by Lee, Kyuho^Khan, Mahmood A.^Ko, Jae-Youn
Cornell Hospitality Quarterly • Feb, 2008 • CQ CASES
Interviews with executives and managers of the Outback Steakhouse Korea chain point to the critical success factors that have allowed the chain to expand even in the face of economic turbulence. Opened in 1997, the Korean operation first had to survive the Asian currency crisis, which it did with assistance from its franchisor. With close cooperation between Korean and American Outback chain executives, the Korean operation has seen considerable success in the past decade. Critical success factors fell into the following categories: decentralized organization, strong training programs, innovative human resource management (including generous pay and benefits), flexibility in marketing strategies, custom menus and operations, a judicious blend of Korean and American business culture, competitive service strategies (including a money-back guarantee), innovative site selection, and a close relationship of franchisor and franchisee. Outback Steakhouse Korea has proven to be a successful casual-dining transplant from the United States. Highlighting the company's competitive advantages and core competencies, this study describes the critical success factors for this restaurant company. Key among the success factors is a decentralized structure that takes advantage of the business acumen of managing partners. A flexible approach that allowed the Korean chain to respond to the country's cultural patterns and market preferences is balanced with a strict approach to hiring and training. Keywords: international franchising; Outback Steakhouse; Korean restaurants; restaurant critical success factors **********
Although the formal barriers to doing business cross national borders can be relatively low, transplanting a restaurant concept from one culture to another remains a challenge, especially when that restaurant has relatively complex operations. Facing saturated markets at home, U.S. restaurant operators have long attempted to expand in international markets, with mixed results (Price 1996). According to Technomic's recent report, approximately 120 U.S. restaurant chains operate 48,000 restaurants abroad; these venues generated a total of $40 billion in 2002 (Mehegan 2002). This is a huge leap in comparison to international units and sales in 1995, which recorded 26,526 outlets and $27.3 billion, as seen in Exhibit 1. U.S. fast-food chains have led the way in expanding in international markets, as typified by McDonald's, which operates more than 16,600 outlets in more than 119 countries. Revenues and profits from international markets account for about 58 percent of McDonald's total revenues and 54 percent of its profits (Miller 2003). In contrast to the relative success of quick-service restaurants, casual dining operations have lagged in international expansion. For example, Darden's largest restaurant concepts, Red Lobster and Olive Garden, comprise a total of 71 international restaurants, mainly in Japan and Canada; while Brinker's restaurant group, which operates Chili's Grill & Bar and Romano's Macaroni Grill, operates 97 international outlets in limited international markets. In this article, we examine the case of Outback Steakhouse Korea, which is one of the few U.S.-based casual dining chains that have recorded a notable success in the international market. Outback Steakhouse operates restaurants in eighteen different countries, but we focus here only on Korea. As Exhibit 2 shows, Korea is not the only market where Outback has seen success. The growth of the Outback Steakhouse international division is notable. Outback Steakhouse recorded $361 million in sales and $25 million net income from its international markets in comparison with $13.1 million in net income in 2004 (Miller 2006). Outback Steakhouse Korea, which has been operating in Korea since 1997, has...