Dan Hannah, Vice President for Business Development at Ruth’s Chris, uniquely American and successful Steakhouse restaurant was responsible for the development of new business strategy focused on continued growth and company operated restaurants. Even though current restaurants were seeing consistent incremental growth, new restaurants were critical. Hannah knew that the international opportunities offered a tremendous upside. There are currently 10 successful locations internationally. These locations include Canada, Mexico, Taiwan and Hong Kong.
Based on the fact that these international locations were doing well and seem to be the path to increased revenue, Hannah decided that he would adhere to the ‘market development’ model. Hannah proceeded to look at market criterias, competition and the meat/beef consumption rate per region/country throughout the world in order find the best suitable locations to grow Ruth’s Chris chain of restaurants internationally. ISSUE IDENTIFICATION Ruth’s Chris senior team to locate new international markets to increase stores whether owned or franchised, in order to increase revenue.
The criterias that have eliminated some of the potential prospects include: Liquid net worth of at least $1US million Verifiable experience within the hospitality industry Ability to desire and develop multiple locations Cost of Franchise – $100,000US A 5% gross sales royalty fee 2% of gross sales fee as a contribution to the national advertising campaign For Market Selection Criteria, some concerns were: Looking for market that includes beef eaters – people who enjoy eating beef Markets where it is legal to import beef from US
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Population – high urbanization rates High disposable income Locations where people do go out to eat Locate markets that weren’t anti – US as Ruth’s Chris is uniquely American. ALTERNATIVES AND OPTONS: (1) Amend/Extend contracts with international Franchisees to offer: •Extension of franchisee territories to allow larger geographical growth within that country •extend length of contract in order to give more time to expand within larger territories Pros: (i)These franchisees are already in the international countries and have a better suitable eye for opportunities.
Allowing a larger territory, extended time and opportunity for these international franchisee to successfully grow, will be beneficial for Ruth’s Chris growth internationally. (ii) May increase business partnership with other business owners and potentially replace restaurant competition Cons: (i)These international franchisees may make a ‘bad decision’ to grow where there is not enough revenue, and could potentially create a ‘bad reputation’ for Ruth’s Chris. (ii)This may take time away from current store and level of service may decrease. (iii) This doesn’t expand outside of current international countries
To implement an incentive program among current international franchisees. Measurables to be: •company owned incentive after X amount of years, driving X amount of sales •Number of restaurant expansion within geographical reach, within that country or within a neighboring country •Consistency with service and food quality with every restaurant •Build future business partnership across that country Pros: (i)Motivation to international franchisees to grow (ii)Increased revenue (iii)Similar cultures of pairing up current franchisees with neighboring countries Cons: (i) Cost associated with incentive
Source an equivalent grade of meat to USDA meat locally at potential international markets Pros: (i)Save costs with importing of beef Cons: (i)Time to source quality of meat (ii)Consistency of quality of meat – may not be the same quality every time (iii) Selecting the right market i. e if grade of meat is available, doesn’t mean the market is attractive i. e is it high urbanization? , do people eat out?.. etc. (4) Advertise and publicize the quality of meats/food within international markets that shows a high meat consumption rate such as Central America/Caribbean, Asia and all developing countries.
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Some advertising techniques may include: •Taste sampling at local/public events and shows •TV advertising •Partner with wineries, beer companies etc to introduce quality of meats •Caribbean resorts restaurants Pros: (i)Introduce the quality of food to international markets. (ii)Build relations with potential franchisees in these countries Cons: (i)Very costly – includes a dedicated Ruth’s Chris team, Travel, Operating costs (ii)Time – need dedicated time for presentation (5) Locate where the top fine dining steak houses are in the world.
Already identified are some top steak houses – Morton’s, Flemming’s, Palm, Capital Grill. Identify where these are in the US and/or the world. These restaurants will already be in locations that include beef eaters, high urbanization, people who go out, and people with high disposable incomes. Pros: (i)Less time to survey where the best location is (ii)Good method to identify target areas internationally Cons: (i)Revenue may not be as high as these competitions may already have established most if not all of the customers in that area. RECOMMENDATION Tool:
To implement an Incentive program among current international franchisees – Canada, Hong Kong, Taiwan and Mexico to reach to nearby countries to expand locations internationally Definition: A program that allows current international franchisees to be rewarded by taking the ownership to expand, challenges themselves, grow, improve service, be consistent with food quality and increase revenue outside of their known territories i. e other potential international markets. This incentive program may include: •Start up funds to obtain real estate for new location •Reduced advertising agency fees
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•Public Recognition which will only enhance current stores revenue •Internal employee/franchisee recognition – wall plaque •Discounts for Franchisee family travel once a year to other locations •Potential for other business partners e. g. Beverage industries worldwide – *this comes with public recognition It is essential to identify where in the world are the potential Ruth’s Chris stores will be located. Based on the meat consumption rate sheet in Exhibit 3, it’s already been identified that the top 5 markets are Central America, Caribbean, Asia, Developing countries and middle income countries.
Increase territories for the current 10 international Franchisees. Allow for these franchisees to expand to neighboring countries. For example, Central America shows the meat consumption growth rate to be 13. 5%, hence allowing current franchisee in Mexico to reach across to Central America and Caribbean. At the same time, current Franchisee Hong Kong and Taiwan can be of reach to Asia and other developing countries as their meat consumption rate is between 8. 65% to 9. 45%. These current franchisee may choose to expand or own Ruth’s Chris in these new international markets.
With proof that when Ruth’s Chris current international franchisee reaches out to these markets, the incentive program will motivate them to keep expanding and looking for ideas, locations and partners to improve revenue. Communication is key to all Franchisees. This will allow transparency to how all international franchisee are performing in building new markets. Monthly or quarterly reports from Franchisee required to show that processes are being adhered to in order to mitigate any potential risks to the name – Ruth’s Chris and to any confidential recipes that go along with the name.
All government documentation required to ensure all steps are legal. Customer survey feedback needs to be obtained to show that the new locations are aligned with Ruth’s Chris current level of food quality and service consistency. IMPLEMENTATION (a) Ruth’s Chris’s senior management team will source, support, develop, communicate and deliver this Incentive Program. (b) The Incentive program will motivate current international franchisees to expand, grow in other international markets, thus increasing revenue and bringing exposure of service level and food quality to these markets.
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This Incentive program will be developed and communicated in one month. Rewards of this program can be awarded as early as the next 3 months. (d)This Incentive program is supported by Ruth’s Chris on a worldwide network MONITOR AND CONTROL (a) Number of international locations (b) Total revenue of each new location (c) Level of market captured by new locations (d) Customer service survey results (e) Time it took to expand to new market
