Case study Fork and Dagger
In October 2012, Richard Lynch, owner and founder of the Fork and Dagger pub in Struan, Ontario, was getting close to retirement and wanted to transfer the business ownership to his two sons, Bradley and Jason. Both sons had been working in the business for quite some time: Bradley for more than 15 years, and Jason for more than 12. Between them, they had experience with all aspects of running the pub, and Richard felt confident that they’d be able to manage the business. But he also knew that his two sons had very mixed views on how to grow the pub: Bradley wanted to completely change Fork and Dagger’s positioning, targeting the lesbian, gay, bisexual, and transgendered (LGBT) community, while Jason simply wanted to focus on developing the pub’s promotions and doing renovations to attract a larger crowd. Richard had asked his two sons to present their plans for the future of the business so that he could make the final deci-sion about what would or wouldn’t happen at Fork and Dagger before his retirement.
Richard was concerned that if he retired without having resolved the issue, the struggle that could result between Bradley and Jason could escalate, management of the business could be affected, and ultimately the business could simply continue to lose revenue—as it had been slowly doing over the past few years.
COMPANY BACKGROUND
Fork and Dagger was founded in 1993 by Richard Lynch, who saw potential growth in Struan’s food and hospitality industry, specifically its pubs and bars. Having worked as kitchen manager for a large chain restaurant, Richard felt he could provide the Struan community with a more casual dining atmosphere while still serving good-quality food at reasonable prices. That was how he came up with the pub’s slogan: “Where the beer is hot, the food is cold, and the servers are delicious!” As a way of attracting business, Fork and Dagger provided both a quiet, semi-formal dining area for those wanting a better dining experience and a bar area where many people came simply to socialize and share a few drinks, sometimes with light snacks or “pub food.” Richard believed that attracting such a broad market gave the pub a competitive advantage, and that this was a sustainable strategy for his business.
In order to compete with other restaurants in the area, Richard felt that Fork and Dagger needed all the features the current market offered. Therefore, within the first year of operations, he invested in 10 wall-mounted televisions and a cable subscription. Sporting events played continuously on the screens in the bar area, while in the dining area programming varied depending on the time of day (with sporting events seldom shown). In that same year the 1994 Winter Olympics were broadcast live from Norway, with the time difference meaning that events were on late at night. A large crowd of late-night sports enthusiasts was attracted to the pub, and this quickly helped create awareness for Fork and Dagger. Sales increased rapidly and the pub gained a reputation for being a fun place to meet and socialize.
At first, Richard relied heavily on this word-of-mouth advertising to help his business get started. The sports crowd was supplemented by family friends and a large group of students from the nearby college. Students were particularly attracted on Thursday and Friday nights, with a number of faculty members also showing up on those nights. Many people from the local business community came in at the end of the workday for a beer or two, but most stayed only an hour or so, and only occasionally did they order food. Saturdays and Sundays were especially popular for food sales, with many from the local community coming in for lunch or dinner on those days. Fork and Dagger eventually grew to include 28 bar tables, each with four movable stools; 12 more-formal dining tables, each with four to six chairs; and six booths, each with seating for four to six people.
Sales Revenue, 2009–2012
Richard was concerned when it became apparent that Canada was in a recession in 2008, but his fears were unfounded. While many more expensive restaurants saw a decline in sales, Fork and Dagger seemed to be more or less immune to the changing economic climate. Sales in 2008 were higher than in 2007, and there was no indication that Fork and Dagger’s revenues would suffer. However, in 2009 Richard saw sales decline for the first year since he’d started the business 17 years earlier. It was only a small decrease, but significant for being the first Fork and Dagger had ever experienced. Revenues continued to decrease in 2010 and again in 2011. Exhibit 1 shows Fork and Dagger’s 2008–2011 income statements.
