South Beauty Group is a Chinese restaurant chain that began in 2000 with 2 restaurants in Beijing. By 2007, it had expanded to 19 restaurants across several Chinese cities. The group saw annual revenue growth of around 55% as it pursued an aggressive expansion strategy. However, with hundreds of menu items and quality relying on individual chefs, standardization was a challenge. The group was considering moving from a single-restaurant model to a centralized management structure to boost synergies and control quality. It also planned to explore new business lines like airline catering and retail food supply.

1. South Beauty
Group : in Quest
of a ‘Beautiful’
Growth Story
Syndicate 5
Agung Mahendra 29111324
Rangga Tri Raeros 29111314
Joseph Enrico 29111349
Reski Mapriharto 29111326
Gilang Surawijaya 29111350

2.  Catering industry with
 In 2007 expanded to a total 20 plush
restaurant
 All restaurant were owned and
operated by the group
 Become a food service partner of
Chinese cuisine for the 2008 Beijing
Olympics
 Planning to expand restaurant to a total
of 100 world wide

3. South
LAN Club SUBU
Beauty
Upper class
segment of
successful Latest brand,
business health Business
people for conscious people
dining youth
segment
(Luxury brand)

4. MARKET
South Beauty growth
Year Revenue (per restaurant) Location Restaurant Number Revenue
2000 5,000,000 Beijing 2 10,000,000
2001 6,666,667 Beijing 6 40,000,000
2002 7,500,000 Beijing 7 52,500,000
Shanghai 1 7,500,000
2003 10,000,000 Beijing 8 80,000,000
Shanghai 3 30,000,000
2004 12,500,000 Beijing 11 137,500,000
Shanghai 4 50,000,000
Chengdu 1 12,500,000
2005 15,555,556 Beijing 12 186,666,667
Shanghai 5 77,777,778
Chengdu 1 15,555,556
2006 17,500,000 Beijing 13 227,500,000
Shanghai 6 105,000,000
Chengdu 1 17,500,000
2007 19,200,000 Beijing 13 249,600,000
Shanghai 6 115,200,000
Chengdu 1 19,200,000

5. insight
South Beauty revenue growth (per city)
3
2.5
2
1.5
Beijing
1
Shanghai
0.5 Chengdu
0

6. Revenue Forecasting by Cities (2007)
zhengzhou
10%
jinan
11%
shanghai
35%
wuhan
13%
tianjing
16%
chongqing
15%

7. annual growth rate
35%
30%
25%
20%
annual growth rate
15%
10%
5%
0%
shanghai tianjing chongqing wuhan jinan zhengzhou

8. Potential market of South
Beauty
 There were only a few restaurant offering
Guangdong cuisine in plush office
building in Beijing

9. South Beauty’s Business Model
O Divide two divisions:
O Head office functions
O Restaurant operations
O Change in the management structure to
company’s central management to
achieve a greater synergies
O Need to distinguish to other restaurants

10.  Upmarket restaurant focused on office
workers and business people
 Multi-brand strategy for the group
• South Beauty
• Lan Club
• SUBU

11. Service Marketing Mix
The mixture of controllable marketing variables that
the firm uses to pursue the sought level of sales in the
target market.

12. 7P

13. Product (Service)
 A product that can provide
benefits, meet consumer demand and to
satisfy consumers. Indeed, customers do
not buy goods or services, but they buy
the benefits.

14.  An independent R&D team was placed in charge
of creating new dishes and the Executive Chef
was responsible for food quality
 The first Chinese restaurant to offers Chinese
food in a western style, and the first to mix food
presentation with artistic elements

15. Place
 The delivery of goods at the right time
and at the right place to consumers.
Physical distribution of product is possible
through channels of distribution which are
many and varied in character.
Place includes the following variables:
Transportation, warehousing
Distribution marketing and inventory control for
Types of intermediaries
channels available for making the product
available for distribution
distribution available to consumers easily
and economically

16. • It is the valuation of the product mentioned by the seller on the
product. Pricing has an important bearing on the competitive position
of a product. The marketing manager may use pricing as a tool for
achieving the targeted market share or sales volume. Pricing can also
be used for capturing market and also for facing market competition
effectively.
Pricing
policies,
Discounts and
Pricing other
strategy concessions
selected and offered for
used. Price mix capturing
includes the market,
following
variables:
Terms of Terms of
delivery, and credit sale

17. • Restaurants were located in top-notch office
building in key cities
• Combination of high-end location and high
pricing was also helpful in developing the upper-
middle class brand image

18.  Promotion is the persuasive communication about the
product offered by the manufacturer to the prospect.
Promotion mix includes the following variables:
1. Advertising and publicity of the product
2. Personal selling techniques used
3. Sales promotion measures introduced at different levels
4. Public relations techniques used for keeping cordial
relations with dealers and consumers
5. Display of goods for sales promotion
 Promotional activities are necessary for large scale
marketing and also for facing market competition
effectively. Such activities are varied in nature and are
useful for establishing reasonably good rapport with the
consumers.

