Environmental Analysis and Strategic Direction In July of 2006 Irish Style Restaurant Bennigan's filed for Chapter 7 bankruptcy, the weak economy cited as the main reason. Higher fuel, labor and food costs associated with the economy’s attempt to balance contributed to the closing of this well established place of business for 32 years. Some took note of the high calorie menu in a more health conscious environment and one survey noted that 76% of US adults were trying to eat healthier and become more conscious of the type of calories they consumed.
Bennigan’s did not keep up with current restaurant trends and became unable to compete with other chains, such as Olive Garden, which chose to offer low fat fare as well as traditional menu selections (Springen). Hundreds of restaurants closed and thousands of employees were laid off as assets owned by the corporation were sold to pay off debts and the bankruptcy filing was considered to be one of the largest in recent years. Parent company Metromedia closed about 200 restaurants though 138 franchises intended to remain open without the support of Metromedia.
Layoffs resulted in the sixth largest job cuts of 2008-2009. Founded in Atlanta in 1976 Bennigan’s used an Irish Pub style motif though their menu and motif failed to distinguish them enough to remain profitable. Metromedia violated the terms of a lending agreement with GE Capital Solutions and attempted for a year to negotiate before resorting to filing for bankruptcy. Most of the Bennigan’s real estate is owned by GE and Bank of New York and the parent company contributed over 100 million in the 2007-2008 to meet payroll and debt obligations.
Employees were not warned before the situation and most showed up to work only to find out the restaurant was being closed. No attempts were made to liquidate first before the filing and bank agreements allowed the situation to worsen before creditors were able to develop a strategy to maintain a customer base and restore profitability (Mccracken). Restaurant consultants described the bankruptcy filing as one of the most drastic signs that mid-price restaurants are undergoing financial struggles in decades. Chapter seven bankruptcies involve liquidating assets rather than restructuring as in a chapter eleven bankruptcy filing.
Since that time a new CEO is heading Bennigan’s and the restaurant is attempting to make a comeback. Consumers have gained more spending ability and with real estate property deals the company reopened several Florida locations in 2011, beginning in Orlando (Bennigans…). Metromedia not only owns Bennigan’s chains but they are also the parent company of Steak and Ale, a casual dining steak house with an atmosphere provided by dim lighting and a contemporary environment. Little renovation has been attempted in either chain and menus are described as lackluster concepts unable to compete in the dragging economy and increased food costs.
Bennigan’s and Steak and Ale were unable to differentiate, with no unique menu signature items and too many units. Franchisee restaurants remained open and independent of the parent company (Sniegowski). Bennigan’s advantage for many years was the Irish theme which was the differentiating factor for the restaurant though with the current restaurant competitive environment this factor was not enough to distinguish the restaurant from competitors. Both restaurants failed to update and keep current with menu changes and to take advantage of their many locations and to establish themselves anew in the market.
While competitors were updating menus to include more health conscious choices neither Bennigan’s nor Steak and Ale accurately reflected the majority of American’s eating trends of today. Resources the company failed to capitalize on include their many locations and their longstanding well established name. Both restaurants were well known names in the restaurant industry and because of this their marketing and development could have created new concepts in order to remain competitive.
To create a strategy that would allow Metromedia to remain competitive market surveys concerning consumer choices should be completed, and consumer interest and choice should be reflected in both restaurants which did not occur, neither restaurant updated style or menu. A marketing plan should include advertisement, public relations, and funds should be allocated for tools that support marketing efforts. Price, promotion, place and product are considered in any marketing plan. Financial history, marketing history, knowledge of customers and the business are crucial factors in developing your marketing plan.
Product at both restaurants should be updated to include current trends which include health conscious lower fat and calorie selections. Current consumer trends include novel tastes, fresh ingredients, the use of local and seasonal items, and the disclosure of more information about menu items, such as calorie count, ingredient sources, allergens, and nutrition. Taking advantage of social media networking to market and resisting discounting through the use of special customer rewards such as free dessert can increase business while allowing costs to remain the same. The restaurant association conducts an annual survey to identify current and upcoming trends.
Trends predicted for 2012 include local grown and produced meats, seafood’s, produce, wine and beer. Healthy kid’s meals and sustainable food sources are also trends to watch for. Sustainable food sources keep current with present needs without compromising future generations. Sustainability has become main stream and will be a big factor in restaurant success if this becomes popular. Though 90% of marketing money is spent on getting a customer to the restaurant for the first time more funds should be allocated to retaining customers and gaining repeat customers which is the largest source of business.
Repeat customers are gained through excellent service, product, attractive price and promotion of specials that are targeted to repeat customers (Restaurant). Works Cited Springen, Karen. "Inside Bennigan's Bankruptcy Filing. "The Daily Beast. 30 July 2008. Web. 11 Feb. 2012.. Mccracken, Jeffrey, and Janet Adamy. "Dining Chains Shut Doors. " The Wall Street Journal. 30 July 2008. Web. 11 Feb. 2012.. "Bennigan's Restaurant Making Comeback in Florida after Chapter 7 | Miami Bankruptcy Lawyer Blog. "Miami Bankruptcy Lawyer Blog | Fort Lauderdale Chapter 7 Attorney | South Florida Chapter 13 Law Firm.
6 June 2011. Web. 11 Feb. 2012.. Sniegowski, Don. "Bennigan's, Steak & Ale Go on the Chopping Block. " Blue Mau Mau. 30 July 2008. Web. 11 Feb. 2012.. "Restaurant Marketing Plan. "Restaurant Design, Restaurant Marketing, Design and Marketing Consultants for Restaurants. 2012. Web. 11 Feb. 2012..