses and avoidable losses which is 15% (from KFC manager).

Actual output


72 people (100 – 100x[13%+15%])


482 people (670 – 670x[13%+15%])


1929 people (2680 – 2680x[13%+15%])

Planned losses: Public holidays (Christmas, New Year, etc)

Human issues (Illness, pregnant …)

The time customers waiting to be served

Avoidable losses: Weather (Storm, heavy snow, etc)

Machine failure.


Capacity constraints are considered as factors that limit the number of customers served by operation (Dettmer, 2003). For KFC, these are: number of staffs, number of queues, available eating space, speed of cooking and delivering. These factors would push the restaurant to its limit points of operation, which called Bottle necks.

NUMBER OF STAFF: There are many shift of working hour a day in KFC. The maximum number of staffs that needed in rush hour is 12 people approximately (with 8 front-men taking customers’ orders and cleaning, 2 middle-men making burgers and chips, and 2 cooks in the kitchen working strenuously). At the busiest hour, the staffs face pressure of too many customers waiting in the queues, shortage of food available, and the mess in eating place. 2 or 3 front-men have to make burger and chips in order to provide food on time.

NUMBER OF QUEUE: It often happens in the fast food restaurant that long lines of customers are waiting to be served. Although KFC Union Street has 8 queues, it does not mean that there are always staffs available.

AVAILABLE EATING SPACE: It is hard to find a clean table in rush hours because of the large number of customers and the busy staffs.

SPEED OF COOKING AND DELIVERING: To ensure the fresh of food provided to customers, the middle-men just make some available. Hence, if a big order is placed or many orders are placed at once, it will take time to make more burgers.

Some constraint factors would be solved by staff’s working flexibility, some, however, could not avoid because they links to other factors. For example, KFC could make more burgers available to avoid customers’ waiting time and increase speed performance objective; however, the foods will not as good as the just-in-time one, which reduces quality performance objective. Therefore, it is essential for the restaurant to decide which objectives are priorities.

The analysis of KFC’s capacity and capacity constraints lead to the following part which will discuss about which strategy it uses to manage the operation.


(Sasser, 1976)

There are 2 evidences from the data collected that shows Chase demand plan (Sasser, 1976) is the strategy KFC following. There are different staff numbers and the amount of food ready in a day.

Due to staff contracts, the manager arranges a large number of staffs for rush hour, which is from 16:00pm to 20:00pm each day while reduce staffs at the opening (9:30am) and the closing time (22:00pm). In 30 minutes before closing, the kitchen stops working and the front-men focus on cleaning rather than standing behind order place. This arrangement is based on which time customers usually come to the restaurant. It helps reduce cost of staff salaries and avoid human surplus on the time not many customers. Besides, working flexibility is required for all the staffs, which are ability of working in different positions (front, middle or in kitchen), doing different tasks and even overtime, if needed.

The other one – amount of food ready in a day – does show that KFC is applying Capacity leads demand theory (Sasser, 1976). KFC always provides the amount of food slightly over than customer’s demand so as to ensure available service in working time. The food left changes to waste because it could not be stored due to KFC’s quality standard. This waste, according to the manager, is not significant and enables to bear with. From the analysis above, it is clear to see that KFC is doing right because the strategy not only fits to identity of fast food market, but also expresses KFC’s customisation, which highly focus on satisfy its customers.

After discussing about five performance objectives (Slack et al, 2004) and capacity strategy (Sasser, 1976), the final part will clarify relationship between those and how they support each other.


Before having strategy, the objectives have to be set. It could be simply explained that objectives are the place you want to drive to while strategy is vehicle that helps to get there. For KFC as a whole, the company expresses its concentration on Quality objective through the slogan “Don’t worry. Eat happy” ( and various actions to be healthier for the customers, such as “Get fresh inspiration from our Deli Deluxe Range”, “We’re fighting trans-fats, not flavour”, “We’ve done away with 25% of saturated fats”, or “Fitted out with green energy”, etc. Quality is known as the vital factor to compete with other big brands like Subway, MacDonald’s, Burger King…, and gain fast food market share when customer’s health concern is increasing more and more.

(, Domino’s pizza tops the market article)


However, for smaller scale, according to the manager of KFC Union Street, the restaurant put Speed objective as their first priority to strive because quality standard as well as promotions is already fixed. “It is KFC Company’s job to upgrade and spread out how good the food is.” – Said the manager – “Our job is to provide food with the same standard, and serve the customers those come to our restaurant best services, and it is speed”. Hence, the restaurant tends to increase the factor it can control, which differentiates it among the others.

Following the objective above, the Chase demand plan (Sasser, 1976) is decided to make it done. This strategy fits to fast food restaurant’s identity so as to utilize time, human, and money resources. Then, considering either capacity lags demand, which allows demand never less than capacity or capacity leads demand (Sasser, 1976), which is that capacity always meets forecasted demand, KFC Union Street chose the second one. The restaurant gives up waste in order to better its service for customers. Amount of food available reduces waiting time for delivering, as well as, waiting time to be ordered. The customers would be more satisfied thanks to fast service.


To sum up, the report is designed from result collected at KFC Union Street, Bristol. With five performance objectives (Slack et al, 2004), capacity, capacity strategy (Sasser, 1976) analysis, it clarified how KFC operates and how theories links to each other, as well as, are applied into practice with particular circumstances.


Dettmer, H.W., 2003. Strategic Navigation: A Systems Approach to Business Strategy. ASQ Quality Press.

James, P., Rowland-Jones, R., O’Brien, L., 2010. Operations and Business
Systems management, 2nd Ed., Harlow: Pearson.

Samuelson, Paul A., Nordhaus, William D (2009). Economics, 19th Ed., McGraw-Hill Higher Education.

Slack N, Chambers, S., Johnston R., 2001, Operations management, 3rd Ed., London: Pittman Publishing.

Slack N, Chambers, S., Johnston R., 2001, Operations management, 4th Ed., London: Pittman Publishing.

Slack N, Chambers, S., Johnston R., 2001, Operations management, 5th Ed., Harlow: Prentice Hall.

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Competing through Operation: KFC Report Essay

PepsiCo restaurants Essay

PepsiCo restaurants Essay.

I. Introduction

The key question is whether PepsiCo should expand its restaurant business by pursuing the purchase of CARTS OF COLORADO, a $7 million manufacturer and merchandiser of mobile food carts and kiosks, and CALIFORNIA PIZZA KITCHEN, a $34 million restaurant chain in the casual dining segment.

II. Analysis of the main problemPepsiCo has 3 main segments: soft drinks (35% of PepsiCo’s sales and 39% of its operating profits in 1991), snack foods (29% of PepsiCo’s sales and 35% of its operating profits) and restaurants (36% of PepsiCo’s sales and 26% of its operating profits).

In the early 1990’s PepsiCo’s three restaurant chains (KFC, Taco Bell and Pizza Hut) were the leaders in their respective segment. PepsiCo’s senior management believes its ability to move people within and across divisions gives PepsiCo a competitive advantage in the restaurant segment. PepsiCo believes their restaurants perform due to their strong management teams; which are developed within the corporation. PepsiCo would like to utilize their competitive advantage in running restaurants with PepsiCo managers by adding California Pizza Kitchen and CARTS OF COLORADO to the PepsiCo portfolio.

Despite PepsiCo’s success with KFC, Taco Bell and Pizza Hut it had difficulty expanding La Petite Boulangerie, a three-unit bakery chain it purchased in 1982. The large overhead for La Petite Boulangerie made the company unprofitable and Pepsi sold it in 1987 for a $13 million loss. The unsuccessful venture into La Petite Boulangerie suggested that although PepsiCo managers were gifted and could be easily moved across divisions; the moves would not always guarantees a successful business expansion.

