Levendary Cafe: the China Callenge

Topics: Restaurant, Foodservice, Darden Restaurants Pages: 5 (1416 words) Published: March 3, 2013
Multi-unit Restaurant Business concepts are represented by units with independent operators. The concepts are categorized into three industry segments 1) specialty establishments, 2) quick service restaurants, and 3) casual dining. An excellent example of this concept business is The Darden family of restaurants, founded from Lakeland, FL, which features the following most successful and recognizable brands in full- service dining: Red Lobster, Olive Garden, Long Horn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s, and Yard House. According to their last SEC 10-k report filing, they own and operate worldwide more than 2,000 restaurants, employ 185,000 people, and serve more than 423 million meals a year. The restaurant and foodservice industry are highly fragmented.

The restaurant and foodservice industry is a powerhouse that has the ability to connect with other industries. With it employing over 13.1 million Americans, its impact and influence on the economy is significant. The overall restaurant and foodservice industry made up over $600 billion in sales in 2010, in the US alone, with over 960,000 locations as referenced in the article. It has since seen an increase of 3.5 % year over year or $632 billion in 2012. The projected sales for 2013 are $660.5 billion. The total restaurant industry sales are 4% of the US gross domestic product (GDP). With all that has been stated, it should come as no surprise that there continues to be positive trading volume within the restaurant sector.

For further economic afforded benefit, the National Restaurant Association sees employment in the industry hitting 12.9 million, which would represent roughly 10% of the total American workforce. According to Dawn Sweeney, chief executive officer of the National Restaurant Association, "As our nation slowly recovers from the economic downturn, restaurants continue to be a vital part of American lifestyles and our nation's economy". Combined with the sales growth restaurant job growth is expected to outpace the overall economy for the 13th straight year, and it's clear that the restaurant industry is once again proving to be a significant economic stimulant and strong engine for job creation.

Critical (industry-wide) success factors were identified as being:

market presence through brand awareness and growth
control of food and labor costs
control of food quality and service quality
ability to select proper sites and control expansion

As an American company, the flexibility and ease of doing business in the US may not be the reality in China. Foreign multinationals may have the disadvantage of dealing with a multitude of uncertainties such as China’s difficult regulatory guidelines and learn to operate within it. It may the unknown with the labor force and the ability to find employees capable of serving its needs. These institutional voids are the very same critical success factors given to those in the home country. It is only at the disadvantage of those that do not have the cultural familiarity in directly dealing or understanding them that are negatively affected.

Why did Levendary decide to enter China Market? How did its US foundation match against China market needs? (compare US vs. China market in terms of customers and operations).

The decision to enter the China market was based upon several factors to include the declining domestic growth in 2008, the advisement of the board, and the US restaurant market had already shifted its attention in that direction. As the US markets became saturated and growth opportunities were leveling, US restaurant companies began looking elsewhere to penetrate. Due to the rapid pace of urbanization and the annual disposable income per capita for urban households which increased year after year, China was the best suitable place for the restaurant to set up and conquer.

It is clear that the foundation,...
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