UNIVERSITY OF THE PHILIPPINES

Diliman Extension Program in Pampanga

Clark Freeport Zone, Angeles City

Country Opportunity Assessment

Management 236 ― International Marketing

PART 3: CORPORATE SUCCESSES & FAILURES

 I. COMPANY #2- A&W RESTAURANT

INTRODUCTION:

A&W Restaurants, Inc. is a chain of fast-food restaurants, distinguished by its

draft root beer and root beer floats. A&W was arguably the first successful food
franchise company, starting franchises in 1921 in California. Today it has franchise
locations throughout the world, serving a typical fast food menu of hamburgers and
french fries, as well as hot dogs. A number of its outlets are drive-in restaurants with
carhops. The company name was taken from the last name initials of partners Roy Allen
and Frank Wright. The chain is currently owned by Yum! Brands.

The company became famous in the United States for its "frosty mugs", where
the mug would be kept in the freezer prior to being filled with root beer and served to the
customer.

HISTORY:

A&W began in 1919 in Lodi, California, when Roy Allen took on partnership with
Frank Wright to help him with the root beer business he had started that year. They
branded their product A&W Root Beer after their last names. Two years later in 1921,
Allen bought out Wright and began franchising his product, arguably the first successful
food franchising operation. His profits came from a small franchise fee and concentrate
sales.

By 1960, they had 2000 stores. In 1971, a beverage division was started,
supplying bottled A&W products to grocery stores. The soft drinks sold under this brand
are root beer and cream soda, made by Dr Pepper/Seven Up, Inc. For some time in the
1970s, A&W had more locations than McDonalds, Oshkosh, Wisconsin franchise
manager Jim Brajdic said: "Problems back then, including a lawsuit, franchisee
discontent and inconsistencies in the operation, caused the chain to flounder and
branches to close.

In 1989, A&W made an agreement with Minnesota-based chain Carousel Snack

Bars to convert that chain's 200 locations (mostly kiosks in shopping malls) to "A&W Hot
Dogs & More".[2][3] Some A&W Hot Dogs & More locations are still in operation today. In
late 2000s, A&W started adding some new franchises with a nostalgic look and modern
technology inside. They have a carhop design with drive-thrus and some have picnic
tables.

In the United States and Southeast Asia, A&W is currently a Yum! Brands, Inc.
company.[1] Most A&W locations that have opened in the U.S. in recent years have been
co-branded with one of Yum!'s other chains—Long John Silver's, Pizza Hut, Taco Bell,
or Kentucky Fried Chicken.

Yum! Brands Advantage:

Porter’s Competitive Advantage Paradigm Analysis

Entry of New Competitors –

New companies trying to enter into a similar type of venture to that of YUM!
Brands Incorporated will find it somewhat difficult. This is due to the saturation of the
restaurant market and barriers of entry, such as economies of scale, cost of entry
capital, time it takes to develop a clientele, already established supply chains.

The Threat of Substitutes –

As I stated above the restaurant sector is nearly completely saturated in the US,
and is rather hard to just start a restaurant chain. The real threat exists in those
companies that are already large, in the same market, and have the resources and
experience similar to that of YUM!. It is important for corporations in the food industry to
apply fair pricing, new innovative products, and establish for themselves a strong brand
identity; all of which Yum! Brands Incorporated has done.

The Bargaining Power of Suppliers –

With YUM!, their suppliers have some bargaining power, since beef, chicken,
vegetables, and soda (Pepsi) are the primary components in their most profitable
products. These products have somewhat variable prices and are subject to mild
fluctuations based on market demand and location.

Rivalry Among Existing Competitors –

The restaurant industry is one of the most competitive of any market, because it
is so saturated and competition is so fierce. It is absolutely necessary for a new and
developing restaurant chain to establish for itself brand identity. Market advertising and
promotion is essential, to actually gaining profits.

Firm Positioning Analysis

The soft US economy has resulted in a nearly zero growth environment for the
restaurant industry. Yet, Yum! has actively overcome this by vigorously expanding into
foreign countries in the past five years. Nearly one third of its profits now come from
overseas.

Cost Leadership - Yum! possesses very well-developed supply lines and uses
relatively cheap ingredients that have many substitutes. Additionally, their suppliers
are very interchangeable. This flexibility in supply chains, variety of foods being served,
and the ease at which their foods can be produced gives them a competitive edge over
their competitors.
Differentiation – Yum! is the first restaurant to offer more than one of it’s concepts at
one location (multi-branding). An example is the KFC and Taco Bell in Olean, and the
A&W and Long John Silvers in DuBois, PA. This increases revenues because a group
of people with varying tastes is more likely to eat there, than say, a McDonalds because
they provide something for a wider variety of preferences.

Focus – Yum! strives to provide its customers with quality, good-tasting food at highly
competitive prices. Its typical customers are middle-class families looking for affordable
meals on the go. As stated above, multi-branding appeals to many groups of people
who would otherwise dine somewhere else.