Therefore, the main problem for PepsiCo management is to decide whether it can successfully purchase and administer CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO. This is in light of the fact that PepsiCo believes it has a competitive advantage in the skillfulness of its managers that was not borne out in the unsuccessful La Petite Boulangerie bakery endeavor.

III. Recommendations

PepsiCo can be categorized as a related diversifier. Approximately 30% of its revenue is split between its 3 main industrial categories. PepsiCo’s business units share common resources and skills. Historically companies that take a corporate strategy of related diversification perform the best (GBS_634M lecture notes). Therefore on the surface it would appear that diversification by acquiring CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO would be an excellent strategic decision.

However, in arguments described below; the evidence does not support a recommendation for PepsiCo to purchase Carts of Colorado or CALIFORNIA PIZZA KITCHEN.

IV. Justification for recommendations

PepsiCo is a lucrative company and therefore does not need to diversify into CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO to maintain it profitability. From 1987-1991 PepsiCo’s sales doubled, income from continuing operations grew at a compound rate of more than 20%, and the company’s value on the stock market tripled (PepsiCo restaurant Case, pg. 4, and Exhibit 3).

Eight key reasons NOT to diversify into CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO.

It is poor rationale for PepsiCo to diversify into CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO simply to reduce risk. The restaurant business is cyclical. Some restaurants will be profitable, while some will not be profitable. PepsiCo’s shareholders can diversify risk by purchasing shares in CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO themselves. Furthermore, it is not an appropriate strategy for PepsiCo management to over-diversify to protect their personal wealth.

Maintaining growth is not a good basis to diversify into CALIFORNIA PIZZA KITCHEN or CARTS OF COLORADO. Most shareholders would rather hold shares in a small profitable company, not a big unprofitable company. As a shareholder, there is only a benefit if PepsiCo makes a profit. Currently PepsiCo is making a profit. Although managers benefit from growth regardless of profit or loss , growth for the sake of growth is not an appropriate reason to diversify.

Although PepsiCo can use CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO to balance cash flow by funneling cash from its large business units to the smaller CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO business units; this is not recommended. Even thought PepsiCo has the capability of doing this an individual shareholder can do this for himself. The counterargument would be that PepsiCo managers can do a better job balancing cash flow than shareholders because the corporation can be more tax efficient than the individual shareholder. But this alone is not a sufficient reason to diversify.

The acquisition of CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO will not create synergy within the PepsiCo corporate strategy. PepsiCo already has a Pizza segment (i.e. Pizza Hut) and does not have experience in the mobile food cart segment. Diversifying into these two market segments will not produce corporate synergy where the whole is greater than the sum of the parts.

One good reason for PepsiCo to diversity into CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO is the sharing of infrastructure and to create economies of scope. PepsiCo is currently saving money because they are competing in several different industries (ie. Soft drinks, snack foods, and restaurants). These business units share the support structure and therefore the reduced costs. While Pepsi’s economy of scope can be used to distribute chips just as well as soft drinks it is not apparent that they can deliver well in the niche restaurant market like CALIFORNIA PIZZA KITCHEN (refer back to La Petite Boulangerie misfortune).

If PepsiCo were to sell two or more different products simultaneously that would be beneficial by creating an economy of scope. For example, if PepsiCo could distribute Pepsi soft drinks and California Pizza from a cart they would have justification for the acquisition of CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO because they would be sharing common infrastructure that would make them unique. The uniqueness would make it very difficult for competitors to imitate and would be a reason to diversify. But there are currently no mechanisms to sell California Pizza’s from a cart. Therefore at this time, sharing of infrastructure is not a good justification for PepsiCo to diversify into these two markets.

It is not apparent that PepsiCo will increase its market power if they acquire CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO. PepsiCo already has multiple business units that buy from the same set of suppliers and sell to same set of customers. They have used this to gain market power. It is not apparent that adding CALIFORNIA PIZZA KITCHEN or CARTS OF COLORADO to the fold will increase PepsiCo’s market share significantly.

It could be argued that by acquiring CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO PepsiCo is exploiting core competence. Although this is generally a good reason to diversify by generating more revenue opportunity and competing in several markets; this is not a good initiative for PepsiCo in the situation with CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO. In order to exploit core competencies, PepsiCo’s business units must be related, so they share the same set of skills. In order for this strategy to be successful, the benefits to PepsiCo have to be unavailable to PepsiCo’s competitors.

If PepsiCo’s competitors can gain the same advantage, then PepsiCo will not have a strategic benefit. Although the Colorado Carts are unique, they can be duplicated by the competition (e.g. California Carts, All-Star Carts, Creative Mobile systems). With regards to CALIFORNIA PIZZA KITCHEN, other pizza restaurants can reproduce the unique flavors and styles of pizza. Therefore, PepsiCo will not be exploiting its core competence and should not diversify.

If PepsiCo is contemplating CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO as good ‘turnaround projects’ then this is not a justification for diversification. CALIFORNIA PIZZA KITCHEN is a profitable company. CALIFORNIA PIZZA KITCHEN has increased both sales and net income from 1990 to 1991. CARTS OF COLORADO has also shown an increase in sales and operating income from 1985-1991. The management teams of both companies appear to be performing well. Therefore the ‘turnaround’ potential is not a good reason to diversify.

CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO do not fit into the PepsiCo Corporate strategyWhere does PepsiCo compete?There may be a market opportunity for PepsiCo in the acquisition of CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO, but that does not necessarily imply that PepsiCo should take the opportunity. The overall scope of PepsiCo is on convenient foods and beverages. The acquisition of CARTS OF COLORADO would certainly be in-line with PepsiCo’s focus of providing foods and beverages at well-situated locations. However, PepsiCo does not have experience in the placement of mobile food carts and therefore PepsiCo would be at a disadvantage to those more experienced in the mobile cart business.

There is even less evidence for a distinctive market opportunity for PepsiCo with the acquisition of CALIFORNIA PIZZA KITCHEN. PepsiCo already owns Pizza Hut and therefore has a place in the dine-in and take-out pizza business. Although CALIFORNIA PIZZA KITCHEN is suited for more upscale markets with unique flavors and tastes, Pizza Hut could introduce similar unique flavors and tastes. In addition Pizza Hut has stores across the United States and internationally, while CALIFORNIA PIZZA KITCHEN has a limited geographic scope. It currently operates only 25 restaurants in eight states (PepsiCo case, pg. 15). The offbeat pizzas may not sell well across the United States and internationally. For example, jerk-chicken pizza may sell very well in Beverly Hills, CA but not sell well in Peoria, Illinois or Duesseldorf, Germany.

How does PepsiCo compete?PepsiCo’s corporate strategy allows for transfer of resources (i.e. managers) across their business units. PepsiCo’s philosophy is “We take eagles and teach them to fly in formation” (PepsiCo case, pg. 3). Therefore PepsiCo may have a strategic advantage by transferring managers from one of its current business units to CALIFORNIA PIZZA KITCHEN or CARTS OF COLORADO. For example, one manager could transfer her knowledge from a position at Pizza Hut to CALIFORNIA PIZZA KITCHEN relatively transparently; although it may be more difficult to transfer knowledge from Pizza Hut to the food carts and kiosks; the business of Colorado Carts.

PepsiCo does transfers resources which fit well with the CARTS OF COLORADO enterprise. PepsiCo can place a Cart outside a shopping mall on the street selling food. At some carts PepsiCo could offer KFC or Taco Bell while offering a Pepsi soft drink; maybe put forward some Frito lays chips. But this strategy does not fit well with the idea of the upscale CALIFORNIA PIZZA KITCHEN being directly near a KFC or Taco Bell in a mega-mall food court.

