King Burgers, a fast food chain has recently opened up new stores at several new locations and reapplied their business model in all the new stores. Unfortunately most of the new stores are barely breaking even. What do you think is the problem?
The case is designed to be presented to the candidate by an interviewer, who plays the role of a representative of King Burgers.
Short Solution (Expand) (Collapse)
I. Poor Performing Stores
1. Are the revenues lower or the costs higher in the new stores compared to the old stores?
Cost: Labor, real estate & facilities and food inputs are the major costs. Costs are higher because the new stores are primarily in upscale malls; the older stores were in lower income neighborhoods.
The candidate should now focus on the reason why the new stores are attracting fewer customers.
2. Customers: How are the customers segmented? Are all the stores serving the same segment?
3. Product: Do all the stores serve same type of burgers?
4. Competition: Does King Burger face similar competition in all the locations?
Location is the key to King Burgers' problem. Most of the new stores are in upscale malls where King Burgers is facing a lot of competition. Moreover it is also suffering from its image as a low-price brand.
If the interviewee solves the case very quickly, you can ask the candidate to recommend what King Burgers should do in such a situation.