SWOT Analysis
Strengths
– The Company’s continuous expansion into Asia and other regions.
– Well-developed restaurant brands and exceptionally efficient and ever-improving
restaurant operations.
– The idea of multi-branding which causes one establishment to appeal to varying
customers.
– Strong advertising campaigns.
– Constant updating of menus and “specials” to appeal to current trends and fads.
Weaknesses
– Some brands (concepts) may weigh down profits of top performing ones.
– Sensitivity to market fluctuations.
Opportunities
– International expansion and growth.
– In domestic markets, turning one-brand units into multi-brand units to appeal to
more customers, which will cut into competitors’ revenues.
– Improvement of operations.
Threats
– The highly competitive nature of the restaurant industry.
– Entry of competitors into foreign markets first.
– Menu appeal.

How Yum Can Use Its Strengths and Opportunities to Minimize Threats and
Weaknesses:

With Yum!’s multi-branding strategy it can minimize the threat of competitors

gaining market share in domestic markets by bringing in customers with varying tastes.
Also, its aggressive expansion and high level of approval in China and other nations will
serve to buffer against competitors seizing market demand before they do. In addition,
their strides to improve their operations can, and will, influence customers to dine in
their restaurants as opposed to those of their competitors. When improved operations
are combined with their extensive advertising and constantly updated menu, Yum! can
expect substantial growth over the next few years.
 II. The Product

TIMELINE FOR THE PRODUCTS:

• A&W Sugar-free Root Beer was introduced in 1974, and reformulated as Diet
A&W in 1987.
• A&W Cream Soda and Diet Cream Soda were introduced in 1986.
• A&W Floats and Sunkist Floats were introduced in 2008.

PRODUCTS:
• A&W Restaurant- Beverages, Burgers, Chicken, Desserts, Hot Dogs, Ice
Creams, Sandwiches, Sides
 Beverages:
• A&W Diet Root Beer (Large)
• A&W Diet Root Beer (Medium)
• A&W Diet Root Beer (Small)
• A&W Regular Root Beer (Large)
• A&W Regular Root Beer (Medium)
 Burger:
• Cheeseburger
• Double Teen Burger
• Extra Burger Patty (Side)
• Hamburger
• Mama Burger with Cheese
 Chicken:
• 3 Chubby Chicken Fingers
• Chicken Grill Deluxe
• Grilled Chicken Sandwich
 Desserts:
 Hotdogs:
 Ice creams
• Caramel Sundae
• Caramel Sundae
• Hot Fudge Sundae
• M&M's Polar SwirlOreo Polar Swirl
 Sandwiches:
• Bacon N' Egger
• Crispy Chicken Sandwich
• Grilled Chicken Sandwich
 Sides:
• Cheese Curds (Side)
• Cheese Fries (Side)
• Chili Cheese Fries (Side)
• Fries (Regular)
• Large Breaded Onion Rings (Side)
 III. The Market

A. Describe the market(s) in which the product is to sold

A&W is indirectly a wholly-owned subsidiary of Yorkshire Global Restaurants,

Inc. Currently, A&W operates restaurants and grants licenses to operate restaurants
under the names A&W® and A&W All American Food. The Restaurants are located
both in the United States and internationally and offer A&W draft Root Beer® and food
products such as hamburgers, hot dogs and fries. The Restaurants are usually located
in an area with high traffic volume and typically are open for lunch, dinner and evening
business.

There are different locations where A&W are placed such as airports, at gasoline
stations, and Malls. Different market is targeted per location, but they succeeded on the
location on Malls and Gasoline stations where students or the young are the bulk or the
consumers.

a. Geographical region(s)

Here are the countries with A&W restaurants:

1. Australia- Until 2003, Tasmania did not have any A&W stores. However, a trial run
was tried, with A&W being combined with KFC stores, offering both store menus in the
one location. The trial ended in late 2004, with the A&W branches closing down. In
March 2005, A&W opened a joint-branch with Long John Silvers in Kings Park, New
South Wales. All Australian A&W restaurants closed in early 2007, due to poor sales.

2. Bahrain- There is an A&W restaurant located in the Desert Dome of the U.S. Naval
Support Activity Bahrain.

3. Bangladesh- An A&W outlet in Gulshan 1, Dhaka, Bangladesh. A&W opened its first
outlet in Bangladesh on 15 December 2004. This 170-seat outlet is located at Gulshan
1, Dhaka is the largest A&W outlet in South Asia. The food served is 100% halal and is
very popular with the local youth population, with root beer being the driving force of the
large number of sales. A&W Bangladesh serves an "All you can eat offer" during the
Muslim holy month of Ramadan and "Baishakhi Bonanza" during the Bengali new year.
As of August 2008, the restaurant was closed due to unknown reasons and has
reopened in mid 2009 at new location very near to Gulshan 1 circle .

4. Canada- The Canadian chain of A&W restaurants are operated by a separate

company, called A&W Food Services of Canada Inc. While originally part of the
American operation, the Canadian company no longer has any corporate connection to
the American chain. There are approximately 700 A&W restaurants operating in
Canada. The first A&W drive-in restaurant in Canada opened on Portage Avenue in
Winnipeg in 1956.
5. China- There were several restaurants in Beijing under the name "艾德熊".

