KENNY ROGERS ROASTERS IN CHINA.

PRESENTER; Ezzu Haq Reena

About Company

Kenny Rogers Roasters (KRR) began operations on January 17, 1991, in Louisville, Kentucky, Opened its first restaurant in August the same year in Coral Gables, Florida. The initial mean featured citrus and herb-marinated wood-roasted check and approximately a dozen side dishes ranging from mashed potatoes and gravy to pasta salad. At this time, the company currently has over 310 stores in operation, with around two dozen of those stores being international. KRR has been experiencing very rapid growth and current plans include 1,200 new stores in the US alone and an addition 240 internationally within 7 years, resulting in nearly 2000 stores by 2002.

About Tony Wang

Ta-Tung

(Tony) Wang is a former KFC executive, used to lead all the KRRs efforts in China. was born in 1944 in Sichuan province in the Peoples Republic of China, and was raised in Taiwan. Wang moved to the United States to complete graduate work in the late 1960s. graduation, he took a management position with KFC in Louisville, Kentucky. After a series of promotions, in 1986, Wang was appointed as KFC Vice President for Southeast Asia

He

After

About FICA

Wang reopened discussions with AIG in early 1994 and he joined FICA as its president and co-owner in 1995. FICA's ownership was split between AIG (60%) and QSR (40%). Wang served as the president of the company and was the primary decision-maker in an office, which was established by FICA in Hong Kong. His reflection was that he was the president because of his skills and contacts, and his financial contribution was based on his 40% ownership.

FICA
FICAs Mandate FICA had a three-fold mandate. Investing in established franchise concepts was the primary emphasis.
The

mandates were:

To develop and invest in franchise concepts in Asia To act as a consultant to franchisees in the region To establish food processing and other franchise support/commissary functions.

FICA Goals
For the coming five years FICA in their role as owners of Kenny Rogers Roasters in China seeks to achieve the following goals: Non-financial goals: opening 15 stores in the cities of Beijing and Shanghai to have profitable operations for Kenny Rogers Roasters in China to increase the marketing research in Asia Pacific expand the supply chain for chickens and other ingredients to be the top middle priced western restaurant in China Financial goals: to operate and make a profit to secure low cost/good quality supplies locally to reduce labor costs

Discovering Potential Partner

Wang began the process of finding an appropriate local partner once the decision had been made to focus on Beijing. In the face of years of open door economic policies, Chinese investment regulations remained complex and cumbersome. There were also legal issues and uncertain regarding the area of ownership. 100% foreign ownership was not allowed according to the regulation stated. However, beyond that point nothing was cleared. Therefore, Wang went for one or more then one partners and among them are: East City Food Services and Distribution Co. Great Wall Trading Co. D&D Reality Co.

East City
FAVOURABLE

UNFAVOURABLE
Although East City was seriously worthy, they had a drawback. That was they could not help much in the way of finances.

Wang had some familiarity East City Food Services and Distribution Co.
It was a city-government owned enterprise. It owned 30 different Chinese style sit-down restaurants and over 100 retail food outlets in the greater Beijing area. East City promised access to its extensive labour pool. The members could either be transferred to KRR or hired through the company's normal channels. East City also had extensive local market knowledge and could be useful in marketing efforts and pricing issues. The company promised to assist in accessing chickens and various food ingredients that would be essential in the smooth running of KRR restaurants from beginning to end their up-stream contacts. In assessing their potential contributions, Wang shared that they would save some groundwork by collaborating with them. They would represent a small option given to the other FICA

Great Wall
FAVOURABLE
Considering the Beijing Branch of the China Great Wall Trading Co., a major investorowned international trading company as a partner was a second option for Wang. China Great Wall had extensive international contacts and was very familiar with Western business practices. Great Wall was also very entrepreneurial and was seeking new investment opportunities with multinational corporations in Beijing. Wang sized up the option that Great wall had a lot of appeal as it could provide bridge between china and America. He was impressed by entrepreneurial skills of Mr Lu Hong Jun.

UNFAVOURABLE
Wang also suggested that China Great Wall had plenty of money including access to hard currency

D & D Reality Co.

FAVOURABLE
D&D was a Hong Kong based real estate development and leasing company, which had revenues in excess of $U.S. 1.8 billion. It signed a contract as leasing agent for a new 14-story office complex being built by Hong Kong investors in a commercial area in central Beijing in early 1995.

UNFAVOURABLE
Nevertheless, Wang was worried that they are still new and do not have mature contacts and he wanted to give them a careful consideration.

The company was interested in filling ground floor space with a signature store. In September 1995, it approached FICA with an offer to form a partnership with KRR. D&D communicated its plans for aggressive expansion in Beijing and promised Wang that as a partner it could provide relatively easy access to prime retail space within the city.

