Fogo De Chao Entry into Hawaii
Fogo De Chao Entry into Hawaii
Fogo de Chao is an authentic fine dining Brazilian restaurant able to establish successful branches in key cities in the United States. With expansion and positive revenue collection, the restaurant faces the opportunity for further expansion, this time in Hawaii. The discussion covers an introduction of the restaurant, environment analysis, and sales and marketing plan to describe the entry of the restaurant in Hawaii, the justifications for the decision, and the manner of achieving successful entry into the new market.
Fogo de Chao is a fine dining restaurant of Brazilian origin. It built its name by practicing the Gaucho tradition of meat preparation since 1975. Prime meat cuts of beef, lamb, pork and chicken on skewers roasting in an open fire is the signature culinary practice of the restaurant. These were the cut and served tableside. The dining format is fixed price buffet. Salads and other entrees together with a selection of wines and drinks accentuate the food. The first branches were in key cities in Brazil before branching out to the United States in 1997. The first U. S.
branch was in Dallas, Texas. Now, there are 16 branches located in key cities in America. (Fogo de Chao, 2010) With a pool of patrons and continuous profitability, entry in Hawaii is a potential expansion. Environmental Analysis An analysis of the internal strengths and weakness as well as external threats and opportunities (SWOT) (Baker & Hart, 2008) faced by Fogo de Chao determines the current capabilities of the company relative to the demands of the competitive environment and points to the areas of focus to ensure the restaurant’s competitiveness in entering Hawaii, as a new market.
Fogo de Chao has a number of strengths that support its capabilities in entering Hawaii and competing in the market. The first strength is the good reputation of the restaurant built over time. Aficionados of Brazilian cuisine living in the key cities know the restaurant. Comparisons with other Brazilian restaurants show either a rating at par or a better rating in some aspects relative to its closest competitors. The second strength is its proprietary knowledge by operating for 25 years and mastering the Gaucho tradition (Fogo de Chao, 2010).
The restaurant has an edge through its extended learning curve (Baker & Hart, 2008). The last strength is the wider marketing channels (Baker & Hart, 2008) used by the restaurant. Fogo de Chao has an online presence through its website in both Portuguese and English language. The website provides information, reservation services, and gift card sales. A search of Google Trends (2010) also indicates significant searches online of the restaurant since mid-2006. There are also weaknesses that Fogo de Chao needs to address. One is the limited focus on building brand awareness.
Fogo de Chao represents genuine Brazilian Gaucho. While it is present in key cities in the United States, it has not achieved very high brand recognition from the huge market of restaurant goers. Those familiar with Brazilian cuisine may recognize the brand but not so much the eating public. Another is the issue of establishing and sustaining a unique feature or value that sets the restaurant apart from its competitors. Last is the ease in imitating the restaurant format and its features. Opportunities exist for Fogo de Chao. First is expansion to wider market segments.
At present, the restaurant branches in the U. S. cater to those familiar with Brazilian cuisine but there is a bigger potential market by building awareness. Second is the diversification of its menu through fusion cuisine to ensure variety and attract more people. Third is geographic expansion by targeting potential markets such as Hawaii. There are also threats faced by the business. One is the difficulties of sustaining consumers’ tastes towards the cuisine of the restaurant as many culinary ideas emerge. Another is the entry of substitutes and weak barriers to entry into its current market.
A number of Brazilian restaurants are entering its market. There are also established Brazilian and alternative restaurants catering to different market segments or geographic markets. Last is variance in food regulations when operating in different geographic locations that require a minimum quality standard that also allows flexibility in meeting regulatory variances. Sales and Marketing (Global Marketing Plan) The global sales and marketing plan for entry into Hawaii cover various aspects to justify the expansion into this new market and the ways to ensure successful entry and marketing.
Marketing Strategy In entering Hawaii, Fogo de Chao’s mission is to provide genuine Brazilian Gaucho cuisine to the market as a unique experience through the combination of authentic food, fine dining atmosphere, quality service, and fixed reasonable buffet price. To actualize this mission involves the consideration of the marketing mix of product, price, place and promotion (Baker & Hart, 2008). The product marketed by the restaurant in Hawaii is authentic Gaucho food prepared in the same manner as traditionally done in Brazil.
The menu in entering new markets includes fusion cuisine to accommodate the taste of the new market by adding local appetizers and drinks while at the same time introducing new tastes. Pricing adopts the standard fixed price for buffet style eating in different branches. The reasonable fixed price finds justification through the authentic cuisine and the fine dining experience. The price can also attract a broader market segment. The place or distribution channel is a branch at the Big Island, Hawaii’s biggest island with various tourist sites, established through joint venture within the allowable foreign ownership in Hawaii.
Big Island is one of the highly populated placed and widely visited places in Hawaii. The location of the branch is in the town with the highest traffic of consumers. The promotion of the branch at the Big Island includes point of sales by launching the restaurant and inviting guests, hosting or sponsorship of Brazilian themed or local inter-cultural events, radio and newspaper advertising, partnerships with tourist destinations for referrals, and online promotions in travel and food sites, blogs and social networking sites. Market Analysis The Big Island has a population of 155,000 people (U.