6. Cuba- There is a combined KFC/A&W Restaurant located on the Guantanamo Bay

Naval Base.

7. Egypt- During 2006, all A&W outlets closed. Before that, there were at least 4 outlets
in Egypt; Mohandessin, Giza; Heliopolis Sporting Club, El Sherouk City; Nasr City,
Cairo, and Green Plaza Mall, Alexandria

8. Germany- Former co-branded KFC/A&W location 2003-2005, Cologne, Germany.

Closeup of aforementioned location November 2003, Cologne, Germany. There were 3
combined KFC/A&W Restaurants. All of them have since been closed (Cologne in
2005, Garbsen (picture of former KFC/A&W co-branded location in Garbsen) near
Hannover in 2005, Berlin in 2007 (Pic of former Berlin A&W). Both of the Berlin and
Cologne locations reverted to KFC-only franchises locations. The Garbsen location
closed at the same time as the A&W portion of the restaurant. This example shows the
same difficulty faced by A&W in Australia and in the UK.

9. Indonesia- The Great Root Bear outside an A&W Restaurant in Jakarta, Indonesia
(July 2009). A&W has a large presence in Indonesia, operating over 200 outlets.
Business appears to be growing stronger in Indonesia market. Like in Bangladesh and
Malaysia, the A&W outlets in Indonesia are 100% halal. The A&W outlets in Indonesia
are the only A&W outlets that sell rice, instead of mashed potato, due to strong
customer preference. A&W outlets are spreading all over the malls in major and minor
cities to compete with 2 giant competitors, KFC and McDonald's.

10. Japan- First opened in 1963 in Tokyo, A&W drive-in restaurants were the first fast-
food franchise to appear in Japan. Currently, they are found in Okinawa Prefecture, the
southernmost prefecture of Japan, at Yokota Air Base in Tokyo, and at the Misawa Air
Base Base Exchange food court. A dining room outlet opened in the Festival Gate
amusement park in Osaka in 1997, but closed within a year.

11. Kuwait- There were three A&W outlets in Kuwait up until 2003 when all were sold
and closed.

12. Malaysia- A&W's first store in Asia Pacific opened at Kuala Lumpur's Batu Road
(now known as Jalan Tuanku Abdul Rahman) in 1963, and still exists today. It was also
the first fast food corporation from the United States to set foot in the country. However,
A&W had a declining business era from 1997 - 2000. The most famous A&W outlet in
Malaysia is undoubtedly the drive-in outlet near Taman Jaya, Petaling Jaya, a satellite
city of Kuala Lumpur. It opened in 1965 and quickly became a favourite gathering place
for students, especially from the nearby Assunta and La Salle Secondary Schools. The
unique A&W root beer mug was often "collected" by these young customers. It was also
a favorite filming location for Malaysian movies during the 1970s and early 1980s.
Customers from the 1970s will recall Tuesdays as Coney Dog Day.

During the mid-1980s, A&W also operated a second Petaling Jaya outlet at the
Atria Shopping Complex in Section SS22 Damansara Jaya. In Penang, A&W had an
outlet at KOMTAR and Penang International Airport and has since been closed down,
but new stores have been opened at malls around Penang. During the 1990s, A&W
operated an outlet at Terminal 3 of the former Subang International Airport. This outlet
ceased operations when the Kuala Lumpur International Airport shifted from Subang to
KLIA in 1998.

To date, several more A&W outlets have been opened in Malaysia, mostly in
shopping malls. The largest A&W mall outlet is located in Suria KLCC, the most
prominent shopping complex in Malaysia. An A&W outlet opened for a number of years
in Likas Square, Kota Kinabalu, but was closed down in 2004.

Just like in Bangladesh, the food at Malaysian A&W outlets is 100% halal.

13. Philippines - The Philippines had a number of A&W outlets starting in the 1960s.[6]
These were all located in Metro Manila, and all were closed by 2004.

14. Qatar- At one point there were three A&W restaurants in Qatar's capital city Doha,
but two were shut down. The last is still running in Doha International Airport but is a
faint image of what other international A&W are like.

15. Singapore-The first A&W store opened at Dunearn Road in Singapore in 1966 as
the first fast food restaurant from the U.S.A. in that country. The chain expanded in the
later years, including one at Singapore Zoo which closed in 1999. The chain's
Singapore operations dwindled by the beginning of the 21st century, and by 2002 it had
only 7 outlets around the island. A&W finally closed in 2005.

5 years after its closure , Singaporeans are Petitioning online via social media for
the fast food outlet to re-open its outlets in Singapore

16. Thailand- There are more than 30 A&W restaurants in Thailand. After a recent
expansion, most locations are found at petrol stations on major highway routes. This
includes 18 at PTT stations, six at Petronas stations, and four at Shell stations.
Locations in shopping complexes include Pantip Plaza, Siam Square, and the Silom
Complex. A full location list is available here: [1]

17. United Arab Emirates- There used to be at least 3 A&W outlets in UAE, however
they have all recently been replaced with Marrybrown restaurants. To date, it is
unknown why all the A&W outlets were replaced. The very first A&W outlet was opened
in 1996, at a large shopping mall called Bur Juman Centre, located in Dubai. Two other
outlets were opened soon after at the Um Sequim Spinneys, and at the Thunder Bowl. It
is believed that business was doing well in these outlets, until they started to be
replaced in 2006. This situation is very similar to Egypt (above) where all 3 A&W outlets
there also closed down in 2006.

