I completely agree that the fast casual segment has been growing quickly, but think players at lower price points are being impacted more than the fine dining players at the other end of the spectrum.
I also agree that consumers are demanding more healthy dining options, and Fogo has been trying to capitalize on this trend. Fogo’s Market Table is a standalone option, and last year the company re-engineered the Market Table to be gluten-free and local. Also in 2014, Fogo introduced a seafood entree and seafood appetizer to attract non red-meat eaters. I believe Fogo will continue to modify its menu and operating menu to meet customer demands.
Doug – great post!
Having grown up in GA, Chikfila definitely brings back memories!
Questions / comments:
What other controls does Chikfila corporate have to ensure quality and service at franchise locations? Are there required training programs for servers?
How competitive is it for franchisees? How many locations does a typical franchisee own?
I think Fogo would make for a very interesting case. I would be interested in digging deeper on the similarities and differences in the two restaurants and how these will affect Fogo’s long-term performance.
A key to success for both restaurants is its people. Benihana recruited hibachi chefs from Japan, and Fogo recruits gaucho chefs from Brazil. In Benihana’s case, it became more difficult to recruit native talent as the Japanese economy strengthened and work abroad became less appealing. In Fogo’s case, gaucho chefs prefer to work in US locations and have more opportunities for advancement in the states. I believe Fogo will continue to have success in recruiting top talent but also wonder how market/government changes may impact its ability to transfer native gaucho chefs to the US.
Thanks for the comments. Just a few of my thoughts below:
– Fogo views other Brazilian steakhouses, steakhouses (general), and fine-dining restaurants as competitors. Primary competitors would be Del Frisco’s, Ruth Chris, Capital Grille, Fleming’s, and Sullivan’s.
– There are not many scale players in the Brazilian steakhouse space. Texas De Brazil is Fogo’s main competitor. I believe the lack of scale players may be attributed to the level of sophistication in the Brazilian steakhouse space. The majority of Brazilian steakhouse are mom and pop restaurants that may lack professional management and capital to pursue aggressive growth strategies.
– Key barriers to entry in this space I believe are access to capital (as mentioned above due to level of sophistication) and access to talent. What really differentiates Fogo is its authenticity that is espoused through its gaucho chefs. Gaucho chefs deliver not only authentic cuisine but authentic service. Because Fogo has a large footprint (10 stores) and great reputation in Brazil, it is able to recruit top talent.
Hope this is helpful!
Interesting post Sid! Great read on how a successful US company (pre data theft) failed to expand into a close, neighbor!
How were competitors such as Wal Mart able to expand and be successful in Canada?
What do you think was the biggest cause?
Inventory planning – Given the company’s history and experience, why did they not implement supply chain mgmt. properly? Was it a lack of understanding consumer demand or supply chain coordination in new market? Why wasn’t company able to fix this?
Pricing – how large was the mark up? was it defendable? Did customers actually save when taking into account transportation and convenience? Or was it more of an emotional let down? Why wasn’t company able to adjust pricing in two years?
Krispy Kreme is a great example of a company with a superior product (yum!) and a weak execution strategy. As you have laid out very clearly, its strategy of entangling its retail and wholesale businesses may be one cause.
To further evaluate the company, it would be interesting to see how Krispy Kreme’s strategy and financial performance has compared to competitors such as Dunkin Donuts and Starbucks.
Questions / comments:
What are the margins in the retail vs whole business? Which one should Krispy Kreme have focused on?
Is Krispy Kreme a breakfast offering or a dessert offering? If breakfast, it makes sense for Krispy Kreme to be more accessible. If dessert, maybe it makes sense for Krispy Kreme to focus on distribution?
Production – Are there advantages of producing on-site? Is it more economical to product on-site or to open additional plants?
Real estate – With the new store format, was Krispy Kreme able to open in more attractive/high traffic locations? Is being a “destination” location necessarily a con? Will being more accessible detract from the brand?
Distribution – Should Krispy Kreme have kept the larger stores but built out its distribution network to increase quality of delivered products?