The following Strategic report will give an insight of the American restaurant chain Five Guys and give facts and recommendations in order to expand their business in Portugal. The report will begin with an external environmental analysis, this analysis will analyze the inherent factors in the environment of Five Guys that can have some impact of them and looks for the most efficient way or way, to avoid or solve it. This type of analysis is relatively qualitative and consists in the identification, exploration, analysis and prediction of environmental variables; Macro and Micro analysis. The Macro analysis will allow us to analyze the forces that surround Five Guys, over the forces which the company cannot exercise any control (PEST) and Micro Analysis which are the forces that affect a particular company and, although they are usually not controllable, a company can influence them. From the analysis of the Micro-environment the strengths and weaknesses of the company are will be revealed. From there an internal environmental analysis which will allows us to study the entire doors and distinguish the strengths and weaknesses that it presents in the relationship with the competition. Strengths and weaknesses are the characteristics that the company possesses in its internal environment and usually influences when it comes to proposing strategies, in this case Porter's five forces will be used to allow the company to know the competition that has the sector in which it operates. From that point forward, an approach to Five Guys 's internal environment analysis will be conducted, by recognizing its strengths and weaknesses. Additionally, a VRIO framework will be used to examine with the end goal to decide the company's assets and weaknesses. In this way, there will be a recognizable proof of focused techniques for Five Guys by using Porter's strategies. Next, the report will incorporate strategic directions for Five Guys to grow their market from its items and services with the end goal to accomplish their piece in the Italian market, trailed by a rundown of references used in this research.
In 1986 Janie and Jerry Murrell proposed to their four children to start a business or go to university. They opted for the first and opened a restaurant named Five Guys in Arlington, Virginia. The name (Five Guys) originally referred to Jerry and his four children, finally, when the fifth brother entered the family business the name went on to represent the five children.
The business grew and started by opening four more restaurants in the USA and by beginning 2000's, they opened new restaurants, expanding throughout the country and Canada and then making the leap to international countries. Today there are already 1,500 restaurants around the world.
3.8 EXTERNAL ENVIRONMENT ANALYSIS
The micro-environment, in which the company develops its activities, determines its internal functioning and, therefore, directly affects its result. For this reason, it is necessary to understand how this environment works and detect which are the forces that compose it and how they relate to the way the company operates. Therefore, every company must conduct a Macro environment analysis, in order to evaluate its attractiveness in terms of existing and potential opportunities and foresee the development of within the fast food industry.
3.1 Macro Environment analysis
3.1 Political and Legal
Portugal is known for its tourism of people from around the world, as it is known for its beaches and this country is in the ranking of most visited countries in Europe. However, Portugal is also known as one of the countries with the minimum wage lowest in Europe. The minimum salary in the year 2018 in Portugal is € 677.00 Gross and € 587.00 net. This political factor can be used for the benefit of Five Guy since due to the minimum wage Five could hire people with little or no experience, since the company makes sure to always train its new employees. (reinisfischer,2018)
Portugal has a quarterly per capita GDP of € 4,871 euros, 179 euros higher than the same quarter of the previous year, which was 4,692 euros (Tradineconomics,2018) , this will position the country it in the second country with the highest GDP growth in Europe. The interest rate in Portugal fell to a record low, reaching 6.7% in June, according to data released by the National Institute of Statistics. It is the first time that it drops below 7%, which was the previous month's mark. Then in October 2018 dropped again with 8.1% compared to last year which was at 8.8% (theportugalnews,2018) Portugal exceeded for the first time in 2017 the 24 million tourists, a rise of 17.3% with respect to 2016 and it was anticipated to rise another 20.5% in 2018 (uk.reuters,2018) this percentages indicate that the economy of the country is rising, there are more people in jobs and tourism is rising. Five Guys would benefit from that tourism as national and foreign residents living in the country and tourists visiting Portugal will be attracted to five guys because it had gained a name within the industry
The lifestyle in Portugal is tranquil and Portuguese people are known for their warmth of their hospitality as it's a norm meaning old-fashioned courtesy is essential. Casual clothing is accepted anywhere except for religious or governmental institutions. A large percentage of Portuguese are able to speak or understand Spanish. Bullfighting is also practiced in Portugal but unlike in Spain the bull is not killed. The nights of June 12 & 13 are days very important for Portuguese because it celebrates the San Antonio Festivities. Portugal has a rich cultural heritage, the result of the mixture of various influences. This is reflected in their traditions and culture. In locations in the countryside many of the Portuguese are accustomed to their pescatarian diet. It is a basic diet that is composed of fresh fish and vegetables.
