Case Study
In-N-Out Burger 1. Why do some business analysts say that In-N-Out's business model is "counter intuitive"?
In-N-Out’s business model is considered to be counter intuitive as it is opposite to the commonly found business model in the fast-food industry. Firstly, all the stores are privately owned by the promoter family only unlike other chains which use franchise based model to expand their business. Such conservative and slow expansion policy as adopted by In-N-Out is quite unique in its industry which usually focuses on rapidly expanding all across the country and abroad. This is why in spite of being in business since 1948; the numbers of stores of In-N-Out are far lesser than its peers like Burger King. McDonalds,
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The offering of logo-branded memorabilia and presence of secret customized menu are few of these measures to create a strong and cult fan base.
3. Why do you think In-N-Out Burger has an estimated 20% profit margin while McDonald's reports a 6% profit margin?
In my opinion, the drastic difference in profitability margin is primarily due to the vastly different business models adopted by the two companies. Whereas In-N-Out focuses on higher margin on limited volume, McDonalds is totally focused on volumes. In-N-Out tends to have lower costs as there are minimal expenses spent on advertising and development of new menu, whereas McDonalds spends heavily on these aspects. Also, In-N-Out has created a loyal fan base which is willing to pay extra for the high quality burgers, thereby increasing In-N-Out’s profit margin. On the other hand, McDonalds finds itself right in the middle of highly competitive and price sensitive fast food industry, and with no major loyal fan base, it has to operate on minimal margins to achieve high volumes. Therefore, due to these differences in approach of the management, the profitability margins are so different for these two companies.
3. How would you describe the competition between In-N-Out Burger and Five Guys?
As observed earlier, In-N-Out follows a fairly different strategy as compared to its competitors which totally
Cost is really one of the biggest differences between these two franchises. Aside from both places offering the dollar menu, their overall pricing on other items, is very different. A McDonald’s value meal can cost up to $4.00, whereas Burger King’s value meals can cost up to $6.00! Saving a few bucks by going to McDonald’s sounds a lot better than spending unnecessary amounts of money at Burger King. Just by looking at the sales difference between the two, you can see that people would agree. In 2009, Burger King’s profit dropped 10% in its second quarter, while McDonald’s sales grew a solid
From when it first was established to now, In-N-Out has created for itself the title of one of the best burger joints and has become a phenomenon in the history of fast food places. This has affected other fast food places such as Burger King; also it has earned the adulation of several famous chefs, which is rare considering In-N-Out is a fast food place.
Chick-fil-A is one of the most successful fast food restaurant establishments in the country. With over 1,300 locations in 37 states in the Southern U.S., they continue to grow the brand by expanding to new territories (Chick-fil-A Company, 2009, para 1). In 2008 Chick-fil-A has seen a 12.17 percent sales increase over the chain’s 2007 performance and a same store sale increase of 4.59 percent (Chick-fil-A Company, 2009, para1). Throughout the years Chick-fil-A has come up with many innovative ideas to continue expanding business and satisfying their loyal customers. One of the ideas was to offer different types of restaurant set-ups to cater to customer’s needs. The different restaurant set-ups include mall/in
A good leader is one that motivates others to do well, not because they have to but because they want to. A great leader knows and understands their vision and is unwilling to compromise their values or morals to achieve success. Not all influential leaders are publicly known for their accolades. It is not until something negative or perceived as negative is brought to the public’s attention that these leaders are judged; such is the case of Truett Cathy, the founder of Chick-fil-a. Standing firm on this beliefs in God and Christian principles he turned a small diner into the multi-billion dollar company, Chick-fil-a that generates more profit in 6 days, than its competitors in 7 days (Williamson, 2014,
In-N-Out Burger keeps its menu very simple and short in order to maintain the control and ensure high-quality food. Its business strategy is to primarily focus on the quality. At In-N-Out Burger, it offers three varieties of burgers, which are double -double, cheeseburger, and hamburger; French fries, beverages, and shakes. And, it just stays there; there is neither desserts, coffee nor breakfast menu. It has maintained this menu for over 50 years. If there is a change, maybe it was a soft drink in the last decade. Until now, the motto of In-N-Out Burger is still “serve only the highest quality product, prepare it in a clean and sparkling environment, and serve it in a warm and friendly manner” (www.in-n-out.com). In order to serve customers with fresh food, the employee will start making the food when the order is complete. All ingredients are never frozen, and no food warmer heat lamps are used. In-N-Out Burger has proven that there is no need for a large menu and no need to constantly change. As long as it specializes in a product, then it will have more loyal customers coming to its
I really enjoyed your discussion board. I knew about Chick-fil-A being a religious company but did not know about any of the others you mentioned. I really think it is important to find a job that can provide understanding about religion. Having worked at Cracker Barrel for 5 years and being unable to have Sunday mornings off work I really can’t wait to work for a company one day that honors Sunday mornings off. I feel like we give so much of our lives to our jobs but we don’t really think about who we might be working for. What is our job contributing to the community that we might not agree with? I know for a fact my job at a cable company does not go along with my personal values. We have adult movies for rent and I often get uncomfortable
The 2 firms had a similar profit margin, major difference exists in COGS and SG&A, while Sears had a higher gross profit margin, high expense (21.17%) is driving the total cost and expense of the two firms to the same level-about 95%.
