A Case Study Winter 2011 BADM 470

Outline for Today Brief History of Ruth’s Chris Steak House Where the company is today Industry/Competition Strategy SWOT analysis Strategic Options for growth Chosen alternative What the future holds

What is Ruth’s Chris Steak House? Fine dining steak house which originated in New Orleans in 1976 Menu offerings: USDA Prime Grade Steaks Chicken Seafood Additional fine meats and sides Company and Franchise owned locations worldwide Currently over 130 locations (2010)

Original “Chris Steak House” opened in 1927 on same day Ruth Ann was born Ruth Ann purchased this steakhouse in 1965 Restaurant burns down in 1976 Ruth buys new property for restaurant and names it “Ruth’s Chris Steak House” Ruth begins offering Franchise opportunities By 1985 it is a global company with franchises in 5 different Countries In 2005 Ruth’s Chris goes public and sells 13,000,000 shares

The Ruth’s Chris Vision To Serve high quality steaks with excellent customer service. Vision is Focused on Continues revenue growth, brand recognition and commitment to quality. “ If you’ve ever had a filet this good, WELCOME BACK.” Ruth Fertel

Current Industry Analysis Broad demographic of customers in United States Capitalized on large market share of population Holds largest share of fine dining steak restaurants in USA 2003-2007 saw increased growth and net income Recession caused drop in share prices and net income in 2008-2009 Highest brand and market penetration among competitors

COMPETITIVE POSITION Main competitors: Morton’s Fleming’s Between the two they have more than 110 locations High grade beef Celebrity endorsements 80% of Morton’s business is from executive expense accounts! This dependence was cause for severe decrease in business during recession Closed 5 locations

Current Strategy Company was built on penetration strategy More of the same restaurants in same market This model has provided high level of brand recognition Quality and customer service Current markets becoming oversaturated with similar restaurants Current economic position has put strain on potentials franchisees in the US A new vision is necessary to continue growth in the company

SWOT ANALYSIS Strengths Strong brand name Highly experienced team High quality food sources Broad demographic customer base Weaknesses Prices are considered “fine dining” Very strict franchisee criteria Opportunities Rise in quality conscious consumers New technology and e-media advancements Threats Recession in USA Loss of Ruth Fertel Many other Steak House Chains

VALUE CHAIN Purchase of supplies from select wholesalers Highest quality meats High level of Service Properly trained and qualified staff and management team Value chain differs from most in that they do not rely on lowering their prices and finding less expensive manufacturing/logistics options

STRATEGIC OPTIONS 4 Strategic Options to continue to grow the Ruth’s Chris brand Product Development Diversification Investment International Market Development

OPTION 1 PRODUCT DEVELOPMENT New kinds of Restaurants in existing markets I.e.. Fast Food locations/ Family Restaurants Issues include Not wanting to compromise quality for lower prices Focus and vision of company may become disoriented

DIVERSIFICATION OF PRODUCTS OPTION 2 DIVERSIFICATION OF PRODUCTS New types of Restaurants in New Markets Issues Include Too much risk Saturation of national markets not desirable Brand dilution/ brand confusion

VERTICAL INTEGRATION/ INVESTMENT OPTION 3 VERTICAL INTEGRATION/ INVESTMENT Cutting down costs Cutting out certain suppliers/ producers Investing Profits Long term bonds Higher risk stocks Neither option is in line with the vision or the growth strategy of the company

INTERNATIONAL EXPANSION OPTION 4 INTERNATIONAL EXPANSION Expanding the current restaurant model to international location Company owned Franchisee owned Current international locations have proved profitable

INTERNATIONAL CRITERIA High level Meat (Beef) eaters Legal to Import USDA Prime Beef High urbanization rate High disposable income People go out to eat Affinity for U.S. brands

BRAZIL Fifth largest country in the world High level of urbanization (83%) 2 Largest Cities Sao Paulo 11.2 Million Rio de Janeiro 6.3 Million High level of meat consumption (82.4kg)

ENTRY MODES Joint Venture Brazilian Supplier Mix of company owned and franchisee owned locations 28 Meat wholesalers in Brazil Bertin Ltd. High quality beef Family built company Core vision and values align with Ruth’s Chris

ENTRY MODES opening in urbanized area Sao Paulo Rio de Janeiro Sao Paulo would be first choice for the initial location High profile neighbourhood Good “buzz” generator

CONCLUSIONS Growing internationally provides: Ability to continue to lead the fine dining steak industry increased Shareholder Return Increased company revenue and growth Continue to differentiate and brand themselves against competitors