Results

None of the joint venture partners could be considered appropriate, Tony Wang had concluded by the end of 1995.
As a replacement, he determined FICA to go alone in setting up KRRs first franchise restaurant in China as he thought that they would not need partner in Beijing except for helping them find good locations for KRR restaurants. They also had to take consideration at the government regulations of China. There is no regulation about having a local partner; rather the regulations say that as a foreign company they cannot have 100% ownership of a food service business. They decided to form a cooperative alliance with a local firm instead of a full-fledged equity alliance. The company they chose to work with was a small, local real estate company. Moreover, they planned to put money into this company to the point of eventually buying them out.

SWOT ANALYSIS

Internal Factors
Management

Strengths
Tony Wang very experienced in successfully bringing American franchises into China Unique food and atmosphere

Weaknessess

Offerings

Public could reject rotisserie chicken in favor of competitors products

Marketing

Good awareness of the No awareness of rotisserie Kenny Rogers name overall chicken or KRR (branding) One of our potential partners has the ability we need to build up our work force No great source for labor (without partners)

Personnel

Finance

Special finance deal with KRR to lower initial fees; Possible partners could provide additional financial assistance

Internal Factors
Production

Strengths

Weaknessess
Very short shelf life of product; Possible problems with quantities of chicken suppliers are able to produce as our demand increases Still need to research market do tailor KRR dishes to Chinese tastes

R&D

External Factors
Consumer / Social

Opportunities
Younger, more liberal, and more affluent market will likely be more accepting of the higher priced offerings

Threats
Rotisserie chicken may not catch on as fast as it did in the US since we do lack the health food craze in China (and most Chinese food is healthy anyway)

Competitive

Distinctive product and atmosphere; No current direct competitors for rotisserie chicken

Product itself (not the atmosphere) can be duplicated rather quickly (but not without significant cost) as demonstrated in the US market

External Factors
Technological

Opportunities
State-of-the-art, real time information flow between KRR locations and headquarters allows for a very agile business able to adapt quickly when problems arise
Due to recent reform, the economic environment is becoming much more stable with a steadily rising GDP

Threats

Economic

Legal / Regulatory

Key partners ready to help in these areas in addition to Tony Wangs experience in past dealings in this area

Environment still very complex and unclear

Competitor Analysis

There are 370,000 fast service food companies, with 400 as actual fast-food restaurants.
The smaller locally-owned competitors typically do not have the capital or management skills to make the jump to chain restaurants.

The other foreign-owned restaurants in China are McDonalds and KFC. There are roughly 17 McDonalds and 10 KFC restaurants by 1995. Also, TGI Fridays and Hard Rock Cafe have also entered the market, with one store each.

Industry Analysis

The Chinese food service industry is a $4.2 billion industry (US$).

The industry is made up of (3) three basic types of businesses: street vendors, fast-food restaurants, and traditional restaurants. There are approximately 370,000 of these types of restaurants in China, with about 400 of them considered specialty, or fast-food, restaurants. The remainder is made up of street vendors.

Industry Analysis

There are (4) four industry characteristics need to be considered by a foreign fast-food company moving into the Chinese food service industry.

1) The governmental regulations - As the Chinese government closely regulates all business sectors. - In our case, the Chinese government has chosen the fastfood sector as a priority sector for accomplishing one of its main goals, increased efficiency in the economy.

Industry Analysis

2) Location Historically, the three best cities for an entering fast-food company have been Beijing, Shanghai, and Guangzhou, each with a population in excess of 10 million.

Beijing: Third populous city

Population: 10,700,000 Urban Population: 6,970,000

Shanghai: Second populous city

Population: 13,010,000 Urban Population: 9,220,000

3) Technological Environment. - In urban areas, infrastructure has improved over the past decade. Especially in Beijing and Shanghai. Also, the City of Beijing and Shanghai had better public transportation system than most other cities in China. 4) Social Cultural Environment. - As China gradually opening its market, western culture became more and more acceptable to Chinese people.
-

Chinese people became familiar with western food, because of the presence of many western style restaurants and fast food restaurant. The popularity of western food is obvious.

Recommendation

We can conclude that the overall environment is favorable to KRRs entry to China. We will be entering China slowly.
We will start off with one restaurant in Beijing, moving to 5 restaurants in three years, 10 restaurants in 5 years, and 15 restaurants in 7 years, the last five placed in Shanghai.

We will be partnering with East City Food Service Company and the Beijing Branch of the Chinese Great Wall Company.

ACTION PLAN
In the first 3 months, we need to: Locate a building for our first restaurant, somewhere in the University District. Locate a chicken supplier. Begin hiring and training of personnel. Apply for various permits and licenses. Begin promotions Order necessary equipment for first store. Conduct small scale marketing research to understand local tastes and preferences. Adapt recipes based on marketing research. Begin process of getting new

Action Plan
In the first year, we need to: Open the first store and get it running smoothly. Begin the search for our next two store locations. Expand our supply chain to find raw materials for side dishes and ensure we have enough chicken supply for three stores. Expand marketing research. In the second year, we need to: Open the next two stores. Expand our target market to include middle class. Increase advertising efforts. Continue marketing research. Begin search for next two stores to be opened in year 3, location based on marketing research.

Action Plan
In years three through seven, we need to: Open the next ten stores. Continue marketing research, re-evaluate strategy to according to findings.