How does PepsiCo execute?PepsiCo, although a very large corporate office, has an execution strategy in which they let the managers go at their own pace. They have a ‘decentralized organization’ (PepsiCo case pg. 4). PepsiCo managers are rewarded on a two-phase system; reporting performance first to direct managers then to upper level managers. In order to be promoted managers of CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO would have to perform very well relative to all of the remaining PepsiCo restaurants. Because all of the other PepsiCo restaurants are at the top of their respective segments it will be a challenge for managers of CALIFORNIA PIZZA KITCHEN and CARTS OF COLORADO to surpass other PepsiCo business units. Therefore the managers will not be incentivized as well managing CALIFORNIA PIZZA KITCHEN or CARTS OF COLORADO.

Therefore, diversifying into California Pizza Kitchen and CARTS OF COLORADO is not copasetic with the PepsiCo corporate strategy.

V. Summary.

The acquisition of CARTS OF COLORADO and CALIFORNIA PIZZA KITCHEN will not lead toward the fulfillment of PepsiCo’s mission which is “To be the world’s premier consumer products company focused on convenient foods and beverages and seeks to produce healthy financial rewards to investors as they provide opportunities for growth and enrichment to their employees, their business partners and the communities in which they operate. And in everything they do, to strive for honesty, fairness and integrity.” (’s management should take the “guilty until proven innocent” approach and not diversify into these two business segments. As described in the preceding paragraphs at this time there is not sufficient and convincing evidence to support the need for diversification into CALIFORNIA PIZZA KITCHEN or CARTS OF COLORADO.


1. www.cpk.com3. PepsiCo restaurants. HBS 9-794-078

PepsiCo restaurants Essay

Case Study of McDonald’s Essay

Case Study of McDonald’s Essay.

In the early 1940’s, two brothers opened a burger restaurant that was based on standardized preparation called the Speedee Service System. This “burger restaurant” is now globally known as McDonald’s. In 1976, McDonald’s introduced the breakfast menu as a way to diversify sales and product selection. Today this multinational corporation serves nearly 54 million customers every day in 120 countries around the world.

McDonald’s first international venture was in Richmond, British Columbia, during 1967. Two of McDonald’s main products were introduced in 1968, the Big Mac and the Egg McMuffin Sandwich.

When the first McDonald’s opened in Hong Kong in 1975, they were the first restaurants to consistently offer clean bathrooms, which drove customers to demand the same standards of other restaurants and institutions.

McDonald’s continually builds its brand by receiving customer input. This is why McDonald’s is known as one of the most recognizable brands in the world. This case study illustrates how McDonald’s marketing process works and how they overcome problems in the process.

This case analysis will include a SWOT analysis of McDonald’s, which looks at the internal environment of strengths and weaknesses and the external environment of opportunities and threats. It then examines alternative solutions to correct weaknesses, threats, and opportunities and concludes with recommendations with exact steps and a brief conclusion.

S.W.O.T. AnalysisThis analysis was developed from the McDonald’s website and various other online sources. Other information was provided by the textbook, Organization Behavior by Robert Kreitner and Angelo Kinicki. SWOT stands for internal Strengths and Weaknesses and external Opportunities and Threats. It will illustrate the opportunities and threats in McDonald’s current environment, and compare it to their internal strengths and weaknesses. We will then discuss creative strategies to align their internal environment with their external environment and provide multiple alternatives and a recommendation.

Internal AnalysisMcDonald’s Corporation is a multimillion dollar global business because of the fact their strengths greatly outweigh their weaknesses. McDonalds is known globally because it is dedicated to the unparallel levels of quality service, cleanliness and values. McDonalds is also globally known because it is financially sound and recognized by the Fortune 500 and the Hoovers 500. We will provide the strengths and weakness of the McDonalds Corporation. We will also show the effect they have on their expansion throughout the globe and the direct impact it has on their financial records. This will be presented in descending order of importance throughout the strengths and weaknesses.

McDonald’s SWOT AnalysisStrengths1.The Company’s developed global strategya.60% of McDonald’s sales and all of its top 10 restaurants, (in terms of sales & profits) are now overseas.

b.McDonald’s adapts to each country’s specific needs & cultural differencesi. For example: In Japan, McDonald’s had to substantially adapt it’s original U.S. style menu to include a McChao(a Chinese fried rice dish). When McDonald’s introduced rice meals in Japan, sales jumped 30% in one year, and it continues to innovate in Japan with Teriyaki McBurger and Chicken Tatsuta.

ii.The menu price has been adapted for each country.

iii.The average Big Mac price for the U.S. is $3.00; China $1.26; Switzerland $5.64c.In 2005 McDonald’s was ranked 8th out of the top 30 global brands.

2.Adaptation to cultural preferences and trendsa.Within the past 3 years, McDonald’s has made several adaptations to their strategy by adding a more appealing breakfast menu, specialty coffees, and healthier menu options.

b. McDonald’s has also managed to adapt their individual franchises to the current trends and concerns in their individual geographical locations, simultaneously cutting costs.

i.For example: In Europe, McDonald’s discovered that children were content with a simple word puzzle on a menu tray or a small stuffed animal and did not require more expensive Happy meal promotions that they used in the U.S.

c.This year the world’s largest restaurant chain, with 31,000 locations, will spend $1.9 billion to open 800 restaurants and reinvest in existing locations.

3.The company’s attention to global health concernsa.McDonald’s menus offer a variety of food products that can fit into balanced, active lifestyles. Restaurants typically serve several types of hamburgers, grilled and fried chicken products, and fish and, in many cases, salads, fruits, and additional sandwich options.

i.Many European countries have launched Salads Plus menus, including meal-size salad choices, a side salad, fresh fruit bag, and other options.

ii.McDonald’s Canada offers Toasted Deli Sandwiches.

iii.McDonald’s Hong Kong has a Fresh Choices Menu, with two salads and fruit yogurt.

iv.McDonald’s Australia offers a QuickStart breakfast menu, including a choice of cereals, juices, reduced fat or nonfat milk, and yogurt.

v.McDonald’s Taiwan serves a Toasted Rice Burger.

vi.Apples are served whole or with other foods in more than 20 countries around the world.

b.Many local business units are adding new salad, fruit, and vegetable offerings.

c.Local business units are also expanding Happy Meal choices to include new sandwich, side, and beverage alternatives. These reflect a System-wide goal of ensuring that Happy Meals remain a choice moms feel good about and children enjoy.

4.The Company has high environmental standards:a.Delivery Vehicles which can carry fresh, frozen and chilled food have resulted in fewer deliveries, enabling them to reduce diesel costs and fuel emissions. Also, fixed delivery schedules reduced the distance traveled in 1993 by 310,000 miles.

b.Each McDonald’s restaurant is carefully designed individually to fit into its local environment. This means listening to local concerns, fitting in with local scenery and landscaping drive-thru restaurants. Over 120 McDonald’s restaurants are in conservation areas and over 30 are in Grade II listed buildings.

c. McDonald’s uses a minimum of 50% recycled content in corrugated cardboard boxes and ask that their suppliers do the same. All McDonald’s food boxes and cartons are made from 72% recycled material, carry out bags are unbleached and made from 60-80% recycled material, while napkins and tray liners are 100% recycled paper. Additionally, all their picnic benches, drive=thru lane traffic bollards and most of the fencing panels are new restaurants are made from recycled polystyrene.

d. McDonald’s have made a commitment that, by 1995, they had reduced the volume of solid waste by 50%. They achieved this by using the three R’s: Reduce, Recycle and Reuse.

5.High percentage of minority employmenta.McDonald’s has the largest number of minority and female franchisees in the quick service industry.

b.More than 40.7% of all McDonald’s US Owner/Operators are women and minorities.

Weaknesses1.Worker shortagea.In all employment areas, there is a high demand for qualified workers.

b.A new development that is creating even more employee demand is the new immigration laws for the country and state.

