For the mid-term paper I've chosen the meals & drink category from the 2008 Inc 500 list. Companies in this industry are involved in processing, presentation and delivering of food and drink. This includes well prepared foods, packed foods, alcoholic and nonalcoholic beverages.
The company with the best revenue on this list is Wingstop with earnings of $206. 6 million in 2008 and the business with the highest growth rate is The Snack Stock with a growth as high as 18, 371. 3%.
The company in least expensive quartile of the top 2008 Inc. 500 Food & Drink list that I think will move up the most positions is a company called Saladworks.
In this newspaper I will evaluate for the different companies what industry these are in and if it's a wonderful industry. I am going to use Michael Porters five basic competitive pushes to evaluate your competition and profitability of the market sectors. The basic causes are risk of new entrants, ability of suppliers, ability of customers, threat of substitutes and rivalry among existing rivals. For Wingstop as well as the Snack Factory I am going to further evaluate placement, competitive advantage, tendencies, customers, products, business design, core competencies and competition for each. For Saladworks I'll explain why I believe they will move up the most positions.
Wingstop is a "Restaurant chain serving made-to-order buffalo chicken breast wings, side food and beer in 28 areas across the U. S". (Inc 500) The company was founded in 1994 and was successful in creating a niche in chicken dining. They started out franchising in 1997 and have a nostalgic, aviation-theme in their restaurants.
The industry they are in is the fast food and quick-service restaurant industry. I will have a look at industry competition to evaluate if this is an attractive industry.
The threat of new entrants in this industry is modest. There are some important barriers to entry however the insufficient some significant ones makes it vulnerable. The barriers that are set up are high opportunities and high set costs. Especially marketing and advertising costs to keep existing customers and getting new ones are high for the top chains. There is relatively high degree of brand loyalty to some brand chains and franchise licenses are secured as intellectual property. The obstacles that are not in place includes the absent of economics of size meaning even small local stores can be profitable. Many consumers are also price hypersensitive and the expense of moving over is low. Due to having less some of the most important barriers the threat of new entries is significant.
The vitality of suppliers in this industry is sizeable but mainly for small restaurants. The distribution to the fast food chains is dominated by way of a few large suppliers that can put pressure on smaller businesses. But with the larger chains like McDonald's the suppliers stand weaker in a bargaining situation.
The electric power of customers and the pressure they can put on the industry is relatively moderate. It is because the consumers in basic principle can produce the product themselves if they want. They are also price-sensitive therefore the prices are retained low and it generally does not cost customers anything to switch to an alternative product.
The threat of substitutes on the market is high. Fast food faces frequent competition from your home cooked food. In addition the fast food product is not differentiated and consumers may easily go from McDonalds to for example Burger King. The price for many junk food is in the same low range and it is simple to switch to an alternative solution restaurant.
Rivalry among existing rivals is also high. There are many small players with the same size but in the top quality lots of big franchise chains. They have many of the same strategies such as good deal, quick service and quality. There is almost no differentiation between the businesses and the growth of one company goes on the expense of any competitor so shelling out for advertising is commonly high.
The industry has suffered a whole lot of criticism coming from the high coverage of negative health results and excess weight from diverse press. Even do rivalry between competitors is high and there's a lot of negative advertising coverage this is an attractive industry to be in. Folks are still buying these often calorie busting products and the sales were more than $180 billion in 2007. (Hoovers)
Wingstop position itself as healthy finger food string. They use whole lot of funds to advertise that the chain is not advertising unhealthy fast food and they always provide fresh homemade food. Their competitive advantages include their award-winning formulas and simple theory, but also important is their marketing and distribution partnership with high profile American soccer team Dallas Cowboys. Their deal with the team has made them the exclusive poultry wing vendor in the team stadium and also made a great deal of hype across the chain. With an increase of than 600 available or under development restaurants in 27 says they have got proven that the concept is scalable in the U. S. The simple concept of providing just fowl wings with some aspect food has been well received by the general public. Scalability internationally is more challenging because buffalo rooster wings are a normal American bar food and are not widely available outside the U. S. Scalability in the rates of McDonalds is therefore questionable but not impossible with the right use of resources. Their advantages is also lasting if indeed they continue with the easy concept, focus only on the chicken breast wings and spend further in the process which makes them unique among competitors. This chain is certainly here to remain.
A style that is working against the business is the increased media focus on health and diet issues associated with fast food chains. The industry is also very competitive and Wingstop must spend a great deal on advertising to keep consumers away from their competition. Another style that is acting for the company is the progressively busy workdays that make people eat out rather than making food at home. Consumers often find the most effective and cheapest substitute when they are in a hurry and need to eat on the run.
