B483 L10 - Noodles & Co PDF

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Noodles & Co Harvard Case study...

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Jeffery Newton B 483

Noodles & Co. Case Study In October 1995 Aaron Kenny opened a fast casual dining restaurant called noodles and Company. He came up with the concept in 1993 while visiting New York and dining in a small Asian noodle restaurant. After moving to Boulder Colorado with his wife he decided open up his first location of noodles and Company. Previously before opening his new business he had worked for large corporations such as Pepsi.

Here are the problems I see from expanding noodles and Company. 1. Competition 2. Expansion three. Keeping the same food quality and atmosphere in other locations while expanding. These are problems most any small franchise has while expanding, but even where noodles and Company holds a large portion of the market. Let’s face it, the competition that noodles and Company faced are endless. There are a lot of established food competitors in the market already. Most of these competitors are already embedded into the food culture of America. A few competitors that come to mind are cheesecake factory and chipotle. Cheesecake factory being on the high-end sitdown dinner, and should faulty being in the high-end fast food. Chipotle offers bean and rice burrito bowls that would draw customers away from noodles and company. Cheesecake factory has many more menu options. They have a menu that offers anything from Chinese to Italian and everything in between. Plus their specialty, cheesecake, is some of the best there is offered out there. One of the competitors that has the most potential to push noodles and Company out of the market is Pei Wei. They are becoming a well known brand, and being backed by PF Chang, really tilts the business in favor of Pei Wei. If Pei Wei has a temporary cash flow problem, they can always get into the deep pockets of PF Chang. They also can use the marketing and management experience of PF Chang. Noodles and Company is playing a too aggressive hand of cards, when they are attempting to open 32 new locations in the next year. Just because you have arranged to finance the aggressive expansion plan, doesn’t mean that you should pursue that plan and expect to keep the same high standards. With the competition this fierce, and other companies attempting to keep them out of the market, they have the potential of being starved out of their niche and going into bankruptcy. One of the techniques some businesses use is to drive up property values by bidding on the same locations. Another technique is to cut cut their prices or offer coupons so that noodle and Company is forced to compete on price. This makes it hard for them to generate profit. The problem that noodles and Company faces with an aggressive expansion plan is keeping the same quality and atmosphere as expanded to different markets. This may not seem like a big problem, but people in different areas of the country, or world want different things or food prepared in a certain way. For instance, in some areas of the country kosher prepared food is important. In other areas food might need to be prepared in a way that aligns with Hindu or Muslim beliefs. This might not affect their immediate expansion plans but needs to be looked at in the future.

Competition is a rough solution to get around with, especially with fair trade laws. If you have an aggressive expansion plan, and have enough money to open 32 stores, a smart practice would be to only open up 16. That way you have a war chest of money that allow you to purchase local advertising and coupons to have a large first week opening. This will give new customers the incentive to visit your new restaurant and try out your food. Another good program is to have a loyalty reward program. For instance, if a customer buys 10 entrées they get the 11 th free. Once you have a loyal clientele, it is easier to create additional offers. For instance our local sandwich shop takes all of the competitors coupons, giving the same deal they offered. If it’s a buy one get one free coupon, they will match that offer. The key is to have your customers develop the loyalty that brings them back to noodle and company for their Asian dishes. This way you create repeat customer with a habit of visiting your establishment. If you create a good loyalty program it is easy to identify individual customers that are loyal and ones that defect to another business that might open up nearby. This allows you to fight back and entice them with specific offers or even direct contact via text messages. A good example I can think of is a Jersey Mike’s sandwich shop that opened in our town. They started a customer loyalty program using text messaging. Every so often I will get a text message with a special coupon offer that entices me to return and buy their sandwiches. It seems to work, because their sandwich shop is always full, with people entering in their phone number to get the loyalty points. My ideas on expansion are twofold. My first idea is to expand locally where you are you have a strong foothold, allowing you to increase your brand loyalty. The second idea is to expand in areas further away by franchising. Franchising allows you to build your brand loyalty without placing too much financial risk on your shoulders. Franchising allows you to sell your brand to another person, with the understanding that they run the restaurant with certain guidelines. You of course make a cut of the profit as the franchisor. Franchising is usually a win-win for both the seller and the buyer. For the franchise or the benefit is the ability for them to use other people’s money to expand the brand rapidly. The initial franchise fee allows a boost in profits, and the recording royalties allow them to expand in their own local area. The fees and royalties allow the corporate headquarters to support the franchisees and market and advertise the brand. This allows them to improve the name, build the brand in the marketplace, and improve the quality of the food and services. Another plus of franchising is allowing the corporate to keep the same quality as standards and atmosphere while expanding. The franchisee has the legal obligation to meet company standards such as quality and atmosphere. The franchise or has the ability to provide significant control or assistance that provides assistance to the franchisees method of operation. For example the the corporate headquarters would be able to influence the approval of the site, requirements for site design and appearance, hours of operation, food production techniques, accounting practices and reporting, participation in national advertising campaigns, and training by the corporate offices. I would like to conclude by thinking that if noodles and Company implements some rational decisions they could become a national brand that Pei Wei and panda express will have to contend with. This would allow them to be a contender in the upscale fast food market then even get into some of the larger chains such as Chili’s and Applebee’s. Once they become large enough they could expand their market by spinning off into other areas of the food....