2.Employee turn-overa.It is difficult to keep the employees already employed with McDonald’s.

i. McDonald’s has a turnover rate of about 35 to 40 percent.

b.People consider working at McDonald’s embarrassing and look for employment elsewhere.

c.Minimum wage doesn’t keep good workers around.

i. $5.85 per hour beginning July 24, 2007ii.$6.55 per hour beginning July 24, 2008iii.$7.25 per hour beginning July 24, 20093.Customer trends change and so do their choicesa.Quality and taste of products is declining.

b.People are generally tired of the same brands that they had been using over the years, so when they do not see the expected innovation they migrate to new brands.

c.People see McDonald’s every where and this over exposure might also be a reason for abstinence. Moreover maintaining the standards of such a huge chain becomes feasible and when there is lack of quality service in one store it effects the whole brand.

External Analysis

The constant improvements in technology and the competitive marketplace challenge McDonald’s with many opportunities and threats. McDonald’s has a great management team that constantly looks for new opportunities because McDonald’s is the industry standard on technology. Other opportunities for McDonald’s would be to expand to all developing and developed countries around the world.

Among the current and future threats, there are thousands of fast-food chains in the world, most of the new fast-food franchises are concentrating on having a healthy image, so therefore McDonald’s needs to continue to improve their healthy choice menu. This will be presented in descending order of importance throughout the opportunities and threats.

Opportunities1.New Technologiesa.Computers that are also tablesi.These computers that are also tables will be very handy because people do not like standing in lines and having to wait to order. Now all customers have to do is find a table and sit down and start ordering. This will pay off even more because customers will be able to special order their food easier which will in-turn reduce the mess up orders because customers will do it themselves.

ii.These computer tables will also make it very easy for customers to pay for their food or even split the bill if they want to. All customers will have to do is lay their credit card or debit card down on the table and then pick what food you want to pay for and drag it over to where your card is laying and then click ok that is correct then use your finger to sign for the bill.

2.International Expansion and Franchisinga.There are only 17,000 McDonald’s around the world and only located in 119 different countries.

i.There are 194 countries in the world and McDonald’s has lost of room to expand there restaurants to new countries.

ii.McDonald’s main concentration of expanding is in the ever growing in population of China. McDonald’s wants to build as many drive thru’s there as possible for the fast passed living. They have done research that there are 30,000 filling stations to put them in.

b.Selling corporate owned McDonald’s and turning them into franchises at home and abroad.

i.Sold 18 businesses in Latin America and the Caribbean’s. As a result these two countries will in turn franchise 1,600 restaurants.

3.New Food Items and New Programsa.Here in America we are accustomed to one of the programs that they are trying to add all over the world. This would be known as the dollar menu. In Europe they are calling it the “Eurosaver”, China has the RMB 5, and Latin America features the McMenu.

b.In Latin America they are experimenting with something called McAhorro. This is a program of special pricing of certain products during certain times of the day or on carious days of the week.

c.In Egypt their McDonald’s are trying something completely new to McDonald’s and this is having a carryout. Other countries also doing this now are Turkey, Hong Kong, and Southeast Asia.

d.New food items that became popular in Latin America are the McCafe coffee and dessert concepts. Which are Expanding to other McDonald’s in other countries to see how they fair.

e.New Healthy Foodsi.Toasted deli sandwiches have now been put on a couple of McDonald’s menus in Canadaii.McDonald’s are starting to cook their French Fries in healthier oils and finding ways to cook their hamburgers to have less grease in them.

iii.Mediterranean – inspired Pitamac, a square pita bread sandwich that is open at the top and filled with spiced beef, grilled vegetables or chicken.

iv.Introducing veggie burgers to more of their restaurants.

v.Introducing water-based instead of oil-based salad dressings for their new premium salads.

vi.Introducing healthier option with their meal instead of fries such as: salads, baked potatoes, yogurt, fruit, ect.

Threats1.The biggest threat for McDonald’s domestically is the lack of growth opportunitiesa.The market in the United States is well saturated and there is not a whole lot of room for growth.

2.Healthier eating habits.

a.People are more worried about their health in today’s society than they have ever been. McDonald’s has introduced salads and other low fat items but it is hard for people to make the switch because the other food that McDonald’s offers tastes great.

3.Fast food restaurant franchises as upcoming competition.

a.The biggest competition would be taco and burrito franchises. This would be a threat because individuals get tired of eating hamburgers and fries and they want something different.

b.McDonald’s has the upper hand on most fast food restaurants because they serve breakfast. Recently Taco Bueno has added a breakfast menu and that could also be a threat for McDonald’s.

4.Terrorisma.With McDonald’s being a big retail food store with a lot of customers in the store daily.

b.This could be a major threat not only to the store itself but to its customers also.

5.Global Competitiona.Through out the globe McDonald’s is facing more and more competition because of other fast food chains entering the global markets.

i.Burger King is the number two burger chain. It is located in over 65 countries now. In the US alone it has more then 11,200 locations.

ii.Subway is the second largest quick serving restaurant. It has an astonishing 27,700 location abroad spanning over 85 countries. Another huge threat that this makes is that it now has more locations in the US than McDonald’s.

b.With global expansion McDonald’s not only has to deal with other abroad competitors but the own countries fast food chains. McDonald’s also has to get accustomed to the local eating habbits and taste so they will be able to satisfy their wants and needs. This means McDonald’s will have to come up with new menu items for each country to fit their customs.

i.Items that they have came up with to fit the taste and customs of consumers in Japan was to introduce the Mega Teriyaki Burger and the Triangle-shaped Mango Custard Pie.

AlternativesAlternative 1- Technology UpdateImproving and Buying New Technology – McDonald’s has been improving many things at their restaurants in the past couple of years such as: remodeling, new menu items, and a drive-thru order speaker that shows you what you have ordered. McDonald’s needs to make sure that they deep up with today’s society and the new technology. One of the newest technology that McDonald’s needs to consider purchasing is called Microsoft surface. This new technology well not only cut down on employee cost but it will help them keep up with the new way of life that time is money.

ProsA. With Microsoft Surface computer tables in place it will make business quicker.

i. People can sit down and order their food at the tablesii. There will be no waiting in lines which in turns saves people time.

iii. Customers can pay at the end of their meals incase they want more food after their first order instead of going and standing in line again.

B. Offer more things to do while waiting on your food and after you are done eating.

i. Microsoft Surface also offers things to entertain your kids such as playing music to painting with their fingers.

ii. Business people will find it handy because they can get on the internet and find thing they need or to get directions to their next destination and then can transfer it to their phones of PDA’s.

iii. Will older people like the new technology because it will be something new to them and will have to learn how to use it properly.

ConsA. Microsoft Surface will be brand new technologyi. The cost of Microsoft Surface will have a very expensive price tag along with it.

ii. Since it is a new product this means it will still have a few bugs in it that have not been found or worked out.

B. How reliable with this new technology bei. Seeing how this is going to be used not only to order off of it will as be used as a table to eat and drink off of. Will the Surface be durable enough to handle messy food and drinks that will be spilled on it?Alternative 2- Improve Healthy menu OptionsMore Attention for America’s Healthy Menu Options- McDonald’s has been successful in adding healthy menu options around the globe. However, throughout our study we have found that the healthy menu options for Americans are quite limited, and even more limited for the children in the United States.

The PlanA.We feel that adding some healthy menu combination meals would really improve McDonald’s sales. Americans don’t want just a salad or chicken wrap as a meal, so why not add a combination meal that includes a salad, wrap, grilled chicken breast, or toasted deli sandwich with their choice of a healthy side, such as a fruit salad, yogurt, vegetables, or baked potato.

