Introduction
This report focuses on historical background of the fast food restaurant “Nathan’s Famous”, structure and ownership pattern, mission and vision of the company, SWOT analysis, list of strategies, financial position, and so on.
History of Company
In 1916, Nathan Handwerker established “Nathan’s Famous” as a fast food stand on Coney Island, New York where he served special hot dogs prepared with the recipe of his wife; however, the company gained global reputation within a short time for the special taste and quality (Morningstar 1).
This restaurant really became famous worldwide while its hot dogs had served to the historical icons like Soviet iron man Joseph Stalin and to the English Monarchy and 32nd president of the United States Roosevelt visited the restaurant to enjoy the Nathan’s hot dogs (Morningstar 1; NATH 4; and Basham 2).
Most legends politicians, celebrities, and sports celebrities of twenties in the United States like Performer and comedian Eddie Cantor, Jimmy Durante and Cary Grant and even the Chicago gangster of twenties Al Capone were the regular customers of Nathan’s Famous.
During thirties, the company started to get orders from overseas market, for instance, London and other cities; in addition, it has enjoyed to monopoly market for its hot dogs supplies in the White House (Nathan’s Famous 1; and Basham 2).
Table 1: Overview of the key facts about NATH. Source: Self generated from NATH (43).
Company Structure and Ownership Pattern
Nathan Handwerker established this company as a family business with his wife; after death of the owner, his son Murray Handwerker became the president of the company in 1959 and explored its expansion strategy by opening several branches all over the USA. Moreover, this company lunched new strategy to open a number of franchises (Morningstar 1; NATH 4; and Basham 2).
During nineties, the son of Murray has taken the leadership of the company; Bill failed to show high performance and he sold out the company to a private group; subsequently, this company incorporated and listed in the New York Stock Exchange for public trade in 1993 (Handwerker 1; Yahoo Finance 1; Morningstar 1; and NATH 5).
Mission and Vision of the Company
- The Mission of the Nathan’s Famous Inc. is to provide unparalleled delicious and high quality fast food to the customers in order to strengthen its position and create a base of satisfied customers worldwide;
- The vision of the company is to improve the number of it outlets and franchisees at home and abroad with the aim to maximize its shareholders value by becoming market leader in the traditional and captive-market restaurant environments within next 10 years.
Product and Services
Although the NATH is a legendary in the global market for its hot dogs from the historic perspectives, the company also deals with a variety of fast foods like hamburgers, breakfast sandwiches, and crinkle-cut fries along with some restaurant tools and equipment like vending machines and Subway units and so on.
According to the annual report, the majority of the fast food retailers like Auntie Anne’s Pretzels, Restaurant Depot, Sam’s Club Cafes, Regal Theatres, Sunoco, Yankee Stadium, and Cowboy Stadium are randomly selling the products of the Nathan’s hot dogs at 1000 outlets in 50 states and accounted sales of 435 million hot dogs in the previous year.
Demographics
The major operation of the Nathan’s Famous Inc. is in the United States where the demography consists with population of 313,847,465 estimated in July 2012 with a growth rate 0.9%, birth rate 13.7 births/1,000, death rate 8.4 deaths/1,000 and net migration rate 3.62 migrant(s)/1,000 population (Indexmundi 1).
Major cities for population density, the position of New York is at the top with 19.3 million population; Los Angeles in the second position with 12.675 million population; Chicago in third position with 9.134 million; Miami is the fourth with 5.699 million, and the lowest population in the capital city Washington, DC with 4.421 million population.
Among the total population, male female ratio is 97: 100; the life expectancy for male is 76.05 years and for female is 81.05 years and at least 1.2 million people live with HIV / AIDS and 17,000 people die from this disease in 2009.
In accordance with the data provided by the US Census Bureau, in 2007, there are several ethical groups live in the US where Native Americans are only 0.97%, whites are 79.96%, blacks are 12.85%, Asians are 4.43%, Hawaiians are 0.18%, and the others are 1.61%.
At the same time, the Literacy rate of the country is 99% and the expenditure for education is 5.5% of GDP and the per capita income is US$ 27100; however, the unemployment rate was 8.15% while the health care expenditure was 16.2% of GDP in 2009.
Strategic Analysis
List of Strategies Implemented
Branding Expansion Strategy
NATH has aimed to put into practice of brand expansion strategy primarily by the marketing of the “Nathan’s Famous” brand and sales of goods with the “Nathan’s Famous” trademarks that carries historical dignity of the company.