S. Census Bureau, 2010), which is the second largest number relative to the other islands of Hawaii. The population density is small because a sizable portion of the geography spans natural sceneries including Mount Kilauea. However, the population is the second largest among the islands. This comprises a sizable market for the restaurant. Majority of the population belong to the 18 to 45 age group (U. S. Census Bureau, 2010) or the higher-level education and working groups with knowledge of Brazilian cuisine, interest to try new foods, and the income to spend on restaurants.
The young adults and adult working population comprise the targeted market segment. The population falls under a structured income class, with majority falling under the middle class and a smaller but significant percentage of the population belonging to the upper and lower income groups. The median income per household in the Big Island is less than the median for the state, but nearly similar to the value for the mainland U. S (U. S. Census Bureau, 2010). The implication is a significant number of households with average to more than average income.
The target market of the restaurant is the middle and upper income groups and visitors. The 1. 5 million visitors to the Big Island every year (Dining Guide, 2010) also comprise a target market for the restaurant by promoting the establishment as part of the places to go in visiting the island. The Big Island is a major tourism destination in Hawaii. Most of foreign visitors include the Big Island in their itinerary. Tapping into the population of foreign visitors as a market for the restaurant is a strategic move.
Although the restaurant is foreign, building the restaurant as an alternative culinary attraction can reach out to this segment. The Big Island has a multicultural population, with the largest groups comprised of Hawaiians, Caucasians, Japanese, Filipinos, and mixed Hawaiians (Dining Guide, 2010). There are also a significant number of Portuguese in the island. Openness to different cuisines supports the acceptance of Brazilian cuisine by the target market. The Brazilian restaurant can establish its place in the Big Island as part of the culturally diverse culinary choices in the island.
Competitive Analysis Accommodation and food services is second in terms of sales next to retail sales (U. S. Census Bureau, 2010). Hawaii has a large food service sector because of its vibrant tourism sector. There are around 100 restaurants in the Big Island (Dining Guide, 2010) competing for a share in the market. One way of classifying the restaurants is according to type such as fast food and fine dining. There is an equal mix of both types of restaurants in the Big Island catering to different market segments particularly based on income class.
Fogo de Chao directly competes with other fine dining restaurants and indirectly with fast foods. Another way of categorizing the restaurants is the cuisine offered. The prominent restaurants are American, Japanese, Italian, Chinese, Thai, other Asian food, and Mexican (Dining Guide, 2010). Brazilian or other Latin American cuisine has not made a mark in the market yet. There are no Brazilian restaurants in the Big Island. This provides a fist-mover advantage (Porter, 1980) to Fogo de Chao. At the same time, the restaurant has no direct competitor as a Brazilian cuisine restaurant.
Still another way of considering competitors is according to the primary food served and the mode of preparing food. The classifications are barbeque, delicatessen, pizzeria, seafood and steak. Fogo de Chao falls under the classifications of barbeque and steak restaurant. Its signature mode of cooking food is roasting and its roasted meats include steak. There are 8 barbeque restaurants and 6 steakhouses in the Big Island (Dining Guide, 2010). The barbeque restaurants are Hawaiian, Hawaiian fusion, and Korean. The steakhouses are American and Hawaiian.
While there are existing restaurants offering similar food and food preparations as Fogo de Chao, the Gaucho style of roasting differentiates the restaurant from existing competitors. Although there are many restaurants in the Big Island comprising direct and indirect competitors to Fogo de Chao, there are not many restaurants with a significant exclusive market share. Some of the restaurants, especially offering fine dining food service, gain a pool of patrons. However, majority of consumers visit different restaurants depending on the momentary preference.
The focus of Fogo de Chao is to build a significant market base of patrons and continuously attract new consumers to achieve an edge. The restaurant can achieve this by building its brand and enhancing brand value to establish and maintain differentiation (Porter, 1980). Porter’s five forces (Porter, 1980) also explain competition in the Hawaiian food service market. The extent of rivalry is high because of the many restaurants operating in the Big Island. Customers have many options in restaurant dining.
However, there is room for differentiation with Fogo de Chao comprising the only authentic Brazilian Gaucho cooking restaurant in the market. Threat of substitutes is low because restaurants have a large consumer market, both domestic and foreign in the Big Island. Buyer power is moderate. Consumers can choose from a range of restaurants depending on their culinary preferences but there are limited choices for some cuisines, Brazilian food for example. Supplier power is also moderate. While there are limited restaurants for some cuisines, consumer taste is flexible.
Barrier to entry is low, which means restaurants need to establish and maintain a competitive edge, which for Fogo de Chao is its first-mover advantage in the Big Island. Financial Analysis Fogo de Chao entering Hawaii is an opportunity to expand the business through a branch that contributes to the profitability of the business based on the expected number of domestic and foreign customers as shown in Figure 1 below. Over a five-year period, the restaurant should gain 20 percent of the domestic market at a steady rate of increase. For the first three years, the restaurant would vigorously establish its name and brand in the local market.
These years represent the highest year-on-year increase of up to 50 percent in the number of customers. In the succeeding years, the restaurant should have an established pool of patrons. Promotional activities and the indirect marketing contribution of restaurant patrons via network advertising would lead to a lower but steady increase of 10-20 percent per year. The foreign market of visitors to the Big Island comprises a bigger market. By promoting the restaurant through partnerships with tourist destinations, the rate of increase can be as much as 100 percent annually.