20. People
Recruiting and training the right staff is required to
create a competitive advantage. Customers make
judgments about service provision and delivery based
on the people representing the organization. People
are one of the few elements of the service that
customers can see and interact with.
Staff require appropriate interpersonal
skills, aptitude, and service knowledge in order to
deliver a quality service.

21. People management
Initiated a large-scale training program for their staff
Waiters had to undertake a three-month training course
Managers had to complete a two-year on-job-training
program

22. Process
This element of the marketing mix looks at the systems used
to deliver the service. All services need to be supported by
clearly defined and efficient processes. In other words
processes mean that everybody knows what to do and how
to do it.

23. IT Applications
Advance IT Application potent tool to enhance the
upper-middle class restaurant and improve efficiency
Using CRM system that build by its own to record
customer information
ERP system was being set up to control the key
financial and the purchasing process

24.  Physical evidence is about where the
service is being delivered from. This
element of the marketing mix will
distinguish a company from its
competitors. Physical evidence can be
used to charge a premium price for a
service and establish a positive
experience.

25. Interior Decoration
Each South Beauty restaurant had a different décor
People came to the restaurants not only for the
food, but also foe the ambience
No competitor could invest so heavily in interior
decoration

26. China’s Restaurant Market
Since 1990, china’s catering industry had been
booming with over 15% CAGR
2007  Catering market size accounted for 4.87% of
GDP
Three main section China’s industry :
Breakfast stands
Street Hawkers
Restaurant

27. Expanding Chains
Expansion required significant investment, in 2006 at
least 10 restaurant chains announced their intentions
to launch IPO
Franchise model became popular for chain
expansion, the franchisees sometime crept out of the
control of the principal companies and gradually set
up their own similar brands
The majority of closed restaurants were franchisees
only 30%

28. Issuing Securities
 Basic Procedure for New Issue
 Obtain approval from board director
 Prepare and file a registration statement with
SEC
 During waiting period, company may distribute
copies of a preliminary prospectus
 A final prospectus must accompany the
delivery of securities or confirmation of sales
 Tombstone advertisement are used during and
after the waiting period

29. Process Raising Capital
Step in Public Time Activities
Offering • Several months • Amount money & type
• Pre Underwriting • A 20 day waiting period securities discussed
Conferences • Not before last day • Registration statement
• Registration statements registration period • Research and analyze
filed and approved • After last day registration for IPO
• Pricing the issue period • Underwriter buys
• Public offering and sales • 30 days after the offering stipulated amount stock
• Market stabilization from the firm and sales
• Underwriter stand ready
to place orders to buy

30. Methods of Issuing New Securities
Traditional negotiated cash offer
Firm commitment cash offer Best effort cash offer Dutch auction cash effort
Privileged subscription
Direct rights offer Standby rights offer
Non traditional cash offer
Shelf cash offer Competitive firm cash offer
Private
Direct placement

31. South Beauty Group going Public
The company need external funding for expansion
Become an public company
Avoid to become family company
Preparation for international expansion

32.  Positioned in the high-end Chinese Dinner
segment
 Not compete directly with Fast Food, Hot Pot
and ordinary restaurants
 2007  10 of 100 top restaurant companies
were in high-end Chinese Dinner Section
 Fake South Beauty restaurant, at least fake
restaurant
 Fighting with these fake players through legal
means

33. The Challenges Ahead
 To expand, the group had to consider the
prioritization of markets to enter
 Focus on the local market to realize its full
potential before venturing abroad, or to do
both at the same time
 Entry into new business such as airline
catering and the supply of semi-processed
food to retail outlet

34. Seeking Standardization
South Beauty carried 380 item menu, moreover the
restaurant were located in several places and had
different chefs at each restaurant
Control the use of raw materials with computer
software to calculate the number of dishes sold and
the raw material used

35. Segmenting
The process of dividing a larger market into smaller
pieces based on one or more meaningful, shared
characteristic.
1. Identify bases for segmenting the market
2. Develop segment profiles

36. Geographic
• Big city
• Upper level in the building
Demographic
• Office worker
• Older people
• High income
Psychographic
• High class people
• Business man

37. Targeting
Group that a firm selects to turn into customers as a
result of segmentation and targeting.
3. Develop measure of segment attractiveness
4. Select target segments

