Case Analysis: Ruth’s Chris: The High Stakes of International Expansion
Q1
In order to cut down the size of potential countries Hannah enforced a strict criterion that eliminated prospects not meeting the characteristics or model for success that was key to the Ruth Chris franchise brand. This includes: (1) liquid net worth of at least US$1 million, (2) verifiable experience within the hospitality industry, (3) an Ability and Desire to develop multiple locations, (4) cost of the franchise, which is $100,000 per restaurant. (5) a Royalty fee of five percent of the gross sales and (6) a two percent of gross sales fee as a contribution for the national advertising campaign.
After deciding on the market development model Hannah and his team shifted
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Each variable is weighed by 25% and then scored out of 100% for a grand total.
Variables consisted of: Per Capita Beef Consumption - Countries such as Bahamas, France and Spain with higher beef consumption per capita are favorable markets for Ruth’s Chris.
Population – a larger the population size generally means a larger the pool for target customers. Brazil fits this perfectly.
Urbanization rate (%) – these are densely populated urban areas, which would have large target customer pools. These areas are ideal for restaurant locations. Kuwait with a percentage 96% would be ideal considering this variable.
Per Capita GDP – a high GDP relates to a positive or growing economy this variable may not be representative of the target customers.
Note: Exhibit 4 of the case study consisted of 33 countries. After selecting my top 16 based on the raw data and opinion of the regions I then did further calculation to arrive at the top 10 listed
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Cost
Ruth’s Chris franchise cost is US$100,000 per restaurant. Such a high cost will slow their expansion in international markets and may result in missed opportunities. I would suggest that Hannah lower the cost for existing franchise owners abroad after a specified period and calculated target goal for revenue has been met in order to expand territory.
Limited Menu
Ruth Chris has a menu limited to steaks, sea food and vegetable courses. In new markets they may need to alter the menu to attract new customers or lose potential sales.
Regular Franchise inspection and reports
Franchises should be inspected regularly to ensure that they are following Ruth’s Chris model , to ensure safety and to ensure that the quality of products and services remains the same.
List of external challenges Hannah will be facing