Five Guys Business Strategies - Case Study Example

Five Guys Five Guys is a private owned restaurant chain that serves fast and casual food. The restaurant focuses on French fries, hot dogs, soft drinks, and hamburgers. Five Guys started in 1986 and with its headquarters in Lorton, Virginia. It has branches in more than 40 states in the US, as well as in six Canadian provinces. This paper aims to determine the business that Five Guys is in, run the rule on their primary competitors, perform the restaurant’s SWOT analysis, and finally give strategies for the hotel chain in the coming five years. 1. Business Case Five Guys began in 1986 by the Murrells together with their 4 sons. Originally, the restaurants name was Jerry and the sons. After beginning the business, Janie and Jerry Murrell had a fifth son, with all sons involved in running the business as the Five Guys. Together, the brothers did away with ideas of broad menus; favoring a more honest and solid buggers (DATAMONITOR 2). They pride themselves in offering non-frozen buggers, which are hand-patted from ground beef, and 80% lean. The French fries preparation occurs daily including cutting the potatoes, along with in the house and fresh buggers. The restaurant created a cult following by word of mouth. Five Guys price their burgers at four dollars; yet manage to keep their clients coming back due to their appeal for high quality and fresh food. The pricing makes the restaurants enjoy increased success in areas with higher income that cater mainly to the male demographic. Rather than, depend on conventional advertising, the company relies on the customer’s word of mouth. The product’s immediate appeal and the restaurant’s storefront ensure that they secure new franchisees and customers. One significant advantage that Five Guy’s business model holds is the simplicity of its menu. Instead of attempting to woo more customers using new products, they prefer to serve clients with well done chips and buggers. The company has shown a desire to keep expanding (Janowitz 4). The company has opened one hundred and sixty three branches in thirteen states. It intends to add at least seventy new restaurants. The company also looks for franchise candidates, whom they evaluate by their general experience in business, degree of personality fit with the restaurant, cash flow, and net worth. Their business involves approximately two thousand five hundred square foot urban or suburban spaces. The restaurant business has also acted as effective anchors for other restaurants, educational facilities, cinemas, and grocery stores. 2. Competition. Industry players in the restaurant business are attempting to capture consumers who are unwilling to eat out with value menus (Kurtz 3). This has caused increased market competition. McDonalds, for example, has rolled out a menu with a dollar breakfast, while there has been the introduction of a one dollar double cheeseburger in its US locations. Jack in the Box, on the other hand, has unveiled the combo meal whose feature is a double patty cheeseburger, ordered with a small portion of fries and a drink from $3.99. As a fast food restaurant, Five Guys also faces competition from other types of restaurants which serve food which was originally a fixture of fast food restaurants. This has in turn changed the definition of the consumer as to what a fast food outlet constitutes (Kurtz 7). A large part of consumers interviewed during a Technomic study reveal that they now consider fast food outlets to include restaurants that are fast casual, and offer curbside or carryout services like Panera. Fast food outlets are thuds in competition with these kinds of outlets. One way that Five Guys is succeeding ion dealing with the competition is by offering better food quality and freshness. Prime meat like Angus beef burger is fresh as compared to other restaurants that freeze them. 3. Five Guys SWOT Analysis Strengths Five Guys has already established itself fully in the food industry, and this is the why most of its customers recognize its operations. This company has also formulated effective policies, targeted at satisfying customer’s needs sufficiently. In addition, Five Guys is capable of offering its products in two hundred and fifty thousand different ways. In attempting to satisfy their customers, Five Guys always ensures that it only utilizes beef that is fresh ground (Williams 228). Freezing of food at the restaurant is not an option, this being the reason why the company has no freezers in its locations, with food preserved in coolers (Williams 228). Most people are currently on fat-free diet and, therefore, the company’s menu is free of Trans-fats. The company has also created better reputation, in the food industry, since it was Zagat rated, in 200, and this has significantly increased its competitive strength. This company also does its regular order services with extra fries to maintain its esteemed customers. In addition, two patties servings done with regular cheeseburgers, act as a favorite. Finally, the restaurant attracts and retains customers by the classic white and red branding (Williams 232). The incredible growth rate of Five Guys in the recent years stands as a major strength of five Guys looking to the future. Five Guys grew by thirty eight percent from 2009 to 2010. This trend hints at Five Guys’ potential for growth in other countries, with interest in fast food restaurants increasing globally. According to Murrell, a founder of Five Guys, approaches by investors from around the world hints at the potential Five Guys has (citation). Rather than introducing itself to the Middle East, for example, the region wants Five Guys. Five Guys’ great bugger control via use of supplies from trustworthy suppliers only serves them in proper stead. Their reputation for not delivering food implies that they only serve fresh food. This is a terrific asset for the company to build on, especially with the current trend in the market emphasizing fresh and organic food. Weaknesses: Despite the company’s attempts to attract and retain customers, allergic customers keep away from the restaurant because of peanut oil and the peanut offers. Therefore, the company has the challenge of introducing vegetable sandwich as the only healthy option (Williams 229). The company’s marketing department lacks developed advertising and low consumer awareness. The cause of this lies in their reliance on “word-of-mouth” advertising, which reaches too small a number of potential customers to compete favorably with other fast food restaurants. This has barred them from reaching out to many customers, and creating