38.  People in big city
 People aged 30-45
• Top-notch office building
• People seeking pleasure and
ambience

39. Positioning
Developing a marketing strategy aimed at influencing
how a particular market segment perceives a good or
service in comparison to the competition.
5. Develop positioning for target segments
6. Develop a marketing mix for each segment

40.  High-end Chinese Dinner restaurant
 Focus on office workers
 High-quality, stylish and confortable environment
 Hygienic and delicious food

41. SWOT Analysis
Strength Weakness
• High quality interior • Too many list
design menu, about 380 item
• Delicious food • Quality of each dish
(unique taste) present relied on the
aesthetically experience chef
• Strong R&D in new
menu
• Good service quality
Opportunities Thread
• No other restaurant • Fake South Beauty
invest so much on restaurant
interior design • Other restaurant copy
• Varies new dishes their menu
• Selected as the food
supplier of Olympic
Games 2008

42.  By mid-2007, the South Beauty Group had expanded
to 19 restaurants
 Market share of South Beauty in the total industry was
less than 0.1%
 Annual growth for the company is 55%
 Considering to move from single-restaurant-based
operation to company-based management

43. Franchise Business Model
 A franchise typically involves the granting by one
party (a franchisor) to another party (a franchisee)
the right to carry on a particular name or trade
mark, according to an identified system, usually
within a territory or at a location, for an agreed upon
term.
 The franchisee is granted a franchise license to use
the franchise company’s
trademarks, systems, signage, software, and other
proprietary tools and systems in accordance with the
guidelines in the franchise contract.
 Not only must you run the business according to the
operations manual and the franchise contract, but
you must pay them an upfront franchise fee (license
fee), and ongoing royalties.

44. Difference Between Franchise &
Non-Franchise
Franchise Non-Franchise
• Provides a detailed, step-by- • Provides a “blueprint,” but it’s
step, business “blueprint.” usually not as detailed.
• There are very specific rules that • The actual contract that you’re
must be followed, including the given to review prior to signing a
use of approved signage, and business opportunity type of
marketing materials, hours of business may be one to two
operation, etc. pages in length. (Franchise
• Franchisors also provide ongoing contracts are 20 to 40 pages
support to their franchisees. long)
• Franchising is also highly • No ongoing royalties
regulated, and there are a lot of
things that a franchisor must do
to legally set it up.

45. ADVANTAGES OF BEING FRANCHISORS
 Capitalized Expansion - Expansion requires the investment of capital
and resources that for many successful business owners is limited
and, sometimes, difficult to raise. Franchising serves as a source for the
capitalized expansion of a successful business. Rather than borrowing
funds from lenders, franchisees invest their own funds to expand your
business.
 Continuing Revenue Streams - Successful franchisors benefit from
continuing royalties that are, typically, based upon a percentage of
franchisee gross sales and paid on a monthly basis.
 Brand Development - The Multi-unit expansion associated with
franchising serves to supplement and expand the value of your
brand. Franchisee contributions to local and regional advertising further
serve to expand brand recognition.
 Economies of Scale - If managed properly the multi-unit expansion
associated with franchising results in increased volume purchases and
leverage with business suppliers and vendors.
 Managerial Talent - Franchisee owners - who have invested their own
capital and savings - typically serve as better managers and operators
than paid employees who do not possess a vested interest in the
business.

46. DISADVANTAGES OF BEING FRANCHISORS
 Legal Regulation - Franchising is a regulated activity
and requires compliance with federal and state franchise
laws. To successfully establish a franchise, franchisors
are required to work with an experienced franchise
lawyer to establish a solid blueprint for franchising.
 Investment - Although franchising serves as a source
for the capitalized expansion of business
(i.e., franchisees invest in your expansion), the
establishment of a franchise system requires the
investment of capital to cover legal fees and the cost of
establishing a franchising infrastructure.
 Image - If a franchise unit develops a bad reputation for
quality or service, it affects the reputation of the
franchise as a whole. If a unit underperforms, it also
means less in royalties for the franchisor.

47. ADVANTAGES OF BEING FRANCHISEES
 The business is based on a proven idea. You can check how
successful other franchises are before committing yourself.
 You can use a recognized brand name and trade marks. You
benefit from any advertising or promotion by the owner of the
franchise - the 'franchisor'.
 The franchisor gives you support - usually including
training, help setting up the business, a manual telling you how to
run the business and ongoing advice.
 You usually have exclusive rights in your territory. The
franchisor won't sell any other franchises in the same territory.
 Financing the business may be easier. Banks are sometimes
more likely to lend money to buy a franchise with a good
reputation.
 You can benefit from communicating and sharing ideas with, and
receiving support from, other franchisees in the network.
 Relationships with suppliers have already been established.