From its long practice, the brand has gained strong confidence of its customers in an extent where the company engaged to boost its sales of non-branded products converting in to own branded products while the concept of co-branding restaurant provided further opportunity to explore its brand (NATH 18);
Distribution Strategy
This company has engaged to expand its distribution channels by increasing addition of new points of sale and distribution along with various retail chain and supermarkets including the company owned restaurants; however, the combined practice of franchising and distribution agreements with different business and individuals is the traditional practice of exploring distribution channels;
Overseas Entry Strategy
This Company has decided to continue its international expansion through its traditional franchising scheme along with its co-branding restaurant concept that would tremendously assist for overseas entry while the company would also engage with sub-franchising and licensing for manufacturing.
International distribution contracts have already given the opportunity to establish 98 restaurants along with 100 co-branded illustration worldwide;
Operation Strategy
NATH has emerged to continue its harmonized architectural design at every operational points for which it provides training and operation manuals for all the stores, no matter whether it is a company owned or franchised entry; in addition, it has provided fees for particular tasks and signed agreement for 10 years (don’t ask for any profit sharing).
Both for local international operation the raw materials of the branded product must be purchased from Nathan’s or from its recommended suppliers; Nathan’s operational strategy always look for new prospects both in traditional as well as captive markets;
Marketing Promotion and Advertising Strategies
The company has considered marketing strategy as an integral part of brand awareness development in the course of its fortunate points of distribution channels by selling its branded menu through advertising in the supermarkets, club stores along with television advertising that boosts its reputation for quality and value for which the company is striving.
In the promotion purpose, the company frequently arranges eating contests of Hot Dogs in different states and the champions are gathered in main restaurant of Coney Island for national competition, all of these competitions get huge media coverage that greatly promotes Nathan’s brand.
On the other hand, under the Nathan’s franchising agreement, the local restaurants are obliged to spend 2% of their annual sales for advertising and promotion; moreover, the local restaurants would conduct local marketing campaigns pointing to the value-oriented strategies for promotion announcing special discount offers.
HR Strategies and Corporate Governance
According to the annual report 2012 of this company, it has already incorporated a Financial Officer Code of Ethics to control CEO, CFO and other employees of finance department; in addition, it posted Code of Ethics on the Company’s website with intent to comply the disclosure requirement under Item 10 of Form 8-K.
Moreover, NATH arranges training programs for managers and co-workers of new Company-owned and franchised restaurants because they are the key asset of the company to create brand image in the fast food industry; furthermore, it has already designed operating manuals with practices and procedures to train the employees and operate the business.
Analysis of the Strategies
Business Level Strategy:
- Cost leadership: The US fast food restaurant competitive market, the competitors mainly consider cost leadership strategy and ask comparatively lower price for the commodity and service; however, NATH offers lower price, but it is not offering the lowest price for all food item. In addition, it has a lot of loyal customers and they purchase hot dogs considering taste and quality; therefore, NATH has not used this strategy since price is not a prime concern to the customers;
- Differentiation: From the very beginning of the operation of NATH, it offers unique hot dogs. However, product differentiation is key strategy of this company, for instance, Beef Hot Dogs, Crinkle-Cut French Fries, Hamburgers, Philly Cheesesteaks, Chicken Classics Menu (Krispy Chicken Tenders and Sandwich, Chargrilled Chicken) Salads (Caesar and Krispy Chicken Club), Famous Favorites, and so on;
- Cost focus: According to the annual report 2012 of NATH, it designs own pricing strategy known as “value pricing”. According to this strategy, individual food items price is higher than the price of combination of several items; however, NATH purchases raw materials from the suppliers at competitive price with intent to focus on this strategy by producing goods at lower price and offer competitive price as well;
- Differentiation focus: It has already captured the market of NATH concentrates on this issue because clients have distinctive preferences, taste with special requirements; therefore, the decision makers focus on this factor, but cautiously it is not introducing new items in the regular basis;
SWOT Analysis of NATH
Strengths
- NATH has a long experience to operate fast food restaurants as it established in 1916;
- According to the annual report 2012 of NATH, it achieved numerous awards for the world famous beef hot dogs;
- In addition, quality and taste of the food items help the company increasing market demand (Basham 3);
- Brand image, reputation, loyal customer base, and leadership quality are the key factors of success (Nathan’s Famous 1);
- At the same time, it has qualified and financially capable franchisees;
- It has 40 corporate management employees, 154 full-time employees, 25 restaurant managers;
- Distribution strategy, pricing strategy, supply chain management, other marketing strategies are the main strengths;
Financial position
At present, it has strong financial position to invest more for the new outlets and change the external business environment; however, the following table shows ratio analysis for this company.
