Porter Analysis
Porter’s Analysis February 10, 2013 MGT 210-001
Barriers to Entry
Depending on the individual’s financial situation, it could be very difficult to open a “Great Steak and Potato Company” restaurant. One needs a total capital investment of approximately $180,000 to $250,000 which would include the initial franchise fee of $30,000, royalty fee of 6%, and $5000 renewal fee during the 10 year term of agreement. One would also need $100,000 to $125,000 liquid capital for the initial startup and running of the business. Location could also pose a problem because one would need an area sufficient for a restaurant style business. Some knowledge and experience in the restaurant and food industry would be very useful too.
Supplier’s Power
The franchise owner is essentially at the mercy of the suppliers due to the fact that Kahala, Corporation (owner of the restaurant chains) requires the franchisee to only use their selected vendors for all of the products required, including but not limited to the grilled, USDA choice sirloin, provolone cheese, lettuce, tomatoes, Idaho potatoes, logoed napkins, paper sandwich trays and cups, and fresh squeezed lemonade. All of which are items the The Great Steak and Potato Company are known for having. Thus the supplier sits in a position of high power.
Buyer’s Power
The individual customer has very little to no power because menu item prices are set and are not negotiable. The customer must pay the advertised price. Even if an entire family were to decide for financial or competitive reasons not to dine at The Great Steak and Potato Company there would be little effect on profit.
Threat of Substitution
As a result of negative economic situations, buyers may potentially substitute other products for The Great Steak and Potato Company as meals tend to be priced from $6.00 to $13.00, depending on item choices and regional location. This same buyer may opt for a meal from McDonalds off the dollar menu as it would serve the
Barriers to Entry
Depending on the individual’s financial situation, it could be very difficult to open a “Great Steak and Potato Company” restaurant. One needs a total capital investment of approximately $180,000 to $250,000 which would include the initial franchise fee of $30,000, royalty fee of 6%, and $5000 renewal fee during the 10 year term of agreement. One would also need $100,000 to $125,000 liquid capital for the initial startup and running of the business. Location could also pose a problem because one would need an area sufficient for a restaurant style business. Some knowledge and experience in the restaurant and food industry would be very useful too.
Supplier’s Power
The franchise owner is essentially at the mercy of the suppliers due to the fact that Kahala, Corporation (owner of the restaurant chains) requires the franchisee to only use their selected vendors for all of the products required, including but not limited to the grilled, USDA choice sirloin, provolone cheese, lettuce, tomatoes, Idaho potatoes, logoed napkins, paper sandwich trays and cups, and fresh squeezed lemonade. All of which are items the The Great Steak and Potato Company are known for having. Thus the supplier sits in a position of high power.
Buyer’s Power
The individual customer has very little to no power because menu item prices are set and are not negotiable. The customer must pay the advertised price. Even if an entire family were to decide for financial or competitive reasons not to dine at The Great Steak and Potato Company there would be little effect on profit.
Threat of Substitution
As a result of negative economic situations, buyers may potentially substitute other products for The Great Steak and Potato Company as meals tend to be priced from $6.00 to $13.00, depending on item choices and regional location. This same buyer may opt for a meal from McDonalds off the dollar menu as it would serve the