B.Don’t forget about our children. Mom’s aren’t just concerned about what they are putting in their mouths, their children’s health is just as important. If a mom can go to McDonald’s and get a healthy meal, but there isn’t anything healthy to feed her children, most likely she’s going to choose a competing fast food franchise. Happy meals need to have options such as, a beef pot pie, turkey sandwich, or grilled chicken fingers. Choices of sides could include a healthy macaroni and cheese, vegetables, fruit & marshmallows, or even cottage cheese and strawberries. McDonald’s could also really score some big points with parents if they added healthy lifestyle tips for kids on the happy meal sacks, or provided toys that promote exercise.

Pro’sA.American’s love variety and choices. That’s exactly what this plan is giving McDonald’s customers. Variety and healthy choices will not only satisfy current customers, but it will attract more business.

B.One of McDonald’s biggest customer bases is America. Providing these options for this customer base will also increase their profit intake.

C.This plan also shows the people in the U.S. that McDonald’s cares about their customers concerns. This is just one more way to attract business.

D.Since the release of the movie “Super Size Me” McDonald’s has been known as the fast food restaurant that makes Americans fat. The best way to improve this bad image is to implement the healthy menu options in America.

Con’sA.Adding more options to a menu also means adding costs for the business. It is more expensive to keep vegetables and fruits fresh than it is to keep the food they currently serve fresh.

B.Even though American’s are very concerned about their health, there is a large number of people who don’t want to do anything about it. People aren’t looking to be healthy when they go out to eat at McDonald’s, and because of that, the new healthy food options may not sell as well as other well established items on the McDonald’s menu.

Alternative 3 – Increasing WagesIncrease starting wages and implement frequent raises – McDonald’s has always been considered one of the worst paying jobs with the lowest skill level. Even though the working conditions are favorable, qualified workers do not want to work at McDonald’s because it is embarrassing, but mainly because McDonald’s does not pay their employees enough. We think starting salaries should be increased as an incentive to want to work for McDonald’s and turn the job into a career.

ProsA. More dependable employees as applicants.

i. The country is experiencing a huge worker shortage, but not only a worker shortage, but qualified, dependable workers. This alternative should help remedy that situation.

ii. With higher starting wages and frequent raises for the employees, there should be a less percentage turn-over rate. If the employees are happy, they won’t be looking for other positions elsewhere.

ConsA. This increase will cost the corporation more financially.

ii. This could limit the amount available in dividends to stockholders hurting future investments.

RecommendationsTechnology updateIn order to remain in competition with not only fast food restaurants, but other restaurants as well, McDonald’s will have to keep up with the growing technological society. This means taking advantage of any fast food advances that pertain to their area of service. The new technology will have to keep the pace of today’s fast moving society, in which time is money.

A specific technology that we recommend McDonald’s take advantage of is the Microsoft Surface computer tables. This technology will be costly, if implemented in metropolitan area’s it will be beneficial to not only the corporation, but also to McDonald’s customers. Microsoft Surface computer tables will increase the contribution margin of the corporation by saving time, money, and order errors.

McDonald’s should gradually begin the implementation of the Microsoft Office table in major cities throughout the globe. As McDonald’s begins to reap the benefits, and work out the kinks of the tables, the corporation should gradually apply this product throughout smaller restaurants.

This process will be very slow moving and costly, but it is key in ensuring McDonald’s continued domination in global fast food service.

ConclusionsIn today’s fast paces, highly technological society McDonald’s has been able to stay on top of the fast food service industry, while providing quality service, and timely deliverance of food. It is not an easy task to stay on top of technologies and changing tastes of customers. McDonald’s will need to continue to research the changing eating habits and styles to attract new customers and keep the business of current customers.

McDonald’s has proven it’s concerns for customers and employee’s by experimenting with new facilities and foods they are proving to society that they are concerned with not only their health but their prosperity. McDonald’s has a very promising future ahead of them and if they continue to adapt to society and new technologies.


Case Study of McDonald’s Essay

About KFC Essay

About KFC Essay.

Colonel Harland Sanders, born September 9, 1890, actively began franchising his chicken business at the age of 65. Now, the KFC® business he started has grown to be one of the largest quick service food service systems in the world. And Colonel Sanders, a quick service restaurant pioneer, has become a symbol of entrepreneurial spirit.

More than a billion of the Colonel’s “finger lickin’ good” chicken dinners are served annually. And not just in North America. The Colonel’s cooking is available in more than 80 countries and territories around the world.

When the Colonel was six, his father died. His mother was forced to go to work, and young Harland had to take care of his three-year-old brother and baby sister. This meant doing much of the family cooking. By the age of seven, he was a master of several regional dishes.

At age 10, he got his first job working on a nearby farm for $2 a month. When he was 12, his mother remarried and he left his home near Henryville, Ind.

, for a job on a farm in Greenwood, Ind. He held a series of jobs over the next few years, first as a 15-year-old streetcar conductor in New Albany, Ind., and then as a 16-year-old private, soldiering for six months in Cuba.

After that he was a railroad fireman, studied law by correspondence, practiced in justice of the peace courts, sold insurance, operated an Ohio River steamboat ferry, sold tires, and operated service stations. When he was 40, the Colonel began cooking for hungry travelers who stopped at his service station in Corbin, Ky. He didn’t have a restaurant then, but served folks on his own dining table in the living quarters of his service station.

As more people started coming just for food, he moved across the street to a motel and restaurant that seated 142 people. Over the next nine years, he perfected his secret blend of 11 herbs and spices and the basic cooking technique that is still used today.

Sander’s fame grew. Governor Ruby Laffoon made him a Kentucky Colonel in 1935 in recognition of his contributions to the state’s cuisine. And in 1939, his establishment was first listed in Duncan Hines’ “Adventures in Good Eating.”

In the early 1950s a new interstate highway was planned to bypass the town of Corbin. Seeing an end to his business, the Colonel auctioned off his operations. After paying his bills, he was reduced to living on his $105 Social Security checks.

Confident of the quality of his fried chicken, the Colonel devoted himself to the chicken franchising business that he started in 1952. He traveled across the country by car from restaurant to restaurant, cooking batches of chicken for restaurant owners and their employees. If the reaction was favorable, he entered into a handshake agreement on a deal that stipulated a payment to him of a nickel for each chicken the restaurant sold. By 1964, Colonel Sanders had more than 600 franchised outlets for his chicken in the United States and Canada. That year, he sold his interest in the U.S. company for $2 million to a group of investors including John Y. Brown Jr., who later was governor of Kentucky from 1980 to 1984. The Colonel remained a public spokesman for the company. In 1976, an independent survey ranked the Colonel as the world’s second most recognizable celebrity.

Under the new owners, Kentucky Fried Chicken Corporation grew rapidly. It went public on March 17, 1966, and was listed on the New York Stock Exchange on January 16, 1969. More than 3,500 franchised and company-owned restaurants were in worldwide operation when Heublein Inc. acquired KFC Corporation on July 8, 1971, for $285 million.

Kentucky Fried Chicken became a subsidiary of R.J. Reynolds Industries, Inc. (now RJR Nabisco, Inc.), when Heublein Inc. was acquired by Reynolds in 1982. KFC was acquired in October 1986 from RJR Nabisco, Inc. by PepsiCo, Inc., for approximately $840 million.

In January 1997, PepsiCo, Inc. announced the spin-off of its quick service restaurants — KFC, Taco Bell and Pizza Hut — into an independent restaurant company, Tricon Global Restaurants, Inc. In May 2002, the company announced it received shareholders’ approval to change it’s corporation name to Yum! Brands, Inc. The company, which owns A&W All-American Food Restaurants, KFC, Long John Silvers, Pizza Hut and Taco Bell restaurants, is the world’s largest restaurant company in terms of system units with nearly 32,500 in more than 100 countries and territories.

Until he was fatally stricken with leukemia in 1980 at the age of 90, the Colonel traveled 250,000 miles a year visiting the KFC restaurants around the world.