18. United Kingdom- There were a few A&W outlets in the United Kingdom, all of
which shared retail space with KFC such as Ashton-under-Lyne, Derby, Glasgow, and
Clayton. An A&W shared space with a Long John Silvers outlet in Walsall opened in
2004. These outlets have all now closed.
Here are the stores of A&W in the Philippines:
A & W Restaurant - Offices/Branches

A & W Restaurant
Address: Ever Grand Central, Rizal Ave. Extension, Caloocan
City, Metro Manila, Philippines
Telephone No: (632) 364-0375
Fax No:
Email:

A & W Restaurant
Address: , Julia Vargas Ave., Mandaluyong City, Metro Manila,
Philippines
Telephone No: (632) 633-5549
Fax No:
Email:

A & W Restaurant
Address: SM Cubao, , Quezon City, Metro Manila, Philippines
Telephone No: (632) 912-2060
Fax No:
Email:

A & W Restaurant
Address: , Perez Blvd., Dagupan City, Pangasinan,
Telephone No: (6375) 515-5567
Fax No:
Email: -

b. Transportation and communication

 big taste nutrition- location of stores in certain ares; shown is map
 facebook- showcase the restaurants
 youtube- video of some comments and testimonials
 cruising nights- the promos where customers can enjoy the trip
 gift shop- where there are gift checks

c. Consumer buying habits

 According to the ACNielsen survey, 30 percent of Asia Pacific consumers eat at
take-away restaurants at least once a week, closely trailed behind fast food fans in the
US (33%). At the other end of the scale, however, only one in ten European adults eat
take-away once a week. On a market-by-market basis, nine of the top 10 markets in
terms of frequency of fast food restaurant visits hailed from Asia Pacific. No European
markets had made the list. Despite a 12 percent of people in Asia Pacific claiming never
to eat fast food, the region has the most take-away addicts with Hong Kong ranks the
world’s No. 1 in terms of frequency of fast food restaurant visits with 61 percent visiting
fast food shops at least once a week to as frequent as more than once a day. In
Thailand, 46% claimed to eat take-away food at least once a month and the addicts
account for 12% who would eat everyday or more than once a day.

In the analysis of consumer buying behaviour, the sample is divided into three
groups based on the rate of buying fast foods: (i) very frequently (those who purchase
fast foods, on the average, once a week or more often), (ii) frequently (once in two
weeks to once a month), and (iii) occasionally (once
in two months or less often). The buying behaviour of fast food consumers was
examined from various aspects.

Table I shows that while slightly more than half(51.5%) of the sample do not
choose an particular day(s) to patronise fast food outlet almost an equal proportion
(44.5%) tend to do so during weekends. This is supported by observations of crowds
during weekends. T. persuade customers to patronize during weekdays, A&W has
come up with its Cone Day on Tuesdays when this item is charged at lower price.

Among the various groups, frequent buyers are the most likely to purchase on
a weekend. Advertising campaigns will tend to increase weekend buyers. To produce a
more even number of customers throughout the week, it is perhaps worthwhile
considering organizing promotion offers during weekdays.

The most popular meals for which respondent consume fast foods are lunch or
dinner (55.9% ni Table 2). This is true across all groups of respondents. Furthermore,
about one-quater (24.7%) consume these foods as a snack, define as a light, casual or
hurried meal. The menu offered include items such as fried chicken burgers, pizzas (a
dough- based product) an porridge; these could be taken as a substantial meal or
snack.

A majority (75.7% in Table 3) of respondents eat fast foods at the restaurant

from which the purchase whereas only 18.7% pack it for consumption elsewhere, such
as at home or in the workplace. Thus the decor and physical comfort (air-conditioning)
of the restaurant can contribute towards enhancing customer satisfaction and
encouraging repeat purchases

Respondents usually patronise fast food outlet with their families (59.1% in
Table 4), relatives friends, colleagues or business associate (38.1%). These visits are
regarded as family or social outings or as a place for meeting clients

Table 5 shows that, except for the actual purchasing, respondents and their
children play a major role in every stage of the buying process by way of suggesting,
influencing the final decision as well as determining what and where to buy.
 Children could exert a considerable influence on parents by initiating the buying
process (35.3%). Promotional offers and a variety of sales gimmicks (such as free gifts
or sales of masks, watches, pouches, multi-purpose bags and mini cameras) form
part of the strategies formulated to capture the children's market. Children are also
influenced by television advertisements, which display colourful and catchy scenes with
the chain's relevant mascot (such as Ronald McDonald, A&W Root Bear, Colonel
Sanders of KFC). However, the final decision of buying is more likely to he made by
adults (60.7% for respondents, 21.4% for their spouses).

