Ruth’s Chris: ‘The High Stakes of International Expansion’
Defining the Issues
As a newly publically traded company, Ruth’s Chris was responsible for the development of a new business strategy to focus their efforts on revenue growth in order to meet shareholders expectations. By maintaining continued growth in established restaurant locations, this strategy needed to concentrate on building equity capital by planning/executing an international expansion to increase profitability of new franchisee-operated restaurants globally. Ruth’s Chris needed to address the challenges of deciding: • What region(s) were the ideal markets?
• Are qualified Franchisee prospects viable as per criteria (Franchisor agreement)? • Will our key success factors be achieved to capture any potential barriers that could impede expansion success?
Cause & Effect
Development models have been explored and evaluated with the main plan geared toward the market development model (more of the same restaurants in new markets) and outlining a well-suited plan focusing on market selection criteria to generate the desired growth. In doing this, the following needed to be considered:
• Which international market would be the ideal region for expansion: a. greatest growth potential with the least risk
b. culturally accepting of menu offerings (region with high ratio of beef consumption per capita) • Franchisee base selection:
c. well equipped, financially adequate, experienced owners d. potentially changing Franchisee criteria to meet majority of investors • Market entry critical path analysis – key success factors: e. new concept for region
f. global product consistency - availability of spec USDA Prime beef g. stability of foreign supply chain, operations and logistics teams h. consumer targets (population, beef-eaters, income, etc.) i. competition (other fine dining steak houses, QSR’s)
j. brand recognition (outside country of origin - US)
k. brand partnership (joint-venture)
Currently, restaurant revenue success has already been generated in the four international regions – Canada, Hong Kong, Mexico and Taiwan. Alternative Opportunities include: • Expanding already successful regions:
As North America is the leader in meat consumption with high population and urbanization rates, should further expansion in high density areas (main cities) in the Canadian market (untouched Western territory with low number of competitors – large population of cattle farmers [beef-eaters]) be the target? Franchisee base is limited. Product availability, and brand recognition do not pose a concern. Asia
Asia has low beef consumption and urbanization rates, but established success in the Taiwan marketplace would contribute to brand recognition in surrounding areas. Potential untouched urban markets to consider would be China (Beijing) and Japan (Tokyo), but product importation could be a challenge. Due to low population, further expansion in Taiwan would saturate the territory taking market share away from current Franchisees – not operable. • Expanding new markets:
As Europe is the second leader in meat consumption with a very high urbanization rate, should the target be the UK, Belgium, Russia and Germany regions (high populated countries)? Franchisee base is limited. Product and brand recognition may be an initial concern. South America
As South America is also a leader in meat consumption and would have the support of a solid group of Franchisees (political leaders and powerful business investors own the majority of restaurant and hotel chains) – brand recognition, product importation and urbanization would also not be concern. Population is quite low and low income standards pose a visible weakness.
In all alternative markets, a joint-venture chain would not be a preferred...
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