Table 2: Key ratio of Nathan’s Famous. Source: Self generated from Morningstar (1).
Weakness
The management of this company has not concentrated on the global market expansion while many companies open new outlets in the emerging market, like Brazil, Bangladesh, India, and China; however, this company has a problem in the decision-making process to develop business and compete with other competitors.
- the corporate governance system is ineffective to meet the challenge of competitive industry
- It has only 219 employees to control all the distribution channels (NATH 12)
- Profit margin is decreasing due to high operating costs in the recessionary economy (Morningstar 1);
- On the other hand, less interest to develop new products and expand business in new business zone;
- Needs to take appropriate measure considering the pricing or other marketing strategies of the competitors;
Opportunities
- NATH has already opened a new outlet in different States of the US market, but it has opportunity to expand more outlet in the high populated market;
- It can create large customer base in the new areas to maximize profits
- At the same time, it should open new branch in emerging Asian market, for example, Bangladesh;
- It has opportunity to increase share capital and earning per share using appropriate strategy in the stock market
- It has scope to increase market share in the first food industry;
Threats
According to the annual report 2012 of this company, the fast food restaurant industry is extremely competitive because many factors influence the business, for instance, economic condition, purchasing power of the customers, changes in consumer tastes, awareness about the nutritional quality and increase number of competitors.
There are many other risk factors, such as, the loss of major suppliers, the impact of agreement with SMG, high competition in the quick-service restaurant segment; however, the following table provides competitive position of NATH.
Table 3: Direct Competitor Comparison. Source: Yahoo Finance (1).
Present Market Shares of the Company
The position of this company in the stock market is comparatively better because the basic chart shows that share price is increasing over time. The following chart compares share price between NATH and McDonalds to show that the investors are now relying on the NATH considering overall position of this company in the recessionary and post recessionary economy.
However, the management of this company should use the share capital to expand business in the global market and the investors will gain confidence to purchase the share of this company considering the position in the fast food industry.
The next basic chart demonstrates that the position of YUM is strong in the stock market, but share price of NATH is higher than the share price of YUM.
Share in international market
NATH has business operation in eight countries with only 30 outlets all over the world whereas MCD has over 31000 outlets and Burger King has about 13200 restaurants all over the world. Therefore, the business reports on the fast food industry had not addressed significantly the market share of this company considering the number of outlets; however, the next table gives information about the presence of NATH in foreign market.
Share in local market
NATH (16) reported that it has not outstanding market share in the local market in terms of the number of Company-owned and franchised units, for instance, it has 274 outlets (highest 66 franchised units in the New Works and 40 franchised units in the New Jersey).
Recommendation
Based on above analysis, this study will suggest two strategies for its further market growth, such as-
New Product Development
Although Nathan’s restaurant deals with a variety of product line, but the hot dog is globally famous and unparalleled for its taste and quality; at this stage, the company required to innovate some new products with unbeaten quality and taste.
In its hamburger menu, there are grilled bacon cheeseburgers, special burgers along with super cheeseburgers; however, the company conducts further research to develop these products by maintaining same quality standards of its hot dogs; however, such innovative idea will assist the company to explore its growth quickly.
Vertical Expansion Strategy
The future growth of the company strongly aligned with its vertical expansion strategy; besides franchising, NATH has the opportunity to consider prospective merger and acquisition, joint venture, and strategic alliances with the local districts food stores in the US market and the international market.
The ongoing licensing programs for packaged foods can also enhance through geographic integration outside the US market, but before introducing any vertical expansion strategy, the company required to have some risk assessment.
However, this report suggests that the management of NATH to arrange meeting with board members to receive proposal to expand business vertically; in addition, it should prepare a timetable in order to implement new strategic alternatives.
Conclusion
From the above discussion, it can be said that Nathan’s creative approaches will assist to establish strong base of satisfied customers, and the focused strategies will ensure continuous expanding opportunities for the company; in addition, it will ultimately support revenue generation program in order to maximize the shareholders value creation.
Works Cited
Basham, Mark. Nathan’s Famous. 2010. Web.
Handwerker, Murray. Nathan’s Famous owner expanded nationwide. 2011. Web.
Indexmundi. United States Demographics Profile. 2013. Web.
Morningstar. Nathan’s Famous NATH. 2013. Web.
Nathan’s Famous. Nathan’s Famous History. 2013. Web.
NATH. FORM 10-K: Annual report 2012 Nathan’s Famous, Inc.. 2012. Web.
Yahoo Finance. Direct Competitor Comparison. 2013. Web.