The reasons for patronizing fast foods are revealed in Table 6. Respondents
were asked to rate the importance of a list of reasons for buying fast foods on a one-to-
four scale in increasing order of importance. The mean ratings in Table 6 show that
consumers generally place the most emphasis on cleanliness of the restaurant and the
hygienic preparation of its products, followed by its physical comfort (air-conditioning).
Thus, in contrast to the local hawker centres, these western fast food chains are
generally perceived as being modern, clean, hygienic C comfortable.

These restaurants also represent import convergence points for those who dine
out M their family or friends, who are in the midst shopping, as a treat for their children,
such as good behaviour, or who celebrate special occasions, such as birthdays. This is
consist with the earlier findings in Table 4.

The basics of fast foods, as implied by the name, are convenience (such as
nobody has to cook or clean up) and speedy service. These factors are evaluated on
the average, as important by the sample. Due to the short time lag between ordering
and delivery of the food, fast foods go a long way towards fulfilling the needs of people
who want a hurried meal or who may be compelled to eat while driving. Besides, the
American fast food concept provides consumers with a convenient alternative to a
home-cooked meal.

Those who patronise fast food centres, on the whole, are seeking a change
from home-prepared food rather than its nutritional value. This could have arisen from
doubts that fast foods contain sufficient nutrients for either themselves or their children.
Thus, efforts should be intensified to inform or reassure the public about the nutritional
aspects of fast foods, for example, whether they constitute complete meals, contain
high levels of saturated fats or provide sufficient nutrients such as vitamins and
minerals.

Playing facilities for children are rated as unimportant. Only a few outlets
provide these facilities. The changing role of women as a result of more of them
entering the labour force is also regarded as an unimportant reason for buying fast
foods. This could be attributed to the availability of domestic helpers in preparing
meals, availability of alternative sources of food in ready-to-eat form, or women's own
efforts in coping with work and preparation of meals at home after work.
 What are typically order from this establishment: The A&W Papa Burger, 1 large
order of onion rings and, of course, a huge frosted mug of A&W Root Beer and an A&W
Root Beer Float for dessert

d. Distribution of the product

Distribution through franchising. Franchise Offer: There are two types of franchise
offered:

a) Co-Brand Restaurant - A&W Restaurant that is to be operated in the same facility

as another branded restaurant concept

b) A&W express units - Based in so-called "captive audience" locations such as

military bases, colleges and universities, airports, interior mall locations and similar
venues. Financial Assistance: A&W does not finance any portion of the franchisee’s
initial investment and A&W does not guarantee any of the franchisee’s indebtedness

e. Advertising and promotion

Advertising & Marketing - Yum! is committed to making A&W Restaurants even

bigger. Last year alone, Yum! and its franchisees spent more than $600 million in
consumer advertising. National marketing news is communicated regularly throughout
the year. Many markets have local advertising cooperatives to coordinate local
marketing activity. Franchisees are encouraged, but not required, to participate in
system promotions.

Promotions and contests - A&W and Jim Belushi offered a trip to Los Angeles with
a VIP pass to "A&W Ultimate All-American Cookout and Concert" at the House of
Blues over eBay.

A&W's marketing budget this year will be spent primarily on print, radio, billboards and
freestanding inserts. In-store materials also will promote the new burgers. A quarter-
pound single patty replaces the one-sixth-pound patty Double burgers still will consist of
one-third-pound patties but will offer more toppings. In all, five standard sandwiches will
offered on Kaiser rolls, which replace traditional hamburger buns.

f. Pricing strategy

Pricing strategy depends on the location but it is price just like KFC and Mcdonalds, its
main 2 competitors. There are some combo meal introduce in the market.
B. Compare and contrast your product and the competition’s product(s).

1. Main competitors
A&W All American Food, based in Louisville, Kentucky, began in 1919
when Roy Allen mixed up a batch of creamy root beer and sold the first frosty mug of
his delightful beverage for one nickel. He took on a partner, Frank Wright, and the two
named the brew after themselves: A&W Root Beer. After all this time, A&W Restaurants
still serve the proprietary beverage in more than 500 locations (most in high-pedestrian
areas) in the U.S.A. As well as for the delicious root beer floats, the brand has become
well known for serving all-American hot dogs and pure-beef hamburgers, and it is the
longest running quick-service franchise chain in the U.S.A.
KFC, based in Louisville, Kentucky, is the world's most popular chicken
restaurant chain specializing in Original Recipe®, Extra Crispy™ and Colonel's Crispy
Strips® chicken with homestyle sides and freshly made chicken sandwiches. Since its
founding by Colonel Harland Sanders in 1952, KFC has been serving delicious, already-
prepared complete family meals at affordable prices. KFC has more than 11,000 outlets
in 85 countries and territories around the world, serving some 8 million customers each
day.
Long John Silver's relocated to Louisville, Kentucky, in 2003. It is the largest
quick-service seafood chain in the U.S.A. The company's first restaurant opened in
1969 as Long John Silver's Fish 'n' Chips when consumers were demanding quick-
service seafood. As the concept has grown, the menu has evolved to meet the desire of
consumers looking for more variety and great taste. Long John Silver's Restaurants
serve 45 million pounds of fish and 15 million pounds of chicken annually. Each week,
about 3.8 million guests visit more than 1,200 worldwide restaurants per week.
Pizza Hut, based in Dallas, Texas, is the world's largest pizza restaurant
company, with nearly 8,000 restaurants and delivery units in the United States and
more than 4,100 units in 85 countries. The company is the recognized leader of the $25
billion pizza category. Menu items include popular choices such as Hand-Tossed, Thin
'n Crispy ®, Pan, Stuffed Crusts, and the complete Lover's® line. New pizzas that have
also become favorites include The Big New Yorker, The Edge™, The Insider, and
Twisted Crust. In 1958, Pizza Hut opened in Wichita, Kansas, and began selling what
are still considered "the best pizzas under one roof."
Taco Bell, based in Irvine, California, is the largest Mexican-style quick-service
restaurant company in the world, a status quickly reached after the brand's 1962
beginning. Currently, more than 55 million people visit Taco Bell restaurants in any
given week in the U.S.A., and they purchase 4.5 million tacos, as well other popular
menu items such as burritos, nachos, chalupas, and gorditas, each day in our
restaurants. Additionally, half the U.S. population sees a Taco Bell commercial at least
once a week, which generates significant brand recognition.

