Question

1 Conduct Qualitative Research on the Applebees Company

2 Conduct Quantitative Analyses of the Company (financial)

3. Prepare Report of Findings with Recommendation

4 how Applebees can grow horizontaly ?

Answer 1

1 & 2 )Evaluating some of the prime targets both from a Qualitative as well as a Quantitative perspective:

Blaze Pizza

Though the pizza category is pretty competitive with many large players, Blaze Pizza tries to carve its own niche with the offerings of a ‘create-your-own-pizza’ that can be ‘Fast-fired’ in a high temperature oven and served within 3 minutes. Strategically, the offering is pretty much different from the standard pizza offering, with customers selecting their own ingredients as per their taste.

The Growth Story – Starting off in Pasadena, California by Rick and Elise Wetzel in 2011, the fast-fired customizable pizza made a spectacular debut. The concept gained greater traction because of its attention to food and its uniqueness to customer service. It offers more than 40 fresh toppings to select with an in-house made dough.

With more than 50 stores by 2014 in the US, Blaze started operations in Canada in 2015 and in Kuwait by March, 2018.

Important Financial Highlights

In 2017, Revenue grew 51% to $279 million, expanded to 36 states and 66 new locations. Full-fledged expansion in Canada and an agreement with M.H. Alshaya to come up with 100 restaurants in Middle East and North Africa (MENA).

Average Unit volumes (AUVs) stood at $1.4 million with an increase in same store sales by 3.7%

Apart from geographic expansion, Blaze intends to focus on the digital technology for a seamless ordering experience on the company’s app and develop some loyalty programs to lock the customer and block competition.

Shake Shack

Founded by Danny Meyer, Shake Shack got off the ground a hot dog cart in 2000 in Manhattan. It had expanded to over 60 location by 2015. Their uniqueness lies in the offer of high quality food – all natural 100% Angus beef- with a higher degree of customization in comparison to the regular fast food offerings. It is cost effective too with an average meal price at $3 to $6 in comparison to the regular fast casual meal average at $8 to $15.

It is considered to be one of the fastest –growing food chains and had gone for an Initial Public Offering (IPO) in late 2014. By 2017, it had presence in 136 international locations in prime cities like Tokyo, Seoul, Hong Kong and Abu Dhabi, etc.

Financial Highlights

Sales grew to $359 million in 2017 from $268 million in the previous year. Business volume is expected to grow sharply in the coming years. However, the expansion will need to be fueled by substantial capital investments. On the profitability front, Shake Shack is considerably lower than the industry average and will need to use its cash reserve to plan future growth and investments.

Report and Recommendation

From an investment and acquisition perspective, both Blaze and Shake look to be a good selection . However, would recommend the acquisition of Blaze Pizza over Shake Shack for the following reasons:

1.   As a strategic fit – As can be observed, the revenues for Shake Shack is strongly dependent on the Manhattan area or other Central Business regions in major cities. Hence, the target segment is more towards the value seeking working professional. However, Dine Brands with Applebees caters to leisure family get-togethers to a greater extent. So, a presence in a niche fire’d customizable pizza offering looks to be a better fit as customers would come in not just for the meal but also for the experience of watching their own crafted pizza being prepared.

2.   Unique Product – Shake Shack offers regular hamburgers and hot dogs at better rates but with better quality as claimed. However, the differentiation in the offering is not substantial from a regular hot dog cart, who can also switch to a better quality beef to offer a similar product. In that the blaze pizza, not only appears to be a differentiated product with a wide variety in toppings but also sells more as a concept with a unique experience coupled with the meal.

3.   Financially, though Shake has better revenues, the net profit for Shake is on the decline as its capital cost to ensure its presence in the high real estate regions of business is hitting its bottom line. Going for a price increase to compensate for this would go against its value offering. Only way to grow is greater volumes which would need further geographical expansion into high rent business regions.