Case Report Ruth's Chris Steakhouse

Topics: Franchising, Trade, Franchise Pages: 3 (621 words) Published: August 11, 2011
Case Study Synopsis:  Ruth’s Chris – The High Stakes of International Expansion  
Defining the Issues
 company completed a milestone completing a successful IPO that raised more than $154M USD in new equity capital  in its 2005 annual report, the company committed to an accelerated development plan through company owned and franchised locations.    current stores were seeing consistent incremental revenue growth, but accelerated development will require entry into the international market  shareholders will expect to see share prices increase (i.e., to maximise profit)  

The Basic Issue
 company wants to increase revenue through expansion (“growth”)  
Analysing Case Data (Cause & Effect)
 barrier to international expansion may be RCR’s strict franchise criteria:  liquid net worth of $1M USD, verifiable experience within the hospitality industry, desire and ability to develop multiple locations; $100K USD per restaurant franchise fee + 5% gross sales royalty fee + 2% gross sales fee.    senior management committed to the market development model, but not all senior management committed to international expansion  market selection criteria presents some potential barriers to international growth (insistence on US Beef)  insufficient international market data (no data on how often people ate in restaurants, or their affinity toward US brands).  some countries will not have an affinity for US brands.

Generating Alternatives
 since franchising was successful in Canada, Mexico, Hong Kong, and Taiwan, the company should continue with this approach for international expansion.  Foreign-owned restaurants may be unappealing to local customers  the franchise model should be revisited, since the criteria are too restrictive and will discourage many potential franchisees  market selection criteria should be reconsidered.  Allowing franchisees to buy local beef and produce would improve the company’s image in a foreign market and...
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