48. DISADVANTAGES OF FRANCHISE MODEL
 Costs may be higher than you expect. As well as the
initial costs of buying the franchise, you pay continuing
management service fees and you may have to agree to
buy products from the franchisor.
 The franchise agreement usually includes restrictions
on how you can run the business. You might not be able
to make changes to suit your local market.
 The franchisor might go out of business.
 Other franchisees could give the brand a bad
reputation, so the recruitment process needs to be
thorough
 You may find it difficult to sell your franchise - you can
only sell it to someone approved by the franchisor.
 All profits (a percentage of sales) are usually shared
with the franchisor.

49. Consideration
Before franchising your business, be sure it is the type
of operation conducive to franchising.
To be a good candidate for franchising, a business
should offer something unique in its industry and
have a model that is easy to replicate.
It should also be adaptable to a variety of different
geographic areas, especially if your plan is to
franchise on a large scale.

50.  South Beauty Restaurant carried a list of 380
dish in main menu, excluding soft drinks and
wine
 Different restaurant has different chef.
 Raw material depended on the scattered local
suppliers
• Quality of dish relied on the experience of the chef
 Standardization for service can be achieve
through training, rules, inspections, and the
right incentive systems.
 Standardization for the menu still in its
nascent phase

51. STANDARDIZATION
• Standardization or standardisation is the process of
developing and implementing technical standards.
• The goals of standardization can be to help with
independence of
single suppliers (commoditization), compatibility, int
eroperability, safety, repeatability, or quality.

52. STANDARDIZATION RECIPE FOR
RESTAURANT
 Definition :
 The United States Department of Agriculture
(USDA) defines a standardized recipe as one that
“has been tried, adapted, and retried several times
for use by a given foodservice operation and has
been found to produce the same good results and
yield every time when the exact procedures are
used with the same type of equipment and the
same quantity and quality of ingredients” in the
manual

53. STANDARDIZATION RECIPE FOR
RESTAURANT
Benefit :
 Consistent food quality
The use of standardized recipes ensures that menu items will be
consistent in quality each time they are prepared and served.
 Predictable yield
The planned number of servings will be produced by using standardized
recipes. This can help to reduce the amount of leftover food if there has
been overproduction, and also will help to prevent shortages of servings
on the line. A predictable yield is especially important when food is
transported from a production kitchen to other serving sites.
 Customer satisfaction
Well-developed recipes that appeal to students are an important factor in
maintaining and increasing student participation levels. Schools may
take a lesson from national restaurant chains that have developed
popular menu items consistent in every detail of
ingredient, quantity, preparation, and presentation. Standardized recipes
provide this consistency and can result in increased customer
satisfaction.

54. STANDARDIZATION RECIPE FOR
RESTAURANT (Cont’d)
Benefit :
Consistent nutrient content
Standardized recipes will ensure that nutritional values per serving are
valid and consistent.
Food cost control
Standardized recipes provide consistent and accurate information for
food cost control because the same ingredients and quantities of
ingredients per serving are used each time the recipe is produced.
Efficient purchasing procedures
Purchasing is more efficient because the quantity of food needed for
production is easily calculated from the information on each
standardized recipe.

55. STANDARDIZATION RECIPE FOR
RESTAURANT (CONT’D)
Benefit :
 Inventory control
The use of standardized recipes provides predictable information on the quantity
of food inventory that will be used each time the recipe is produced.
 Labor cost control
Written standardized procedures in the recipe make efficient use of labor time
and allow for planned scheduling of foodservice personnel for the work day.
Training costs are reduced because new employees are provided specific
instructions for preparation in each recipe.
 Increased employee confidence
Employees feel more satisfied and confident in their jobs because standardized
recipes eliminate guesswork, decrease the chances of producing poor food
products, and prevent shortages of servings during meal service.
 Reduced record keeping
A collection of standardized recipes for menu items will reduce the amount of
information required on a daily food production record. Standardized recipes will
include the ingredients and amounts of food used for a menu item. The food
production record will only need to reference the recipe, number of planned
servings, and leftover amounts.

56. Implementing Standardization
Determine the factor to be used
Calculate cost that might occurred
Prepare standard operating procedure
Evaluate the standardization from time to time

57. Conclusion
The franchisee is granted a franchise license to use the
franchise company’s
trademarks, systems, signage, software, and other
proprietary tools and systems in accordance with the
guidelines in the franchise contract.
single suppliers (commoditization), compatibility, interope
rability, safety, repeatability, or quality.
Domestic target
zhengzhou, jinan, wuhan, chongqing, tianjing.
IPO when the revenue is optimum.