And it all began with a 65-year-old gentleman who used his $105 Social Security check to start a business.


KFC operates in 74 countries and territories throughout the world under the name “Kentucky Fried Chicken” and/or “KFC.” It was founded in Corbin, Kentucky by Colonel Harland D. Sanders, an early developer of the quick service food business and a pioneer of the restaurant franchise concept. The Colonel perfected his secret blend of 11 herbs and spices for Kentucky Fried Chicken in 1939 and signed up his first franchisee in 1952. By the time KFC was acquired by PepsiCo in 1986, it had grown to approximately 6,600 units in 55 countries and territories.

KFC restaurants offer fried chicken products and some also offer non-fried chicken-on-the-bone products, with the principal entree items sold in pieces under the names Original Recipe, Extra Tasty Crispy and Tender Roast. Other principal entree items include Chunky Chicken Pot Pies, Colonel’s Crispy Strips, and various chicken sandwiches. KFC restaurants also offer a variety of side items, such as biscuits, mashed potatoes and gravy, cole slaw and corn, as well as desserts and non-alcoholic beverages. Their decor is characterized by the image of the Colonel and distinctive packaging includes the “Bucket” of chicken.

In 1996, KFC’s worldwide system sales of over $8 billion grew faster than the industry average even though the number of restaurants in its global system did not materially increase. This growth was largely due to the impact of new products as shown by the fact that same store sales in Company-operated stores in the U.S. increased 6%. In 1995, same store sales for Company-operated stores in the U.S. were also strong, increasing 7%. For the first half of 1997, KFC same store sales growth for Company-operated units in the U.S. was consistently positive resulting in a 4% growth rate for the 24 week period. Average U.S. system-wide sales per traditional unit in 1996 were $775,000.


The Yum! Brands, Inc. organization is currently made up of six subsidiaries organized around its five core concepts, KFC, Pizza Hut, Taco Bell, A&W All-American Food Restaurants and Long John Silvers. Yum! Brands and KFC is based in Louisville, Kentucky; Pizza Hut and Yum! Restaurants International are headquartered in Dallas, Texas; Taco Bell is based in Irvine, California; and A & W All-American Food Restaurants and Long John Silvers are based in Lexington, Kentucky.

Each of Yum! Brands’ concepts are engaged in the operation, development, franchising and licensing of a system of both traditional and non-traditional QSR units. Non-traditional units include express units and kiosks which have a more limited menu and operate in non-traditional locations like airports, gas and convenience stores, stadiums, amusement parks and colleges, where a full-scale traditional outlet would not be practical or efficient. In addition, there are approximately 367 units housing more than one concept (“2n1s”). Of these, approximately 354 units offer both the full KFC menu and a limited menu of Taco Bell products, and approximately 13 units offer both the full KFC menu and a limited menu of Pizza Hut products.

In each concept, consumers can either dine in or carry out food. In addition, Taco Bell and KFC offer a drive-through option in many stores. Pizza Hut
and, on a much more limited basis, KFC offer delivery service.

Each concept has proprietary menu items and emphasizes the preparation of food with high quality ingredients as well as unique recipes and special seasonings to provide appealing, tasty and attractive food at competitive prices.


Our passion, as a restaurant company, is to put a YUM on people’s faces around the world, satisfying customers every time they eat our food and doing it better than any other restaurant company. A&W, KFC, Long John Silver’s, Pizza Hut, and Taco Bell offer customers food they crave, comeback value, and customer-focused teams. The unique eating experience at each of our restaurants make our customers smile and inspire their loyalty for life. Toward that end, our 750,000 associates around the world are trained to be customer maniacs.

With sales now in excess of $1 billion in Australia, we have proof positive of the power of Customer Mania. But what’s at its core? Three things, really:

· Operational excellence

· Great marketing and advertising

· Real “sit up and take notice” customer service

When we took the concept of Mania to our Restaurant Team Members – the talented people who deal with our customers day in, day out, every day – they embraced it with passion. They took the program and ran with it, becoming powerful catalysts for change throughout our entire organization! Why? Simple – Customer Mania unlocked their enthusiasm and creativity, empowering them to do whatever it takes to satisfy guests.

Listening to the Voice of the Customer

Customer Mania is a great concept, but how would we give it meat? By listening to the Voice of the Customer! One initiative we undertook in Australia was to invite RGMs to customer research sessions, where they could closely observe customers talking about their experiences in our restaurants. Their stories – good and bad – were telling. Customers complained about speed and communication in the KFC drive-thrus, and the lack of ready access to a manager in the restaurant.

As a direct result of these focus groups, our Customer Mania team developed two important initiatives: Improving our drive-thru facilities and service to make them more customer-friendly, and revamping our problem resolution process.

· Drive-thru: We embarked on building large glass boxes at the entry to drive-thrus, with menus and an attendant replacing the speaker. These changes will make the drive-thru experience much more personal and more responsive.

· Problem resolution process: We took our best frontline workers, put them through additional LAST training, and empowered them to resolve customer complaints on the spot. As a result, customer complaints made to the home office have been reduced dramatically – down over 50%!

It’s all about Leadership

No doubt we’ve got a long way to go. But it’s clear to me that the five leadership principles we’ve established for Customer Mania are working, and are worth sharing:

· Lead from the top

· Stay the course, create a “five-year journey” mindset

· Be consistent

· Recognize, recognize, recognize

· Define what success looks like

· Good luck, and Yum to you!

About KFC Essay

Channels of Distribution: McDonald’s Essay

Channels of Distribution: McDonald’s Essay.


The core of this presentation is to discuss the theory of distribution strategy with the underlying real life examples of McDonald’s fast-food restaurants. The aim is to discuss McDonald’s distribution channel and the way in which this fast-food restaurant chain gets its products to the market. In the theory of the Marketing Mix, place (distribution) determines where the product will be sold and how it will get there. In fact, as noted on, McDonald’s is the leading global foodservice retailer, with more than 30,000 local restaurants serving nearly 46 million people each day in 121 different countries.

Approximately 80 percent of all McDonald’s restaurants worldwide are owned and operated by independent franchisers. Furthermore, at the essence of place decisions, Kotler (et al., 2001, p. 513) claims that, “retailers, particularly fast foods chains, often state their seven P’s of marketing to be, that is location, location, location, location, location, location and location.” Hence, a retailer’s location is the key to attracting customers.

The costs of the building or leasing facilities are a major factor on the retailer’s profits. Thus, site location decisions are among the most important the retailer make” (Kotler, et al., 2001, p. 513).

Intensive Distribution.

Distribution arrangements tend to be long term in nature. Because of this time horizon, channel decisions are usually classed as strategic, rather than tactical or operational ones. Many of McDonalds restaurants are open 24 hours per day which satisfies the customers needs and wants, especially for exists their hunger. This kind of distribution strategy is called “intensive distribution”, means marking the product available for sale through all possible channels of distribution. As defined by Kotler (et al., 2001, p. 487), “intensive distribution is stocking the product in as many outlets as possible.” In addition, this strategy must be designed to reach the consumer wants at anytime and anywhere.

Vertical Marketing Network (VMN).

A franchise organization, to quote Kotler (et al., 2001, p. 482), is “a contractual vertical marketing network in which a channel member called a franchiser links several stages in production-distribution process”. McDonald’s has adopted the service-firm-sponsored retailer franchise network, in which a service firm licenses a network of retailers to bring its service to consumers (Kotler, et al., 2001, p. 482). Nevertheless, McDonald’s caters to a large consumer market with varying tastes and thus cannot afford to introduce products without familiarizing itself with provincial preferences in food.

