Case Report Ruth's Chris Steakhouse
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
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