Case Brief•Outback Steakhouse is a chain of casual dining restaurants positionedwith an Australian theme in the United States, first established in 1988by Bob Basham, Tim Gannon and Chris Sullivan.•From its first year, Outback Steakhouse, Inc. was the fastest growing U.S.steakhouse chain, with over 200 stores by early 1995•They Have achieved a great success in an industry that 75 % of newentrants fails•Sullivan and Basham were Franchisees of 17 Chilis Resturant and theyhave used, and Gannon was working in new Orleans Rest Chain,•Early Financing: funded Outback Startup from selling Chilis Rest andlimited partnership & Investments by family/friends•1990 they have turned into venture capital firm securing a 2.5M$ funds
Case Brief•1994 Outback successfully issued Equity Public offering (B.Merit CFO)•Outback has been growing in US to the rate of 70 Through NationalFranchising strtategy Stores annualy, and they had believed that they willreach saturation with 4 to 5 years in US•Outback International Rollout started with Expansion into Italian DiningSegment through Joint Venture with Carrabbas Italian Grill.
Why has Outback been so successful ? As Chris Sullivan the chairman has mentioned “Outback is all about a lot of different experiences that has been recognized as entrepreneurship”
Why has Outback been so successful ? 1) Founders are domain experts in chain restaurants industry. 2) Applying high quality standards for meat and other ingredients. Tim Gannon “we don’t tolerate less than the best” 3) Successful Business strategy based on Differentiation. 4) Successful Corporate strategy based on horizontal growth and expansion in international markets.
Why has Outback been so successful? contd 5) Strong company culture “tough on results, but kind with people” 6) Positioning of cheerful, fun and comfortable experience. With also a theme association of adventure and outdoor.
What are the key factors that drive sustainable profitable growth in the restaurant business in general ?
Key factors of sustainable growth in restaurant industry1) Decisions making are long-term and economic sense.2) Adapt desirable technologies, especially for record keeping and tracking customers (CRM).3) Educate managers through continuing education at trade shows and workshops. An environment that fosters professional growth has better productivity.4) Effectively and regularly communicate values and objectives to employees.
Key factors of sustainable growth in restaurant industry5) Maintain a clear vision, mission, and operation strategies, but be willing to amend strategies as the situation changes.6) Create a cost-conscious culture, which includes stringent record keeping.7) Focus on one concentrated theme and develop it well.8) Create and build a positive organization culture through consistent management.9) Maintain managerial flexibility.10) Choose the location carefully, although having a good location seems to be more a moderating variable than a mediating (causal) variable in restaurant viability
Positioning StrategyPositions ConsideredOutback’s superior quality control and service have positioned itself as a best-value steakhouse. “WE DON’T TOLERATE LESS THAN BEST”Outback has leveraged their fanatical pursuit of quality as a key marketingcompetency to attract customers.Positioned itself as a place providing not excellent food only but also cheerful,fun, comfortable experience.EvaluationConsumers were enticed by the "different" theme.The Outback experience was associated with a cheerful, fun, andcomfortable time.This attribute, in combination with high quality and flavorful entrees, gaveOutback an early strong brand image.
Sustainability of various strategy locally and internationally.
Strategy SustainabilityLocally• High quality to affordable prices and innovative concept• Good reputation, brand awareness and image in the US• Excellent Human Resources Department• Differentiation Strategy (customer orientation)• Good supplier relation• Experience in local franchising (US-Market)• Relaxing atmosphere (Australian Theme)• (Location of restaurants (suburbs))1- Differentiation Strategy (central of chains differentiation: High quality offoodand service, relaxed ambience and comfortable experience)2- Limiting service to dinner (Outback serves only dinner)3- Customer satisfaction4- Outback Location and Australien Theme5- Management and ownership structure, Benefits for employees6- Human Resources - Selection of managers and employees7- Long term relationship with suppliers and employees8- Constant drive for innovation and improvement
Strategy SustainabilityInternationally1- Find the right franchisee partner (for) abroadOutback uses a business model that incorporates franchises and jointventures. The franchise concept makes good use of what Connertyhas characterized as Outbacks "pure strength," a support operation.2- Focus on the strength – Support OperationContinue to work strategically with domestic suppliers to develop anoverseas supply network.3- Geographical expansionLocal rules, work practices, customs, and other cultural factors can differso widely from place to place that a working knowledge of the targetcountry is a prerequisite to successful operation abroad.