Since 2007 the number of vegans in the Portuguese territory had grown an 400% during the last 11 years. The published statistical study revealed that in 2007 the percentage of vegans was 0,3% compared to the study undertaken in 2017 shows the number to be at 1.2% this means that the number of vegetarians in Portugal has quadrupled in the last decade. It's 120,000 being the number of Portuguese who have switched to a vegetarian/vegan diet, which it's 1.2% of the Portuguese population. (Vegan 2050, 2018) This change of food habits can be a challenge for Five Guys because they specialized in food that includes meat or chicken. Five Guys can benefit from this habit changes as it brings the opportunity to Five Guys to add and create a vegan friendly meal in their menu.
Also, since 2015 tourism in Portugal had raised. In 2017, tourism rose by 12% with the arrival of 21 million tourists. this places Portugal in one of the most visited destinations in Europe. Five guys are already known to many people in different parts of the world, since tourists tend to eat in fast and well-known restaurants (The Telegraph, 2018). Portugal is a patriotic country with its culture and its gastronomy and the Portuguese are proud of them. This is a favorable point for the expansion of Five Guys in Portugal as this will allow for Five Guys to open more branches and franchisers around the country as it will become more popular because of the popularity within the country will grow.
In recent years, technology has become a fundamental tool for companies in all sectors. The use of technology provides almost everything in the new modern world, and it is possible to find it from what are the sales to the same service to the client.
Technology allows brands or companies to have power over their customers. The use of technology is also important for Five Guys. From the official website, customers can not only place their orders but also make payments. Customers place orders and make payments online. (Five Guys, 2018) Also, the increase of the use of the social networks has grown remarkably in the last years. the use of social networks like Facebook, twitter and the biggest one Instagram has allowed many brands to have a presence in the market and create a community of loyal customers.
Five Guys has been one of the companies of great growth in recent years and already have a wide n line of loyal customers and followers in social networks already mentioned. These strategies of average partner in the case of Five Guys are essential, in the case of Five Guys, they posted pictures of their clients enjoying the meals, positive quotes, videos, branch photographs. to which it attracts its loyal customers. Not only this, technology is also being used in the area of research and development to grow a brand and its number of followers.
Food has been the life of human beings, the creation of many habits, ways of doing and being in the world, in relation to what is eaten, which goes beyond nourishing the body. The use of pesticides puts at risk the quality of the waters in the areas close to the fields of cultivation since these compounds are transported through water and the atmosphere (derived from pesticides) and pollute both surface and groundwater. In addition, once applied to crops, part of the pesticides remain in the crops and reach our food. (NBC News, 2018)
The use of pesticides in food remains a subject of criticism with different points of view. Portuguese it's known for the quality of its products for being environ-friendly. Five Guys should adopt this concept since the company already in itself the restaurant creates its hamburgers with fresh products delivered to restaurants every day. Five Guys does not have refrigerators in their restaurants for that reason. The use of organic products or ingredients in Five Guys would draw the attention of customers concerned with the pesticides issue and also will bring more local customers as they will be able to feel the different in the taste.
4.8 Micro Environment Analysis
4.1 Competitive Rivalry
Fast food restaurant chains are not popular food options to the 10,276,011 citizens (Worldmeters,2018) Even though Portuguese citizens are not appealing to the fast food industry you can still find different fast food chains name. The most known is McDonalds. McDonalds s not only possess a strong name around the world but also a strong image.
This companies had been related to obesity, Fast food restaurants had been accused for decades of the amount of unhealthy calories their ingredients and products has. However, Five guys in the order hand, had been praised for their fresh ingredients and products.
Five Guys competition in Portugal can be really strong. Not because of the big name but because of the normal local restaurants around the country. Portuguese gastronomy is led by a lot of fresh and organic vegetable, fresh fruits, fresh fish and national products. Portuguese cuisine is usually easy and fresh. (Portugal Resident, 2018)
Although the Portuguese cuisine does not relate to unhealthy food. The opening of a new Five Guys will appeal tourist and citizens around the world living in Portugal because of the fast service and also because it's a well-known American restaurant.
4.2 Power of suppliers
The sector has become one of the most important due to the volume of business it generates. Only last year, was placed in third place with 15.3% of final livestock production, behind the pig and dairy sectors. The production the Portuguese beef had its origins from 1997 and since then had grown. Despite the growth of the beef in Portugal, Spain had been and still a enormous supplier to Portugal. In Europe, the beef suppliers list is long as they are too many beef producers suppliers in the European Market with a 12.79% converting them in the largest third supplier in the world. (Europa.eu, 2017)
4.3 Power of buyers
Within the fast-food industry the power of buyers is huge in Portugal. Citizens and tourist people in the country have the option to choose from different cuisines from around the world. Although being the power of buyers huge a lot of the customers (national and tourist) might also choose to find more traditional restaurants serving more healthy and traditional cuisine.