The problem Wingstop is resolving is the elementary need for food and the necessity for having it made and served fast when people don't possess time do make it themselves. The need for food can be an aspirin problem with regards to Maslow's hierarchy of needs because the physiological need must be met or the body simply cannot continue to function. But the need for a fast meal is quite a strong vitamin problem because even with chaotic workdays you can decide to remember to make your own food. The job to be done is to be available and visible to provide customers.
The customers are day-to-day consumers which have a liking for rooster wings. The consumers are families seeking to celebrate without having to make themselves and singles with a chaotic workdays that doesn't have time prepare and need something easy.
Their product is generally Buffalo style poultry wings nonetheless they also sell different poultry types, side food and ale. Other rooster alternatives are boneless whitening strips and breaded poultry. Their side dishes includes fresh chop seasoned fries, potato salad, creamy cole slaw, hot cheddar mozzarella cheese sauce, bourbon cooked coffee beans, crispy veggie sticks and dips. A lot more than just the physical products they sell an experience. The American pub experience in a 1930-40's pre-jet aviation theme influenced setting.
Their business model is that of a manufacturer. Their main product is a nondurable physical property by means of food plus they buy the raw materials and transform them to their product as a originator. Even do they outsource a lot of the actual development as a huge part of the branch consist of franchises they remain a originator. Wingstop have clear regimens for each and every franchise so that the product tastes the same everywhere you get it and so they do substantive design of the merchandise and are therefore not really a distributor.
To continue steadily to succeed Wingstop need to be top of the line when it comes to marketing. As well as the process of making the favorite chicken breast wings they sell their most significant central competency is the ability to advertise the brand and create hype around their restaurant string. They have lengthened a contract using their countrywide spokesman, Super Dish hero Troy Aikman and this shows that they are on the right track. As mentioned early on the competition among junk food chains are difficult and the only ones that survives are the ones that get through too consumers and continues them returning. To get consumers to come back the meals and service in the restaurants must be excellent. Because a lot of their restaurants are franchises they have to be proficient at creating solid exercises so the experience in the restaurants doesn't change from one another. But the most important factor to continue the success is to be visible and stand out among the junk food restaurants which must be done by advertising and creative marketing.
The competition Wingstop encounters is all different junk food chains including not only the restaurants that sell chicken wings but also the methods that offer hamburgers, pizza tacos plus more. The big rivals in the segments as a whole are McDonald's, Burger Ruler, Wendy's, Pizza Hut and Taco Bell to say some that has a sizable part of the market shares. More straight Wingstop has to contend with the other restaurants offering similar chicken breast wing meals. A number of the competition chains are Buffalo Wild Wings, Hooters, Wing Area, Applebee's, Brinker, Carlson Restaurants, Damon's, Darden, Family Activities Principles, Fox & Hound Restaurant, Ker Inc, Papa John's and Zaxby's (Hoovers).
The biggest competitor from the list is Buffalo Outdoors Wings (BWW). They had income of $422. 4 million in 2008 and operate a chain of more than 550 restaurants in practically 40 states. Besides the chicken wings they are incredibly well-known for their dipping sauces that accompanies. They also sell appetizers, burgers, tacos, salads, beverage wine and other beverages. Like Wingstop they have got used connections with sports to market themselves as a sports bar franchise.
Another competitor worthy of mentioning is Hooters that have possessed success with the restaurant experience they give consumers which factor is more important than the food they provide. Hooters have a beach theme and their waitresses clothe themselves in the chain's trademark bright orange short shorts and tight T-shirts and are known as "Hooter girls". By focusing on the special atmosphere they may have managed to identify themselves and gained a competitive gain. It has also opened the entranceway for international enlargement and they now have 450 Hooters restaurants in about 45 states and even more than 25 other countries.
The Treat Factory
The Snack Factory is a family group owned and operated business that makes and markets crunchy snacks. The business was founded in 1981 by Sara and Warren Wilson. Warren began with offering funnel cakes based on his grandmothers recipe on country fairs in 1969 and paid his way through college with the proceeds. After university he opened up a store offering funnel cakes in New Jersey and here he found Sara. Each of them began to develop the company called Funnel Wedding cake Factory and finally made a concept of bagel chips that was flat crunchy chips created from bagels into an organization called New York Style Bagel Chip Company. This is a new idea and consumers welcomed the new product. The bagel potato chips company was later sold to Nabisco in 1992 and the funnel cake company was sold to J&J Snack Foods a couple of years later. The enterprisers didn't stop and used the following years to develop a skinny but crunchy pretzel ideal for dipping and spreading that became known as Pretzel Crisps.