Competition

The QSR segment is a crowded and intense environment. Yum's diverse portfolio of
restaurants attracts competition from many different types of quick service restaurants.
McDonald's (MCD) is Yum's largest global competitor. MCD is the leader in the US
QSR segment and is growing in China. KFC is the dominant player in the chicken QSR
segment with its closest competitor as Popeye's. Although, increased chicken choices
at burger joints like McDonalds, Burger King, and Wendy's are also grabbing sales from
KFC. Pizza Hut has received significant competition from Domino's Pizza (DPZ) and
Papa John's over the last few years and they have been keeping Pizza Hut's sale
growth down.

From a market perspective Yum faces its fiercest competition in the US. This is due in
large part to the fact that US market is extremely saturated with QSRs. Overseas, Yum
has a very strong position and plans to expand its already very successful International
division into continental Europe, Russia, and India.

The table below shows fiscal 2009 data for the largest publicly traded food service
competitors by revenues. Subway and Dunkin' Donuts, also a major players, are
privately owned.

Revenues Net Income Net Franchised

Company Restaurants
(M) (M) Margin %
McDonald's (MCD) $22,745 $4,551 20.0% 32,478 81%
Yum! Brands (YUM) $10,836 $1,083 10.0% 37,000
Starbuck’s (SBUX) $9,775 $391 4.0% 16,635 47%
Darden Restaurants
$7,218 $372 5.2% 1,773 0%
(DRI)
Brinker International
$3,621 $79 2.2% 1,689 40%
(EAT)
Wendy's International
$3,581 $4 0.1% 6,451 80%
(WEN)
Burger King Holdings
$2,537 $200 7.9% 11,925 88%
(BKC)
Jack in the Box (JACK) $2,471 $131 5.3% 2,212 46%
CKE Restaurants
$1,419 $48 3.4% 3,141 71%
(CKR)
Domino's Pizza (DPZ) $1,404 $80 5.7% 9,339 91%
Panera Bread
$1,353 $87 6.4% 1,380 58%
Company (PNRA)
Data from company FY 2009 annual reports (CKE data from FY annual, ended January
31, 2010).

2. Direct competitors- Yum! Brands

AFC Enterprises, Inc. (AFC) develops, operates and franchises quick service
restaurants, bakeries and cafes (generally referred to as QSR's) in two distinct business
segments: chicken and bakery. The chicken segment operates and franchises under
the trade names Popeye’s Chicken & Biscuits and Church's Chicken. The bakery
segment operates and franchises under the trade name Cinnabon and franchises cafes
under the trade name Seattle's Best Coffee. As of December 28, 2003, AFC's brands
operated or franchised 4,091 QSR’s in 46 states, the District of Columbia, Puerto Rico
and 36 foreign countries. In 2003, franchise revenues represented approximately 15.6%
of AFC's total franchise revenues. In November 2004, the Company sold its Cinnabon
subsidiary to Focus Brands Inc., an affiliate of Roark Capital Group.
(Finance.Yahoo.com)
McDonald's Corporation operates and franchises McDonald's restaurants in
the foodservice industry. These restaurants serve a varied yet limited, value-priced
menu in more than 100 countries around the world. The Company also operates Boston
Market and Chipotle Mexican Grill, and has a minority ownership interest in the United
Kingdom-based Pret A Manger. In December 2003, the Company sold its Donatos
Pizzeria business. All restaurants are operated either by the Company, by independent
entrepreneurs under the terms of franchise arrangements (franchisees/licensees) or by
affiliates operating under license agreements. When granting franchises and forming
joint ventures, the Company is selective and generally is not in the practice of
franchising to, or partnering with, investor groups or passive investors.
(Finance.Yahoo.com)
Wendy's International, Inc. is primarily engaged in the business of operating,
developing and franchising a system of distinctive quick-service and fast-casual
restaurants. As of December 28, 2003, there were 6,481 Wendy's restaurants
(Wendy's) in operation in the United States and in 21 other countries and territories. Of
these restaurants, 1,465 were operated by the Company and 5,016 by its franchisees.
As of December 28, 2003, the Company and its franchisees operated 2,527 Tim
Horton’s (Hortons) restaurants with 2,343 restaurants in Canada and 184 restaurants in
the United States. Of these restaurants open, for the fiscal year ended December 28,
2003, only 57 were Company operated. In addition, the Company and its franchisees
operated 283 Baja Fresh restaurants in 25 states, of which 132 were company-operated
restaurants and 151 franchise restaurants. (Finance.Yahoo.com)
Sonic Corp. operates and franchises a chain of drive-in restaurants (Sonic
Drive-Ins) in the United States. During the fiscal year ended August 31, 2004 (fiscal
2004), the Company had 2,885 Sonic Drive-Ins in operation, consisting of 539 Partner
Drive-Ins and 2,346 Franchise Drive-Ins, principally in the southern two-thirds of the
United States. Partner Drive-Ins are those Sonic Drive-Ins owned and operated by
either a limited liability company or a general partnership. It owns a majority interest,
typically at least 60%, and the supervisor and manager of the drive-in own a minority
interest in each Partner Drive-In limited liability company or general partnership.
Franchise Drive-Ins are owned and operated by its franchisees. (Finance.Yahoo.com)