further awareness of their products. Regulating the nutritional content of food is also the other challenge this company faces. This is because the standard French fries it offers is almost equal to one thousand five hundred calories. In addition, the bacon cheese burgers offered by the restaurant have nine hundred and twenty calories. In 2010, it is unfortunate that the company voted among the unhealthiest chain of fast food restaurants. This significantly damaged its reputation among its customers (Williams 237). In addition, Men’s health magazine rated the restaurant chain as the fourth unhealthiest restaurant chain in the United States. The company needs to improve its accessibility since it does not have a drive-through. Expansion of the fast food chain is due to run into difficulties. This is because they pride themselves in having the best French fries, made from potatoes grown in Idaho. Five Guys have been using these potatoes since first opening. Using this advertising line could prove difficult in foreign markets like London and Baghdad. Five Guys prides itself in its quality. Ever since its establishment, Five Guys sticks by its basics. This is in spite of complaints about certain aspects of their buggers and French fries. However, in the event of expansion, change becomes inevitable especially due to societal and cultural differences. The stubbornness, which served Five Guys in the US, may not work in another location, say Baghdad. Opportunities One of the greatest opportunities that the company has developed is that it is currently implementing its expansion programs. As a chain that is growing at a phenomenal rate and is in a high demand, it has just expanded business into Canada. The restaurant’s chains also opted to expand their markets by offering options of healthier meals like McDonalds. The chains also increased their toppings offerings, especially in various parts of the United States. The restaurant is currently improving its market strategy in order to increase awareness of its brands (Williams 237). A possibility for Five Guys to expand their global channels of distribution also exists. Five Guys, as a company built on “word of mouth” can expand internationally because a considerable number of people travelling to the US would recall it. The company also possesses the ability to add merchandising channels of distribution, on top of expanding their menu. Under menu expansion, Five Guys could explore different menus in order to adapt to various geographical locations, as well as offer healthier produce, substitutes, or use other oils in place of peanut oil. Five Guys could also add variety in their toppings to include unusual sauces. The current trend in the market favors fast food chains, with increasing numbers of people opting to eat out. A significant demand exists for Five Guys fast food restaurants, especially with the recent expansion to Canada. Room for growth in the Canadian and US markets also exists. Threats Competition from key rivals is the biggest threat Five Guy is currently facing. Stiff completion comes from all other burger joints that serve healthy options in their daily menus (Williams 245). The fast food restaurant market has also become complex in that it is keenly watching whatever they are eating. This makes it difficult for the restaurant to provide the right nutritional contents that the customers require in their products. Government policies are also the other key threat that the restaurant faces. For instance, the healthcare bill has set standards for calories served in every menu for all restaurant chains. This makes it be difficult for the restaurant to satisfy its customer’s demands efficiently (Williams 252). A weak local and national economy also threatens to affect Five Guy’s operations. Lower revenues from a decrease in amount customers want to spend could affect the company’s bottom line. Health concerns are another threat to the expansion and sustenance of Five Guys. These concerns relate to the high fat and calorie content of the peanut oil, as well as allergies attached to peanuts for some of their unknowing customers. Complaints by some NGOs and social health institutions could, in the worst case scenario, result in an investigation. Individual demand by customers points to clients’ preference of lower fat content over high fat content. Most of the customers prefer healthier substitutes at reduced prices. This is a threat to the establishment of Five Guys, which uses peanut oil. The current financial credit restrictions could also see franchisees unable to borrow money to foot operating expenses, which can cause a reduction in their expansion plans. 4. Five Guy’s Five year Strategy By utilizing print, web, and radio advertising, the restaurant chain aims to strengthen awareness of Five Guys customization of fries and burgers. Five Guys aim to undertake an advertising strategy. It owns over seven hundred and fifty locations across the US and Canada. It is also Zagat rated. Using the slogan “what ever you want, where ever you’re from” (York 6), the campaign aims to enhance the image of the customer and also increase their awareness. The campaign aims to draw the public’s awareness to the fact that the wide selection of complementary toppings can help create a perfect bugger. Five Guys have a creative media/tactics strategy (Schlosser 3). This aims at convincing the consumers that Five Guys serves the freshest and best burgers compared to the competition. The media strategy will last from August 2012 to July 2013, with the main goal being rising of its market share to 2.0% from 1.2%. The adverts run on radio, Magazines, and web. Works Cited DATAMONITOR: Five Guys Case Study: Maintaining Growth in Fast Food with a Simple Menu & Quality Focus (2010). Print Retrieved from: http://search.ebscohost.com.ezproxy.stthom.edu:2048/login.aspx?direct=true&db=bth&AN=57735660&site=ehost-live Janowitz N. Five Guys sticks to burger-and-fries formula. Shopping Centres Today (2007): 28(7). Print Retrieved from: http://search.ebscohost.com.ezproxy.stthom.edu:2048/login.aspx?direct=true&db=bth&AN=25809549&site=ehost-live York E. FIVE GUYS. Advertising Age, 80(39), 28. (2009). Print Retrieved from: http://search.ebscohost.com.ezproxy.stthom.edu:2048/login.aspx?direct=true&db=bth&AN=45505212&site=ehost-live Kurtz D. L. Boone & Kurtz contemporary marketing / David L. Kurtz. Mason, OH: South-Western Cengage Learning (2012). Print Schlosser E. Fast food nation: the dark side of the all-American meal. Boston: Mariner Books/Houghton Mifflin Harcourt (2012). Print Williams C. Management. New York: Cengage Learning, 2008. Print Read More