The first KFC was opened in Tiananmen Square, China 1987; it struggled as western food was unknown to the east. This was still a very conservative nation, not prepared for the “Fast Food” takeover. The restaurant did pretty well, but grew slowly. The Harvard business review, stated that “in 1992 the Chinese government granted foreign companies greater access to markets, KFC China’s managers gradually developed the blueprint that would transform the chain.” (Yums' China, 2017) Although they have done well for themselves they struggled, as growth was steady but slow and their customer base was shrinking. “In November 2016 Yum China Holdings, Inc. became a licensee of Yum brands in Mainland China; they have exclusive rights to KFC.” (Yums' China, 2017) Yum controls approximately 7,300 restaurants and more than 400,000 employees in more than 1, 100 cities. YUMS generated over $8bln in sales in 2015.
In contrast with McDonalds their success is from globalization. Since the early 1940’s McDonalds has been a burger business, and accomplished to be the first one’s to become global. McDonalds has invested into several community organizations that helped the business to earn trust from the communities and gave more of a positive outlook towards their restaurants. They support their own employees, their families, and other groups of society in every country where it has business. McDonalds has website links to promote healthy living for kids, teens, and Latin and African Americans. McDonalds Happy Meals, McDonalds for teens, Me Encanta, and 365Black. They have corporate governance, which shows in detail of their operational structure. There is a whole webpage that is dedicated to explain about what is their drive to stay successful, what the board of
The company that I am writing about is Starbucks, the international coffee shop chain. The company's financial statements for this analysis are from the FY2011 Annual Report and 10-K. The company has 10787 stores in the United States, of which 38% are franchised and the remainder are company-owned. The franchise model is more common when the company operates internationally. There are 6216 Starbucks stores internationally and of these 63% are franchises, with just 37% company-owned. The franchise model for international expansion has been utilized to help Starbucks expand quickly in foreign countries and to mitigate foreign political risk and to ensure that the product/service offering is tailored to local tastes (Thompson, 2012). The company is now in the process of buying back some overseas franchise stores in order to retain more profits for itself (Franchise Press, 2011). This paper will take a look at the company's most recent annual report to analyze the financial statements.
• Risk of new entry by potential competitors: the risk is very high in the restaurant industry because of the low capital investments required to enter. Outback Steakhouse competes not only with the casual diners but as well as with fast food chains, and even supper markets. Many of the high-end grocery stores offer variety of complete meals. It costs the customer absolutely nothing to switch to a different restaurant; therefore companies in this industry cannot depend on locking in the customers. However, by establishing a brand loyalty customers will return. Established restaurants such as Outback Steakhouse have an advantage with the economies of scale in advertising and purchasing.
McDonald’s has extremely strict rules when it comes to awarding franchises. First, it is very costly to open a new location or purchase an existing location, with the median startup cost being $300,000 (Kalnins & Lafontaine, 2004, p. 750). As well, the company does an extensive background check on a variety of issues including credit history, business management experience, and the acceptance of the contractual agreement that the company provides. Because of these strict rules and the large amount of capital needed to purchase a location, “rates for franchise applicants are 1% for McDonald's” (Norton, 1988, p. 204). This is an extremely low acceptance rate and is even lower than McDonald’s chief competitor, Burger King, who accepts 1.5% percent of applicants (Norton, 1988, p. 199). These low numbers are understandable in the context of the business and risk that is involved. Though the franchise purchaser must pay a large amount of money to gain the rights to the restaurant, they truly have nothing to lose besides money because they are simply running another company’s business model as well as using their trademarks and logos. McDonald’s on the other hand, has a great amount at stake because they place the well being of an entire restaurant into the caretaking of an individual who simply purchased the rights for the store. If the store does poorly or if there are issues with customer service, it reflects
Company B (88.9%) has a higher gross profit margin most likely because the firm not only manufactures and mass markets a broad line of prescription pharmaceuticals, over-the-counter remedies, consumer health and beauty products but also manufactures medical diagnostics and devices. Company A is lower (76.1%) due to its limited product range (only manufactures drugs).
Net Profit Margin- The net profit margin of 18.34 percent for 2008 indicates that 18.34 cents of net income was generated for each dollar of sales. The significant increase of 7.83 percent, from 2007’s 10.51 percent, yielded an additional $1.84 billion in profit on the company’s $23.52 billion in revenue.
Answer to Question 1. MITRE is following the committed expert strategy. Its recruiting focus is targeted. MITRE does not resort to broad recruiting channels because it’s costly and doesn’t attract the right kind of candidates. MITRE mostly uses internal sources to hire new people. The company’s current employees do most of the recruitment and, in return, they get bonuses and opportunities to improve their team by suggesting candidates that they find suitable.