Managing in a Competitive Environment: Red Robin

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  • -monopolistic competition-a few large firms and many small firms with small market share-industry worth $54 billion-4 C ratio low concentration, below 50%-HHI below 1000 = low concentration
  • -fresh ingredients: sustainable farming, animal welfare -service: rigorous employee training , refer to customers as guest, each diner last 47 min-promotions: made to order
  • Lack of control of price
  • some locations may loose some customersbut they will attract new guests from the desired target market, increasing revenue
  • MODEL after CPKcost would increase slightly because of buying rewards to give away revenue may be lost when percentage discounts are given as rewards, but the hope is that it will bring in many new customers and bring enough customers back to increase revenue at a greater rate than cost to raise profit margin percentages.
  • We realize…
  • RR labor costs are 34.78% of total revenueContributing factor
  • Going out to eat is elastic. Economy is getting better so back to tv ads
  • Managing in a Competitive Environment: Red Robin

    1. 1. Alexandra Glazer Emir Dereli Leigh DeStefano Shayna Duff Wingkai Li
    2. 2. Darden Restaurants, Inc Market Share Brinker International Inc CBRL Group, Inc 14% Bob Evans Farms, Inc DineEquity Inc 7% 4% Buffet Holdings, Inc 3% *Red Robin 62% 3% Denny’s Corporation 3% 2% Buffalo Wild Wings Other 1% 1%Four Company Concentration Ratio: 28.8 % HHI Index: 364.78
    3. 3.  Substitutes Entry Barriers Supplier & Buyer Power
    4. 4. PRICE Red Lobster LongHorn Steakhouse Olive Garden Chili’s Grill and Bar Red Robin Gourmet Burgers Buffalo Wild Wings QUALITY
    5. 5. •Freshest •430 locations Ingredients •Shopping plazas Product Place Promotion Price•Bottomless •Price control Fries/Drinks issues•Kid Oriented •Average check $11.42
    6. 6. -Several locations & fluctuations in target market-Advertising costs would stabilize and be moreeffective- By stabilizing brand reputation -lose some customers -new guests from the desired target market -increasing revenue
    7. 7.  Cost slightly increase Original decrease in revenue outweighed by increase in revenue due to the nature of the repurchasing cycle Revenue increase at higher rate than costs, increasing profit margin Financial Connection Loading Oriented Strategy
    8. 8. Red Robin Buffalo Wild Wings 6% Food & Non Food & Non Alcoholic 24% Alcholic Beverages Beverages Alcoholic Beverages Alcoholic Beverages 76% 94%
    9. 9. Red Robin Buffalo Wild Wings 2009 2008 2007 2009 2008 2007 Profit Profitmargin % 2.09% 3.12% 4.01% margin % 5.69% 5.78% 5.96%of sales of sales Asset Asset 1.40 1.43 1.39 1.74 1.73 1.67turnover turnoverReturn on Return on assets 2.93% 4.45% 5.59% assets 9.92% 10.02% 9.97% (ROA) (ROA) Equity Equity 2.08 2.27 1.93 1.47 1.42 1.39multiplier multiplierReturn on Return on equity 6.10% 10.09% 10.78% equity 14.62% 14.24% 13.87% (ROE) (ROE)
    10. 10. Red Robin Buffalo Wild Wings COGS % of sales  COGS % of sales ‘09: 23.68% ‘09: 27.40% Profit Margin % of  Profit Margin % of sales ‘09: 2.09% sales ‘09: 5.69% Alcohol costs more to purchase, but more money is made off of selling alcohol, thus profit margin increases
    11. 11.  Red Robin’s internal structure •Employees •Guests •Shareholders
    12. 12.  The Operating cost of Red Robin is higher than that of Buffalo Wild Wings ◦ Red Robin values their employees first ◦ RR labor costs 34.78% ◦ BWW labor costs 29.99% ◦ RR’s lower profit margin percent of sales of 2.09% compared to BWW 5.69%
    13. 13.  Marketing  Microeconomics ◦ Targeting the right market ◦ Red Robin is going to ◦ Red Robin Revenue ‘08-’09: return to television ads -3.24% in 2010 but fear they ◦ Buffalo Wild Wings Revenue may not be able to ‘08-’09: +27.6% compete with competitors 2009 2008 2007 ◦ An unnecessaryAdvertising expense Costs ◦ Successfully compete Red 17.2 mil 24.4 mil 16.5 mil against competitors Robin with established programs Buffalo 17.5 mil 13.5 mil 10.5 mil Wild ◦ Promotions to keep up with competitors Wings
    14. 14.  Cohesive Brand Reputation Returning Guest Incentives Utilize Late Night Maximize profit margin Increase ROE

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