Gordon Biersch Case Questions:
1. Identify the key factors responsible for the success of Gordon Biersch to date. What concerns, if any, do you have as the company looks ahead? 2. Evaluate Gordon Biersch's organizational alternatives to realize its growth ambitions. Recommend a course to follow? 3. Evaluate Gordon Biersch's efforts to raise outside capital. What would you have done differently? 4. Which offer, if any, should Gordon Biersch accept? Why? How should they proceed? 5. Assume for discussion purposes that Lorenzo Fertitta's proposal is the preferred option. What are the key issues for Gordon and Biersch to negotiate? What positions should they take on each one?
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The masterminds behind Gordon Biersch were two individuals, Dan Gordon; a qualified brewing engineer from the esteemed University of Munich, Germany, and Dean Biersch; who had a passion for food service and a vast experience in the food and beverage sector. Their unique idea of a microbrewery and fine dining restaurant stemmed from a law amendment of California in 1983 which allowed brewing and serving of beer in the same locale. They envisioned the concept of providing high quality fine dining with outstanding service in an attractive ambiance featuring exceptional German-style lagers in on-site breweries. Their target market was the fairly sophisticated, yet not so young natives of Palo Alto as well as the Stanford University faculty, staff and graduate student body.
Their unique idea came to realization in July 1988 after rigorously detailed planning pertaining to atmosphere, food selection and German-style brewery. The capital was raised by the contribution of five investors, (Dean’s family friend Carrau being the largest investor) and a line of credit of for the remaining 36%. They selected a strategically fit location two blocks from CA’s University Avenue, a busy street amidst restaurants, stores and movie theatres. The restaurant was uniquely designed to accommodate the dining area as well as the visible brewery behind glass windows.
The first restaurant became an immediate success and the first year they over achieved their estimated $1.5 m sales by 47% and topped $2.2 m. The following years proved to be even more successful and they paid back their loan of $400,000 in six months. Gordon Biersch served three exclusive beers and employed the strategy to serve only those three brands (which were rightly priced) and no other brand of beer which proved to be very successful. These exclusive beer brands were what created Gordon Biersch’s distinct identity from the rest of the brewpubs/restaurants. They strongly believed in establishing return patronage through excellent service and a great dining experience to its core clientele. Gordon Biersch also offered souvenir beer steins and T-shirts for their customers. They employed a subtle yet effective marketing strategy of concentrating on public relations and customer referrals (buzz marketing / word of mouth marketing). This not only proved to be a successful strategy but also economical for them. The excellent service offered to the customers ensured positive word of mouth and referrals to friends, family and co-workers. The public relations was focused at relevant events like sponsorship of charity events, participation at local beer festivals, supplying free beer at Stanford parties, etc.
In 1990 Gordon Biersch opened their second location in San Jose which was a bigger space with a second floor and had 60% extra capacity in the brewery. They added new items on the menu and also had live jazz music six months per year. Although there were a few issues with city regulations, they still managed to achieve twice the budgeted sales amounting to $3.1 m. In 1992 Gordon Biersch opened the third three-level...
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