C. Market size

A fast food consumer, on the average, patronises a restaurant frequently (between once
in two weeks to once a month), during weekends, for lunch, dinner, and accompanied
by family members. Both adults and children play an important role in the buying
process. Reasons such as cleanliness. convenience, family outings and celebration of
special occasions are considered important in buying fast foods.
Customers eat out for a change from home prepared food but they do not believe that
fast foods provide good nutritional value. Hence, it is vital that efforts to maintain or
increase a chain 's market share should be tailored according to the pattern of
consumer behaviour.

The multi-attribute image model is proven to provide with confidence valuable

information for predicting and describing store image. By identifying the importance of
relevant attributes and evaluating fast food restaurants on these attributes, a manager
can better understand the market. He is better informed not only about the image of his
store compared to that of other stores on overall measures and on various attributes,
but also on how important these attributes are. He can subsequently develop effective
marketing and operational strategies.

Customers attach great importance to quality of food, cleanliness and consistency.

Politeness of staff and type of service form the next important group. The remaining
menu, environment, location and price form the lowest group. It is noted that price is
given the least importance. Hence, for a fast food chain to do well, great attention
should be paid to the first two groupings to enhance customers' beliefs of these
attributes.

For example, improving the nutritional value of fast food by providing a good balance of
vitamins and minerals and by reducing oils and saturated fats (cholesterol) would
encourage more customers to fast foods. It may then be j justified as an alternative to a
home-cooked meal.

It appears that the seven stores can be subdivided according to their image
characteristics as follows: (a) McDonald's and KFC, (b) Pizza Hut and A&W (c)
Grandy's and Shakey's Pizza, and (d) Wendy's. KFC seems to dominate the market,
with the largest number of outlets (60) and claiming to capture about 70% of the market;
the balance is shared among McDonald's, A&W etc.

All of the A&W Brand products have sold well, with A&W root beer competing directly
with Coca-Cola, Seven-Up, Dr. Pepper, and Pepsi. Although it is unlikely that A&W root
beer will ever increase its share of the soft drink market, the 30 percent share of the root
beer market that it retains is more than enough to keep management at Cadbury
Schweppes happy.

D. Government participation in the marketplace

There should have a support from government so that the franchise will be successful.

The Philippine economy also benefits in this scenario since part of an international
franchise’s profits is remitted into the country. This does not take into account the
products, such as coffee and other raw materials, which the country exports to sustain
the franchises.
Although franchises are not failure-proof, entrepreneurs favor the odds of better return
on investment and profit, as well as tried-and-tested systematic business operations
that they provide. While the country’s franchising sector can be considered to still be in
its infancy stage, the time is ripe for Philippine brands to go global.

In countries like Singapore and Malaysia, local franchisors enjoy the support of their
government in terms of financing and even marketing.

In Singapore, firms that are looking to franchise overseas receive incentives and
financial aid from the government. Even embassies are told to promote Singapore
franchises.

In Malaysia, the government has a master plan for franchise development. Malaysian
franchises receive support to establish themselves first in their country. Now, they are
looking at the international market to expand their businesses.

IV. Executive Summary

There is a need for review the strategies to better penetrate the market. And there are
the following:

When we purchased A & W almost seven years ago, there was an article in the trade
press that said something like--"Does Sid Feltenstein really know what he is doing? A &
W hasn't been a factor in the restaurant business since Gerald Ford was President."
That writer certainly had a point of view. Moreover, based on what A & W had done in
the past, it was not an unreasonable point of view. However, my perspective on the
restaurant industry over the last 30 years is that some of the greatest success stories
are about brands that have been around for a long time, that have fallen on hard times,
yet still possess great brand awareness and brand equity, who have, with the injection
of the right management, the right strategy and capital to do what is necessary, come
back to be bigger and better than they ever were.