The Snack Manufacturing plant is in the snacks industry which can be discussed as "Companies that manufacture, process, and/or program snacks, including salty goodies, nuts, snack pubs, and snack mixes" (Hoovers).
The threat of new entrants on the market is low on national and international level. A significant barrier of entrance in this market is high amount of brand loyalty. The big companies with the popular makes make it very difficult to come in to the market and set up a new brand. It is easier to enter on the neighborhood level because the consumers are open to local products. Customers are price very sensitive in this industry too but with already very low prices it is difficult to enter and compete with the larger firms.
The ability of suppliers in this industry is low. Most of the organic foods for the treat manufacturers come from farmers plus they don't have strong bargaining ability. Farmers have no choice but to check out the costs the snack manufacturers gives them.
The power of customers is also not so saturated in this industry. Customers are supermarkets that again sell to consumers. The supermarkets and the favors need to supply the consumers with the treat brands they need or they will go someplace else. The stores therefore have weak bargaining power towards the manufacturers but indirect the manufacturers have to listen to the consumers that are price hypersensitive and set the price so they will buy the product.
The threat of substitutes on the market is on the other palm high. You can find continuous threat from existing snack food and also from new alternatives. There isn't much to differentiate a handbag of chips from another and the customers have to buy in what the consumers want the most because they can not bring every brand.
Rivalry among existing competitors is also high. There may be fierce rivalry among the largest companies and marketing and advertising budget are extremely high. Because of low differentiation and that growth continues on the expense of an rival making customer buy and keep buying is vital.
Despite high costs on campaign and brand advertising and large corporations competing to capture larger shares of the marketplace this is also a good industry. The industry generates billions of us dollars in revenue and if you as an organization manage to take some shares of the market there exists large revenue involved
The Snack Stock position themselves as a wholesome snack substitute with less calorie consumption, cholesterol and excessive fat compared to other treat alternatives. Both the founders and their members of the family are involved with the company and this gives the company a family group business image. Their most significant competitive advantages are the manufactured in America brand and recipe that is developed over many years combined with the experience the Wilsons supports. They have already demonstrated that it's scalable by increasing syndication to some of America's largest retailers having a growth as high as 18, 371. 3% this past year. However the family centered company can only source to so many before they have to expand creation and that may be in conflict with their image. The progress may therefore not be too ecological, but with the merchandise in the hands of the bigger snack company the growth might continue. This might mean an exit for the Wilson like they do with the other two companies but they are entrepreneurs and can probably keep going for another big thing.
A style that is acting for the business is the multimedia focus mentioned previously health results from eating food with high calorie and fat amounts. Folks are becoming more and more worried about these issues and also have started to choose more healthy alternatives. Another trend working for them is the consumer interest for made in America brand products. Having this label can appeal to People in the usa who affiliate this with high quality and the sensation of contributing to keep creation in the U. S. A style that is acting against the company is that many of the top competitors likewise have shifted focus over on healthy treat products and have much more money to use on marketing their products.
The problem The Treat Factory is solving is the appetite consumers have between the key meals of the day that are breakfast, lunch and dinner. Snack food is an option to be consumed between these foods as a power supply or for style enjoyment. This issue is also is also a supplement need. The work to be achieved is to give a product that the consumers see as an alternative to the many different kinds of snack foods. It also should be available as many consumers buy the products on impulse usually when they are searching for something completely different.
The Treat Factory's customers are the large retailers, supermarkets and fine stores who sell the merchandise to the finish customer the consumers. Vendors and supermarkets they are already supplying to add Sam's Club, Whole entire Foods, Shaw's Supermarket and many more across the U. S and Canada. Sam's Club is a string of membership-only retail warehouses which is today offering more than 47 million U. S. participants. Whole Foods is a food retailer of natural and organic products and have more than 275 locations in america, Canada and UK. Shaw's Supermarket is the second largest grocery store group in the brand new England Claims and works 200 stores entirely across New Great britain.
The product The Snack Factory is retailing is Pretzels Crisps. The product is like a standard pretzel only that the middle is removed. The merchandise has a lot of crunch and flavour and is made with no trans body fat, no saturated fat no cholesterol and only containing 110 calories per serving. The merchandise is intended as a treat right from the bag but also for dipping and get spread around for toppings. The Pretzels Crisps come in various flavors including original, garlic, honey mustard & onion, buffalo wing, chocolates, peanut butter and chipotle cheddar. The purchase price out to the finish users from sellers and supermarkets is around $2. 99.