For this reason, McDonald’s distributes its products in foreign and domestic locations with the help of franchisers who are well aware of what works in their country. Moreover, these franchisers also provide insight to the company on its diverse customers, and helps McDonald’s achieve its vision of “being the world’s best quick service restaurant experience.” In brief, this is an extremely intelligent distribution method since it helps in providing people with the kind of products they desire, maintaining the franchise reputation worldwide.

To encourage repeat customer visits, McDonald’s is intensifying the efforts to ensure the restaurant interiors and exteriors are clean and welcoming. Moreover, McDonald’s intends to regain the status as the gold standard for clean restaurants. Furthermore, McDonald’s is giving the business a fresh edge in many places by rebuilding, renovating and re-imaging the restaurants. The McDonalds experience abroad demonstrates that doing such can result in improved sales and profitability as stated on McDonald’s ensures consistent products by controlling every stage of the distribution. In addition, regional distribution centers purchase products and distribute them to individual restaurants. On the other hand, when designing its channels, a company needs to consider competitors’ channels.

Yet, it may want to compete in or close to the same outlets that carry competitors’ products (Kotler, et al., 2001, p. 486). Thus, food companies want their brands to be displayed next to competing brands. Meanwhile, McDonald’s adopted this setting channel objective as a view and therefore wants to be located near its competition. On the other hand, McDonald’s uses essentially the same competitive strategy in every country, the company wants to be the first in the market and establish the brand as rapidly as possible by advertising very heavily. This effective distribution strategy (place) has helped McDonald’s develop a strong market share in the fast-food market around the world. Moreover, according to Kotler (et al., 2001, p. 513) stores must have a planned atmosphere that suits the target market and moves customers to buy. In addition, McDonald’s has pre-determined the locations for many of its stores to help reach a variety and diverse population.


In conclusion, McDonald’s has an intensive distribution process which is a credit to their Marketing department. As businesses and other organizations move forward, the challenge of making their products and services readily available to customers around the world will become much more difficult and complex. Marketers responsible for developing and managing the marketing channels needed to meet these customer demands in the global market will need all the help they can get. McDonald’s has implemented a successful distribution strategy in which other companies should follow. Adopting a marketing strategy that openly focuses on distribution (place) on location of stores, has helped make McDonald’s the successful business it has become is a definite success story.


Kotler, P., Brown, K., Adam, S., Armstrong, G., 2001. Marketing, 5th Edition, The McGraw-Hill Companies, New York.

Channels of Distribution: McDonald’s Essay

Case Analysis: Profitability of Wendy’s Chilli Essay

Case Analysis: Profitability of Wendy’s Chilli Essay.

Dave Thomas, the founder of Wendy’s restaurant, opened his first restaurant on November 15, 1969 in Columbus, Ohio. Dave was born in Atlantic City, New Jersey on July 2, 1932. He was adopted at six weeks old by Rex and Auleva Thomas. Dave moved from state to state with his father when his mother passed at the age of 5. At the age of 12, Dave obtained his first job at a restaurant in Knoxville. Thus, he began his love for the restaurant business.

At the age of 15, Dave dropped out of high school to work full time in the restaurant business. While working full-time at the Hobby House restaurant, Dave met Colonel Sanders, the founder of Kentucky Fried Chicken (now KFC). In 1962, Dave was offered the opportunity to turn around four failing Kentucky Fried Chicken restaurants in Columbus, Ohio. Utilizing his past experience, Dave turned the restaurants around, sold them back to KFC, and immediately became a millionaire all at the age of 35. He then co-founded Arthur Treacher’s Fish and Chips.

Dave again capitalized on his experiences in restaurant management when he decided to establish his own restaurant. Since hamburgers were his favorite food, Dave decided to start a restaurant that would serve a quality hamburger without a 30 minute waiting period. Named for his eight year old daughter, Dave started Wendy’s. In order to focus on quality and remain competitive, the menu was limited to four basic products excluding beverages. The product line included hamburgers, chili, french fries, and Wendy’s Frosty Dairy Dessert.

Wendy’s hamburgers patties consisted of ¼ pound of 100 percent pure domestic beef, served as a square shaped patty rather than a round shaped patty, and served “hot ‘n juicy” in accordance with individual customer orders. The french fries were sliced slightly longer and thicker from high quality potatoes and cooked in specially-designed fryers to allow the inside to be cooked without burning the outside. Wendy’s Frosty Dairy Dessert is a thick blend of vanilla and chocolate flavors and must be served with a spoon as a dessert rather than a straw.

Wendy’s chili is the fourth basic menu item. Whenever the cook overestimated customer demand, beef patties stayed on the grill beyond the recommended time. This caused the beef patties to be well done. To avoid customer dissatisfaction, Wendy’s used the “well done” beef patties that had been refrigerated from the previous day and could not be served to customers. Each eight ounce serving contained about a quarter pound of ground beef. Wendy’s chili is prepared by the assistant manager or an experienced crew member using an original recipe. The labor cost for the assistant manager and crew member is listed in Table 1. The cost to prepare the chili is listed in Table 2 below. Table 3, illustrates the direct cost associated with the production of chili.

Table 1. Labor costs for assistant manager or a crew member to prepare chili in 1978

Table 2. Ingredients and costs in 1978.

Table 3. Direct cost for 1978

In the event of a shortage of overcooked patties, beef patties were cooked for the sole purpose of inclusion in the chili. In order to prepare a pot of chili, it took 10 to 20 minutes of preparation time. This process required chopping the meat into small pieces, adding the other ingredients and stirring the batch six times. Sixty percent of the total annual sales for chili occurred during the months from October to March. The chili product has the lowest gross profit margin. The 1978 labor and additional direct costs are listed in Table 4 below.

Table 4. Cost of Chili Preparation, Overall Cost of Chili and Profit of Chili.

In November 1979, Wendy’s became the first national restaurant chain to introduce a Salad Bar on the menu. Initial test marketing of the salad bar concept had been successful. This innovative idea also posed a dilemma. If Wendy’s was to follow their limited menu concept, the salad bar would potentially replace chili since it had the lowest profit margin on a full cost basis. Then, management would be faced with containing the cost of the overcooked patties that resulted from overestimating customer demand and cooking too many hamburgers. While hamburgers comprised 55 percent of total sales, chili sales comprised of five percent of total sales. The chili was most popular between the months of October through March. During these months, 60 percent of the total annual chili sales occurred. Management was faced with deciding which product would be best to sustain long-term profitability.

Wendy’s revenues were derived from the sales made from company-owned restaurants, from royalties paid to the company by owners of franchised restaurants, from fees paid by the owners of franchised restaurants for technical assistance and from interest earned on investments. By 1978, Wendy’s operated 1,407of restaurants. Of this number, 1,119 stores were owned by franchisees. Franchised stores were built to a uniformed specification and were not located within the same market areas as company-owned stores.

Most restaurants were located in urban or densely populated suburban areas; a large volume of customers was a primary factor for Wendy’s success. Each franchisee paid a $15,000 fee for technical assistance prior to the opening of a restaurant for services such as site selection, construction plans, initial training for owners and staff members, advertising materials, national purchasing agreements and operations manuals. For 1978, company-owned stores generated 84.13% of revenue, royalties generated 12.65% of revenue, technical assistance fees generated 1.87% of revenue, and interest from investments generated 1.35% of revenue. The income statement from Moody’s is listed in Table 5 below (Moody’s, 1980, p. 1565).

Table 5.

By focusing on a product differentiation marketing strategy, quality food, quick service and reasonable prices, Wendy’s was able to achieve its financial success and to grow rapidly at a time when the fast-food industry appeared to be saturated. The adoption of the limited menu concept also contributed to this success. Having a limited menu concept allowed Wendy’s to concentrate on the quality of a few menu items and allowed Wendy’s to quickly prepare a meal to the customer specifications. The limited menu concept does not allow for changes in consumer preferences nor does it allow Wendy’s to compete with other fast food restaurants serving items such as chicken.

