Pizza Hut Case Study

PIZZA HUT CASE STUDY

        “I am going to open Winnipeg’s first Pizza Hut” Bill said to his wife. “”If I am ever going to be independent, I’ve got to do something soon.I’m not getting any younger. This opportunity looks good and I think that I can pull it off.” Bill signed the franchise application, sealed the envelope, and stopped. Again he started to think about the pros and cons of the business proposition he was contemplating, the risks involved, and whether or not this was what he really wanted to do.

        WILLIAM BANTING.

        Currently employed as a senior administrator in the Department of Public Works, William Banting had been a civil servant for 22 years. As a line manager, Bill was used to managing people and getting things done.

        Bill was 47 and married to Irene, who had recently gone back to work full time as an executive secretary. Their, two daughters, both in their 20’s, were now married. He owned his own house with clear title and held his savings in the form of government bonds and investment certificates. His banker estimated his net worth at $270.000, some of which reflected an inheritance he had received five years ago. Bill currently earned about $4000 a month.

        THE PIZZA HUT OPPORTUNITY

        On their holidays last summer, the Bantings had visited relatives in Kelowna, British Columbia.Bill’s brother in law, Ed, owned and operated the Pizza Hut franchise in Kelowna. The two men had spent a lot of time talking about the business, and Bill had spent many hours watching the activity at the restaurant. He had been impressed with the systemized approach, the well trained staff, and the family atmosphere that prevailed in the restaurant.

        Ed told him that after 3 years in business, his profits were steady and he was earning a good living. While there were pros and cons to franchising. Ed felt that Pepsico Food Service International, the Pizza Hut franchisor, had a good reputation and was not hard to deal with. He suggested that Bill investigate the possibility of acquiring a franchise foe Winnipeg.

        Bill had done just that. Correspondence had been exchanged with Pepsico, and Bill was invited to submit a formal application. In the meantime he had some homework to do.

MARKET RESEARCH

Bill was investigating the Pembina Strip in the south part of Winnipeg as a possible site for a Pizza Hut restaurant. It was centrally located in a major residential area and had very heavy traffic flows. It was also adjacent to the University of Manitoba. Bill had lived in the area for a long time and was well known through his community activities.

Bill judged this area to be a good location for a Pizza Hut, he collected some data from Statistics Canada, he also visited the president of the local restaurant owners association, where he learned that the average amount spent by Canadians at restaurants with table service was over $450 per capita each year. Pizza and Italian restaurants had a 17% share of this expenditure and overall restaurant sales were growing ar a real rate of 5% annually.

There were ten pizza restaurants on the Pembina Strip. 5 represented larger chain or franchise outlets, while the others were smaller independent operations catering mainly to take out and the delivery market. The larger competitors did extensive media advertising and were well established. The restaurant association president said that is was likely that the larger business’s grossed two or three times the sales volume of the small operations. In addition, Bill reasoned that the location, close to the university would add at least10.000 people to the local population base.