Their business model is that of a company like Wingstop. The Pretzels Crisps they are making is a nondurable property so these are grouped as physical. The pretzels are produced from raw materials to the ultimate products that they sell out. This sort of change of the asset classifies the company a originator. A creator of physical investments follows the basic business model of an manufacturer.
To continue the success The Snack Factory need to put more capital into marketing if they're going to continue the development they have observed. Their primary competency lays with the knowledge in producing new food products and quality recipes for the planning of the Pretzels Crisps. Sara says, "We consider it's the product that catapults us. Sure, we do some marketing, but our success emerged before we does any marketing. The product itself makes people come back to get more detailed. " (Inc 500. Sep 1, 2008) It is obvious that the business is not spending much on advertising and they have been using in-store samplings as the most used marketing method. This process has gotten the company so far and they have said they were looking at the opportunity to increase to Asia and European countries while keeping the business personable and family oriented. But coming from a local manufacturer start and beginning to compete with the large snack manufacturers this provides some issues. The industry contains large corporations fighting hard to fully capture shares plus they spend heavily on promotion promotions to influence customers to buy their product. To contend with these corporations they have to be good at marketing in a large scale. The business doesn't have the experience with taking products to be competitive in the top since they sold the previous companies before they received there. If they're to pursue international growth they have to progress in marketing, spouse up with companies that have the knowledge or they must make an leave and sell.
Their competition is really as mentioned the large players in the snack industry. There was no company information on The Snack Stock in the Hoovers database but taking a look at the info for the company J & J Snack Foods that bought their funnel wedding cake company I came across a set of opponents in the treat business.
In the united states they will have to compete with companies like J & J Snack Foods, Frito-Lay, Mrs. Domains, Snyder's of Hanover, North american Dairy Queen, Auntie Anne's, Cinnabon, Dawn Food Products, Dreyers's, Standard Mills, Interstate Bakeries, Jamba, Jel Sert, Drink It Up, Kellogg U. S. Goodies, Kraft Foods, Lance Snack foods, Mister Twister Pretzels, Nestle USA, Otis Spunkmeyer, Globe Smoothie, Pretzels, Inc, Ruiz Foods Inc. , Sara Lee, Smoothie Ruler, Sorbee International, Wetzel's Pretzels, Dippin Dots, Blooms Foods, Golden Companies, Goya, Hanover Foods, Mckee Foods and Tasty Cooking. There are a lot of players on the market and they are all seeking to maximize market show.
One competitor worth mentioning is Frito-Lay that markets more chips than every other company in North America. Their state of the art food treats include popular products such as Cheetos, Doritos, Fritos and Lay's. They have responded to the market trends and also have bought several healthy treat brands plus they spend closely on marketing to remain on the top.
Saladworks is at the cheapest quartile of the most notable 2008 Inc. 500 Food & Beverage list. The company had revenues of $5. 5 million and a growth of 98. 3%.
Saladworks was founded by John Scardapane in 1986 and started out with an individual location in the Cherry Hill Shopping center in Southern NJ. It is the first and most significant tossed-salad franchise in the U. S. with 104 locations in 9 state governments today.
The idea of the franchise and their positioning is to provide fresh and healthy salads as choice food for consumers on the go. They sell generally premium salads but also soups, wraps, sandwiches and more. In 2008 they also added personal salads to the menu. They invited four A-list chefs to create four different salads that became the personal series.
The competitive benefits that Saladworks has is being first with turning fast food in to a wholesome meal and the chef skills in the development so that it is hard for copycats to check out. The company possessed a major development in 2002 when they were able to add 21 new franchise locations in mere 10 a few months. Consumer response and the development Saladworks has experienced prove that it is scalable.
The company is in the fast food and quick-service restaurant industry identical to Wingstop. As stated early on the competitive surroundings is hard in this industry with modest risk of new entrants, considerable bargaining vitality of suppliers, modest vitality of customers, high degrees of both hazards of new substitutes and rivalry among the competitors.
A large tendency in this industry is dependence on healthy alternatives among the many unhealthy junk food. The firms that sell products with high calories from fat have began to include some healthy alternatives as side food in their selections. But unable to shift entirely to healthy alternatives is difficult because their brand is associated using their products. Where would McDonalds be if they threw out their burgers and began advertising only salads?
Because SaladWorks is first and major and places itself on the market with trends on the side I start to see the potential of the business franchising more across the U. S and possible also to Europe. They signed a contract for ten new locations in Metro Atlanta in 2008 and in 2009 2009 they have expanded with new stores in Virginia. They have also made deals for starting new locations in California and Boston. With the plans for expansions, market styles on their aspect and the features of being one of the first I believe the corporation will move up many positions on the Inc 500 Food & Drink list for the years to come.