As shown in the charts above, Portuguese disposable income had grown since 2015. In January 2018 there was a higher increase in the disposable that dropped in July 2018. There is not a major difference between so the power of buyers will still be strong and firmed. The fact that customer have so much influence can become a bigger threat to the company because it means that customers have the power to raise or lower the restaurant prices.
4.5 Threat of substitutes
The increase in people changing their eating habits. Its a good thing for Five Guys because they use good quality ingredients, including peanut oil for their potatoes. McDonalds is known as a fast food option and not of good quality. Consumers seek more quality and it does not hurt them to invest more for it. Portugal is not known for its great variety of international restaurants; the threat of substitutes is not of great level since the competition are not international restaurants but local.
4.6 Threat of new entry
The threat of new competition coming in the market is medium. Portugal's companies' profits are at a low percentage. This is good for national and international companies to invest in the country. Within the fast-food industry the presence of American restaurants is low. Companies like Burger King and McDonalds have stablished themselves in the market for years and had already make a name for themselves and they have the loyal customers all over the world. The customers loyalty to these restaurants can make the entry of new companies quite challenging until they create a customer base.
5.8 Internal Environment Analysis
5.1 Primary Activities
Inbound Logistics: Since the beginning of Five Guys, Jerry Murrell has always used potatoes from Southeastern Idaho (Five Guys, 2018) Southeastern Idaho potatoes are known in the USA for their quality and flavor. There are many states that grow potatoes, but the goal of Five Guys is to offer its customers all the ingredients of premium quality.
Marketing Sales: Happy customers mean good successful business, and this is why the Murrell family had never spent any of their revenue in Marketing. They believe in word of mouth. It is a source of trust, with a great power of influence over the customers. This is one of the reasons why Five Guys company are focused in making sure their products are made in the best quality possible for their customers
Service: To make sure clients are satisfied with their order. Five guys use a tactic that can be costly in some way costly for the company but that they believe makes customers feel satisfied with their order. The tactic is that after you have ordered your food and it has been prepared and packed. Five Guys gives their customers an extra scoop of potatoes. The option of customization of their burgers is something unique that the company possesses and had not being seeing by their competitors (Popsugar,2017).
5.2 Supporting Activities
Procurement: In order to maintain order in its warehouse control, Five Guys compares the reports of its restaurants in different parts of the world. these reports are compared with the reports of the previous month
Technology Development: Five Guys offers their customers the online option to purchase their products through their online website. This can be easily accessed from a Computer, mobile or tablet. Also they had partnered with delivery company apps for their customer who are more familiar with these apps can also access to their service.
(Five Guys, 2018)
Human Resources: Five Guys created Five Guys University. It an official training centre for its employees. In Five Guys University, potential employees undergo a training to understand and learn about the company's culture. Employees learn about the preparations for the products, the operations related to the online website and how to engage with customers under Five Guys protocol to ensure a high level of service is delivered to the customers
Firm Infrastructure: The theme colours of the company are white and red. This provides a modern and live full decoration to their restaurants.
6.8 Identification of Competitive Advantages
6.1 FIVE GUYS AND THE DIFFERENTION STRATEGY
Companies use this strategy give the product or service something that the consumer perceives as unique. The added value different from any offered by the competition will act as a protective barrier. The user will be willing to pay more for that unique added value and will be loyal to the brand for it.
In this case, Five Guys compared to a market dominated by fast food restaurants based on low price strategies, they created another new concept, which is the "quality fast food" or "better burger".
Five Guys distinguishes itself from its competitors because of these points to create a differential value in the mind of the consumer.
• Quality of the raw material and the final product:
• An efficient logistics processes.
• A well-trained work teams.
• Customer service at the point of sale.
Five Guys offers “more" or a balance of "everything", both in the product and in the service or shopping experience
6.2 Quality of materials
When this decision is taken at the business level, considerations of the price of the product must be acknowledged, therefore, it will be more expensive than the competition. (Five Guys, 2018)
They bet for the change inside the sector, conserving all the foods by means of refrigerator, nothing freezes. (Five Guys, 2018)
The use of this fruit as a snack in establishments or as cooking oil is due to two differentiating reasons of the brand. As a tribute to the American style, known for the great use of this food and because at high temperatures it is healthier than other oils. (Five Guys, 2018)
6.5 Simple effective service
Either on the website of an ecommerce or with the dependents of a physical store, the experience of purchase or consumption is a large part of the value that the customer will give to your brand.
Five Guys knows this, and taking into account the large number of customers in the establishment incorporates the following measures:
- A large trained number of staff ready to be efficient in the preparation and reduce the waiting times.
- They offer free peanuts to customers waiting in line.
- There is an option to order online and pick it up in restaurant without having to wait.