Is it Appropriate to Intl’y Expand• US Market will be saturated within 4 to 5 years.•Franchising wasthe most popular means for rapid expansion.•International expansion was an important source of revenues for a signifiantnumber of players in the industry.•US food themes were common throughout Canada as well as western europeand east asia. As a result of the opening of previously inaccessible marketslike Eastern Europe, former Soviet Union, China, India and Latin America, thepotential for growth in US. Food establishment abroad was enormous.•High potential of foreign markets•Better potential for franchise as they traditionally perform better that thecompany-held restaurant.
Country Selection•Outback had no firm plan for international rollout (Weak point).•Preliminary choice of markets targeted for entry: •First Year; Canada, then Hawaii then South America then Far East, Korea, Japan. •Second Year; UK then Europe• Choices should be based on: •(External Factors): •Country market factors. •Country production factors. •Country environmental factors. •Home country factors. •(Internal Factors); •Company product factors. •Company resource/commitment factors. •Infra structure •Demographics
SWOT analysisInternal Analysis •Strengths 1. Recognized High Quality and super value of meal They serve 2. Strong entrepreurial spirit and working environment. 3. Good geographical strategy that target customer where they are (B-location with A-demographics) 4. Very good relation with Domestic suppliers willing to follow OSH strategy of international expansion
SWOT analysisInternal Analysis •Weaknesses 1. Limited international experience 2. Limited brand awareness in foreign countries 3. Very tight links with suppliers may makes OSH too dependent on them
SWOT analysisExternal Analysis •Opportunities 1. High potential of foreign markets 2. Better potential for franchise as they traditionally perform better than the company-held restaurant. 3. Demand for foreign franchise 4. Menu Diversification
SWOT analysisExternal Analysis •Threats 1. Competitors with new concepts and innovations (national and international), and Having more experience in the international market 2. Cultural differences and economic barriers (tariffs, regulations, laws, laborlaws and unification, ...) 3. Inability of suppliers to follow internationally, host suppliers need to be found 4. Growing Health concern about red meat consumption
TOWS Matrix Strengths Weaknesses S.1. Excellent Human resources/ Loyalty W.1. Narrow Product-line (Beef only) S.2. Quality Positioning Strategy W.2. Hours of operation S.3. Wide distribution network/Strong Relation With Suppliers W.3. dinner food onlyOpportunities 1. Follow market penetration strategy by 1. Menu diversification engineering (W.1 O.2 expanding presence in US and International O.3) markets 2. Capitalizing on the growing InternationalO.1. Diversify menu offering 2. Market Campaign Market potential with a good site/country 3. Franchising selection (W.1 O.3 O.2 )O.2. Vertically integratedbackwardsO.3. Expand businessinternationallyThreats 1.Menu diversification engineering (S.1 S.2 T.1- 2)T.1. Economic downturnT.2. New entrants withinnovation menuT.3. Health concern and redmeat consumption 9/26/2012
PESTEL ANALYSISPolitical Technological Taxation Food Industry focus / Resources Foreign trade restriction EnvironmentalEconomic Waste Disposal / Energy Interest rate./ Money Supply Consumption Inflation / Unemployment Environmental lawSocial Population (Demographics) Income distribution./ LifestyleLegal Competition law / Employment Law Health law / Safety law 28
New Entrant (High) Low Capital investments needed Low Switching cost Industry Economy of scale for large restaurants chain Analysis Franchising becoming frequently a quick option Rivalry Competition (High)Power of Buyer (High) •Competition in the restaurant POWER OF SUPPLIER•Buyers don’t depend on suppliers industry is very strong (Moderate)only Fragmented restaurant industry – High segmentation •Many food suppliers are available.•Alternative sources are plentyavailable •Switching cost is moderate Many Global restaurant chains Low switching cost High quality suppliers become popular Substitute Product (High) •Variety of different substitute are available Human needs could be satisfied easily Home cooking
Strategic Recommendations1 Domestic expansion of Outback steakhouses and Italian theme restaurants. PROS: Increased market share Saturate the market with Outback locations Increase number of company owned stores domestically Increased potential for higher profit Potential for economies of scale Avoids risks associated with international expansion Continue Develop well-recognized brand name CONS: Delays entry into global market Domestic saturation may occur in 4-5 years Intense competition Supplier Bargaining power increase 9/26/2012 30
Strategic Recommendations2 Global Expansion PROS: Revenue increases Maximize brand recognition and accordingly Brand Equity Increased market share Creates a stronger financial position to buy back non-company owned domestic franchises Application of proven franchise model (Faster to Grow and Expand) Supplier contracts increase thus strengthening relationships Spread business risks over larger market base CONS: Foreign market entry difficulties · No established supply chains (Domestic Supplier might not be Compliant) · Political, economic, and socio-cultural differences 31