In 1970, Wendy’s broke new grounds by opening a second restaurant with a unique feature. This restaurant featured a drive-thru window with a special grill within the pick-up window. Wendy’s was able to achieve success in their drive-thru window concept, because their product was served fresh from the special grill within a short span of time. While other restaurants offered a standard product through their dive-thru window, Wendy’s differentiated their concept by offering a product that was prepared fresh to the customer’s specifications. Therefore, the product delivery time did not increase when preparing the order as requested by the customer, whether in the dining room or through the pick-up window.

Wendy’s used a product differentiation approach for their hamburgers. By marketing the hamburgers as a square patty rather than a round patty, Wendy’s was successful in advertising their hamburgers as “old-fashioned.” Wendy’s also cooked each hamburger in a manner that provided a customized hamburger for each customer quickly and at a reasonable price.

Innovations have been the key to Wendy’s growth. Their innovative style of management has made Wendy’s a leader in the fast-food industry. By catering to young adults and adults, Wendy’s has attempted to create brand loyalty among their target customers. Wendy’s recognized the dynamic needs of their customers and consequently offered a dining experience that emphasized quality food, fast and friendly service within a setting that is common throughout all their restaurants.

Wendy’s has made growth a priority in their strategic plan in order to achieve high employee retention and satisfaction rates. According to Doorley and Donovan, “employee satisfaction rises when a company grows, probably because people experience new challenges and are excited about being on a winning team (Swanson, 2001).” The introduction of a salad bar will contribute to a diversification strategy that will also augment their innovative approach.

Chart 1. Sales comparison of Wendy’s and competitors.

Quality was a foundational component in the first Wendy’s restaurant. This was due largely to uncompromising passion for quality by the founder, Dave Thomas. Quality still remains the top priority in the food, people and service industry. The mission statement of Wendy’s is: “To deliver superior quality products and services for our customers and communities through leadership, innovation and partnerships (Wendy’s, 2004).” The vision statement of Wendy’s is: “to be the quality leader in everything we do (Swanson, 2001).” This core value has guided the organization and helps to define the corporate culture and distinguished Wendy’s from the competitors.

Business Creations recommends Wendy’s pursue adding salads to their limited menu concept; however, this should be done as a menu item rather than as a Salad Bar concept. Since Wendy’s has placed a high emphasis on quality, a Salad Bar concept introduces various risk factors which may cause dissatisfaction among the customers. Risk factors such as foreign objects falling into items on the Salad Bar and the food area remaining sanitized are just two of the risk factors.

Also, the Salad Bar concept would require additional labor to replenish the stock. To maintain a consistent standard, Wendy’s should prepare the salad and sell the item as a pre-packaged menu item. We also recommend Wendy’s further evaluate removing chili from the menu in the 128 restaurants in the southern states during the summer months since sales decrease to 40 percent during this time frame. Excess beef patties can then be used as a topping for a salad, such as a Taco Salad.


Hoover’s fact sheet. (2003). Retrieved from:’s/–ID__11621–/free-co-factsheet.xhtml,–ID__13112–/free-co-factsheet.xhtml,–ID__15659–/free-co-factsheet.xhtml,–ID__54531–/free-co-factsheet.xhtml,’s/–ID__10974–/free-co-factsheet.xhtml on May 2, 2004.

Moody’s OTC Industrial Manual. (1980). New York, NY: Moody’s Investors Service,


Swanson, B. (2001). “New strategic plan combines the best of Wendy’s and Tim Hortons.” Wendy’s Magazine. 13.

“Wendy’s strategic plan”. Retrieved from www.wendy’ on May 2, 2004.

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Case Analysis: Profitability of Wendy’s Chilli Essay

Analysis of “The Trouble with Fries” Essay

Analysis of “The Trouble with Fries” Essay.

Malcolm Gladwell’s article “The Trouble with Fries” is about a very invasive topic. Fast Food is killing us. Can it be fixed? Although his thesis statement isn’t exactly clear, he effectively uses evidence to convince his audience that a nutrition movement is needed especially for fast food. By discussing many factors with supporting evidence that is factual he shows why fast food is struggling to have a nutrition movement. Malcolm Gladwell uses some very shocking facts about French fries and how unhealthy they are for the body.

He states the average American eats about thirty pounds of French fries a year.

In 1990, health concerns arose about using animal-based cooking oil to deep fry them. This caused major fast-food houses to switch to deep frying in vegetable oil. Gladwell then proves this change to be even unhealthier. Switching to vegetable oil means going from saturated fat to trans-fat, this makes the body’s ability to regulate cholesterol uncontrollable. Vegetable oil becomes a trans-fat because it has to go through hydrogenation to become suitable for deep frying.

According to a study Gladwell uses, for every 5% increase in the amount of saturated fats that a woman consumes, her risk of heart disease increases by 17%.

But only a 2% increase in trans-fat will increase her heart disease risk by 93%. This study was designed by Walter Willett who also states that the consumption of trans-fat in the United States probably causes about 30,000 premature deaths each year. This evidence used by Gladwell is very persuasive in the matter that an actual nutrition movement is needed. Gladwell discusses an alternative healthier way to deep fry French fries which shows great strength in his argument. The much healthier way of deep-frying French fries is by using Olestra, Malcolm Gladwell discusses.

Olestra is a fat substitute that cannot be absorbed by the body. Frito-Lay’s no-fat Wow! chips are made with a version of Olestra. The FDA won’t approved the alternate healthier way of deep-frying French fries by using Olestra because they claim it causes gastrointestinal distress. Proctor and Gamble, the developers of Olestra, performed a test and found that people eating typical amounts of Olestra-based chips don’t have significantly more gastrointestinal problems than people eating normal chips. The FDA is now reviewing this finding. Gladwell used this to point out that it’s entirely

possible, right now, to make a French fry without many dangerous health concerns. The very strong point of this article is that Malcolm Gladwell not only uses French fries in his argument, but beef as well, to prove that it is not only the FDA holding back a nutrition movement. Gladwell uses evidence found by Auburn University. The Auburn Team created what they called the AU Lean beef. This was a beef patty that was ? water, 20% protein, 5% fat and, ? seaweed. They did a blind taste test comparison of AU Lean burgers and traditional McDonald’s burgers. The AU Lean burgers won overall.

AU Lean also won in a test of 100 families trying AU Lean, market beef, and 5% fat beef. What this showed was that people can be fooled into thinking they’re eating a lot of fat when they really aren’t. Shortly after, McDonald’s came out with the McLean Deluxe, using AU Lean beef. It was sold as the healthy choice, therefore people were informed it was healthy and it went off the market. This was great evidence Gladwell used that proved Americans think healthier food won’t taste as well. There was also evidence that children also think the same way as the McDonald’s example of healthier food won’t taste as good.

Gladwell discusses an experiment by Leann Birch on children’s aspects of food based on restriction. The experiment consisted of a large group of children feeding them a big lunch then letting them loose in a room with lots of junk food. Her findings were some children ate none of the junk food while others really chowed down. This showed that the ones who chowed down are restricted from high-fat, high-sugar food so they think in terms of presence and absence of food rather than their hunger. Because they had been told junk food was bad for them, they thought that it had to taste good.

This example really set the light for Gladwell’s argument. It’s not the fact that the food is unhealthy but because of it. Malcolm Gladwell effectively convinced his audience that a nutrition movement is needed. He proves that not only the FDA is holding back an actual nutrition movement but the consumers as well. He supports this by the studies of evidence he provided stating there are healthier ways to fast food. Works Cited Gladwell, Malcolm. “The Trouble with Fries. ” The New Yorker 5 Mar. 2001. Web. 20 Feb. 2013.

Analysis of “The Trouble with Fries” Essay