The biggest strength Five Guys possess is that it understands the consumers wants and demands a unique meal experience. Therefore, they provide a product that accommodates perfectly to the consumers tastes and not a generic one. They do not offer you the typical product with the same ingredients as their competitors. Also, the restaurant having a wide variety, makes customers to not get bored and to come back to try more. With this approach, we get new clients and keep current ones, giving them something exclusive that they will not find anywhere else. (Five Guys, 2018)
7.8 Strategic Directions
7.1 Product Development
The American and Portuguese food culture are opposite. In the USA, people are more accustomed to the fast food in big plates, big size drinks and people are not as cautious. It had become a serious issue.
Unlike in Portugal people are keener to small plates and smaller portions and the traditional food its more of a balanced nutritional diet. They believe it is vital to have balance diet composed of all the vitamins the body need and water is essential for the well-being of the people. Portugal's traditional food it is already composed of more healthy plates. Five Guys should consider a new product that can satisfy vegans, vegetarians and pescatarian potential future customers. Five Guys must apply a diversification strategy and make sure to create a product that cannot be found in their competitors' restaurant. Cod Burgers, Soups or sausage burgers because it is already in the Portuguese local gastronomy. (Eater, 2017) Portugal its ranked number eight in the list of countries known for exporting Oil Olive oil worldwide after Morocco. (World Atlas, 2017) People in Portugal are more familiar to the taste of olive instead of peanut oil.
On 28th December 2017, McDonalds introduced McVegan made of vegan meat (Independent, 2017). Five Guys should introduce a product to satisfy vegans in Portugal. As mentioned before, the number of vegans in the country had already quadrupled in the last ten years and it will keep on growing. A product such as a vegan burger with a gluten free bun will attract these customers. McDonalds buns are made of normal bread with gluten. This will position Five Guys in a better position than McDonalds for their vegan customers.
7.2 Method of Expansion
In the United Kingdom, Five Guys had been part of the 36% revenue growth. Their expansion had been revealed as fast and successful from the start. In the year 2000 Five Guys managed to open more than two hundred and ninety-six franchises within their first year and by 2003 Five Guys had already opened thousand franchise stores around the world. (Walker, 2017)
For the opening of Five Guys, the opening should be in Lisbon, the capital. Lisbon with 2,927,316 inhabitants positions it in the largest city in the country. It is a city with annual visits of 13 million people from different parts of the world. Rua Augusta is a perfect location, it's a better commercial and tourist area that will be perfect.
Five Guys should focus on television marketing, it will be the best way to catch the local's attention, especially for the people leaving in villages outside the big cities in the country. Also, Five Guy should invest more in posters and social media advertisements to catch the attention of potential customers in different age ranges.
Five Guys need rebrand their reputation if they want to prosper in the country. They must adapt to healthy food habits in Portugal. The Portuguese society are aware of the need to have a varied healthy diet. They should add new products in their menus with different options. They need to in order to success in the country. Products related to their national dishes will be an idea that Five Guys should take into consideration. It will be new concept that will attract not only the locals but also the curiosity of the tourist.
Also, it is necessary to create a menu for vegan's customers, as the percentage of vegans in the country had quadrupled and it is becoming a large community not only in the country but around the world. Vegans tourist will be able to enjoy their vegan and gluten free burgers.
7.4 Risk Analysis
Since 2017 the Portuguese government added the Sugar tax and a high rise is expected in 2019. (Beveragesdaily, 2018) The Portuguese government imposed a new tax on some foods with a high salt content, such as chips and cookies.
The measure would only apply on cookies, pasta, chips and cereals containing at least 1 gram of salt per 100 grams of product and will mean an increase in the price of 0.8 cents per kilo.
this is an issue that Five Guys must adapt and follow the law since they must find new methods to prepare their potatoes without much salt. (Beveragedaily, 2017)
Five Guys has become one of the most successful fast food restaurants chain since its opening.
Five Guys started as a family business and by 2003 their expansion reached 1000 restaurants around the world, including franchises. Portugal is a country of different habits and culture compared to culture and habits in the USA but the expansion to Portugal would be a good opportunity for the company. Portugal is open to new investors both nationally and internationally. In order for the success of Five Guys to be great, there's a need for innovation when it comes to the menus since the Portuguese are more comfortable with a healthier meal. There a need of add more option to their menu for vegetarians, vegans and gluten free diet customers. Currently the presence of American restaurant chains is weak in the country, there are not many international fast food companies in the country and their current competitors are not offering the service Five Guys it is offering their customers adding more products to their menus will will position the company in advantage against its competitors.
Portugal had started along with other countries to add a sugar tax to businesses and Five Guys need to make sure they understand and follow all the regulations imposed by the Portuguese government this will open the doors to the Portuguese market.
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