It is hard to kill an established brand. It was my feeling, when considering the acquisition
of A & W, that this brand was a prime candidate for such a comeback.

A & W Restaurants is the oldest fast-food restaurant chain in the United States; it began
business in 1919. At its peak, it had 2500 restaurants, which, at the time, made it one of
the top two or three largest restaurant chains in the world. Because of its prior market
penetration, even though at the time we bought it they were down to 600 stores, it had
enormous brand equity and brand awareness--something that we felt could be
leveraged.
The first thing after buying the chain was to establish a clear objective and specific
strategies to support that objective--all of which needed to be designed to turn the
business around. The major objective was that, by the year 2000, we, working with our
franchisees, would improve average restaurant dollar profits by 50 percent. This was a
key objective because, if our stores are not making above average profits, then nothing
else matters; on the other hand, if franchisee profits are growing, anything and
everything is possible.

To support this objective, we established four inter-related strategies with our franchise
community, as follows:

Improve Our Operations

In order to do this we had to take a centralized operating organization and put our store
supervisors in the markets they supervised. We needed to improve our training,
standardize our menu, improve the quality of our products and invest in a field
operations organization to provide our franchisees better support.

Re-Image Our Chain

At the time we bought A & W, we had 600 stores with virtually 600 different images--
most of which were old and tired. Our objective, by the year 2000, was that at least 75
percent of our chain needed to be to an image that we would create. This "to be
created" image would capitalize on the nostalgia throughout America that the brand
enjoyed; we called it contemporized nostalgia. A chain with a consistent, dynamic, retail
image is very powerful.

Market Our Brand More Aggressively

All of our franchise agreements called for spending 4 percent of gross sales on
advertising. As best we were able to tell, it wasn't being done principally because the
franchisor was not providing sufficient leadership in the marketing arena to get these
dollars spent. To improve this situation we also needed to provide additional field
marketing support for our franchisees. Additionally, we charged our operations team
with the objective of securing at least 85 percent of franchisee support of all marketing
initiatives; we bonused them accordingly.

Accelerate Distribution and Put A & W Back On an Aggressive Growth Curve

To this end we established a goal to have at least 1000 points of distribution by the year
2000. This was, in many ways, the more difficult objective because there were an awful
lot of much bigger players with whom we had to compete, who also had much larger
marketing budgets than we had. Thus, our distribution strategy was to create concepts
ranging from 200 square feet to as big as one wanted to make it so that we could retail
our brand and our core menu in non-traditional outlets where we were intercepting other
people's traffic--or as I often say "wherever people live, learn, work, shop or play." In
this way we were able to neutralize our lack of marketing resources vis-a-vis
competitors.

We made it very clear to our chain that, in order for us to be successful in achieving the
goal of improving average restaurant dollar profits by 50 percent by the year 2000, each
one of the strategies had to be executed brilliantly. It was not an "a la carte" choice
because the strategies were totally inter-related. If all these strategies were not
implemented, we would not be able to achieve our goals.

Over the years, I have learned that if franchisees are not intimately involved in the
execution of strategic initiatives, both in terms of what the tactics are and how the
tactics get communicated and executed, the likelihood is that one will not succeed.
Thus, in order to do all the things that we needed to do, we have to mobilize the
franchise community through the national A & W Franchise Association.

Our franchise association saw it was in their best interest to see the chain vital and
healthy again and they were extraordinarily supportive and helpful. While we did not
always agree on everything, we were always able to work out the differences because
both of us had in mind the long-term success of each and every franchisee. Along the
road, there were several issues that could have become very contentious, but with
goodwill on both sides we were able to resolve those as well.

We really did achieve all of our goals. First, by the year 2000, the stores that embraced
our four inter-related strategies improved their dollar profits by 50 percent. Our
operations improved quite dramatically, as we saw all critical measurements in terms of
quality of food, cleanliness, speed of service, and much more--much higher than they
were when we first purchased the company.

We were able to achieve our goal of 1,000 units in operation by 2000 and, indeed, more
than 75 percent of our chain was utilizing an exciting retail image that we created shortly
after we bought the company.
Our marketing was executed on a far more consistent and aggressive basis which
enabled us to enjoy same store sales growth in excess of chains that have far greater
marketing resources than we have.

Developing a very clear objective with simply understood, but difficult to execute
strategies, supported by our franchise community, enabled us to achieve all of the goals
that we and our franchisees set. It was a particular honor for our chain to receive, this
year, Nation's Restaurant News "Hot Again--Hot Concept Award," which is the first of its
kind given to any chain.

The success we have enjoyed would not have been possible without the enthusiastic
support of the A & W franchise community working as closely and constructively as
possible with members of the A & W management team. It is these two groups of
wonderful people who should be credited with "the successful remaking of A & W
Restaurants."

“We termed the new design ‘contemporary nostalgia’ — it’s a look that captures the
history and heritage of our brand,” Bazner says. The new design features an updated
logo, overstuffed booths and warmer lighting. Bazner says franchisees have accepted
the redesign and used it as a vehicle to increase profitability.

V. Sources of information

A&W Restaurants

From Wikipedia, the free encyclopedia