EXHIBIT 1 Fork and Dagger’s Year-End Income Statements, April 30,
2008–2011
2008 2009 2010 2011
REVENUES
Alcohol $1 209 350 $1 168 001 $1 125 964 $1 056 709
Food $1 273 000 $1 229 475 $1 185 225 $1 112 325
Merchandise $63 650 $61 474 $59 261 $55 616
TOTAL REVENUES $2 546 000 $2 458 950 $2 370 450 $2 224 650
EXPENSES
Cost of Goods Sold
Liquor $76 380 $73 769 $71 114 $66 740
Beer $152 760 $147 537 $142 227 $133 479
Draft $203 680 $196 716 $189 636 $177 972
Wine $45 828 $44 261 $42 668 $40 044
Food $547 390 $528 674 $509 647 $478 300
Total $1 026 038 $990 957 $955 291 $896 534
Operating Expenses
Wages* $611 040 $598 148 $579 908 $556 916
EI expense $15 276 $14 954 $14 423 $14 048
Casual labour $30 552 $29 507 $28 445 $26 696
CPP expense $22 914 $22 131 $21 334 $20 022
WCB $9 165 $9 165 $9 165 $9 165
Benefits $7 638 $7 377 $7 111 $6 674
Total Payroll $696 585 $681 282 $660 386 $633 521
Advertising $40 736 $40 343 $40 027 $40 594
Restaurant supplies $68 742 $66 392 $64 002 $62 066
Entertainment $127 300 $125 948 $122 523 $123 233
Total $933 363 $913 965 $886 938 $859 414
General & Admin
Bookkeeping $25 466 $25 550 $25 254 $25 330
Cleaning $25 460 $25 170 $24 860 $24 190
Insurance $15 276 $15 328 $15 331 $15 367
Bank charges $25 460 $25 408 $25 479 $24 511
Sponsorships $12 730 $13 000 $11 200 $11 600
Office supplies $1 527 $1 611 $1 559 $1 570
Promotions $50 920 $49 010 $47 870 $43 330
Cable $5 092 $5 109 $5 158 $5 211
Rent $127 300 $127 300 $127 300 $127 300
EXHIBIT 1 Fork and Dagger’s Year-End Income Statements, April 30,
2008–2011 (continued)
2008 2009 2010 2011
Repairs & maintenance $38 190 $37 000 $37 300 $38 000
Telephone $6 365 $6 378 $6 395 $6 409
Gas $17 822 $17 853 $17 809 $17 798
Hydro $38 190 $38 330 $38 370 $38 280
Water $10 184 $10 164 $10 178 $10 157
Total $399 982 $397 211 $394 063 $389 053
TOTAL EXPENSES $2 359 383 $2 302 133 $2 236 292 $2 145 001
NET INCOME $186 617 $156 817 $134 158 $79 649
*Richard, Bradley, and Jason all took a salary from the business, included in the wages.
It was evident to Richard that the market for pubs and bars in Struan was slowly becoming more and more saturated. Most customers who visited Fork and Dagger on a regular basis continued to do so, but some who’d been regulars in the past simply stopped appearing at the pub. Richard believed they had moved to other venues. For example, the local golf club had recently renovated its bar area and was making a concerted effort to attract a loyal group to socialize there. Other bars and pubs in Struan were beginning to offer additional features that hadn’t been offered in the past. Big Joe’s Sports Bar, several blocks away from Fork and Dagger, had recently renovated its premises, providing its customers with six pool tables in addition to the flat-screen TVs it already had. The Shark Tank, another nearby pub, had recently begun to offer free karaoke nights every Saturday night, and was bringing in a live blues band every Sunday afternoon. Richard wasn’t keen to add these features to Fork and Dagger, since it would mean having to focus more on the bar area of his business, compromising his dining room customers’ experience. And with limited room in the pub, he’d have to eliminate several tables to accommodate pool tables and a karaoke stage, which he really didn’t want to do. He was also concerned that live music in the bar area in the afternoons would drive away his dining room crowd on Sundays. Richard believed that the atmosphere he’d established at the pub, as well as the outstanding service his staff provided, would continue to set Fork and Dagger apart from its competitors. Still, knowing he’d have to make changes or sales would continue to decline, he decided it was time to get Bradley and Jason more involved in the decision making. After all, the future of Fork and Dagger would be their concern. He’d now asked each of them for their thoughts, knowing very well that they’d have very different views of what should be done to increase sales.
BRADLEY’S PROPOSAL: TARGETING A NEW MARKET
Bradley Lynch obtained his Bachelor of Arts degree in 2005 from a prestigious Ontario university. He continued to work at Fork and Dagger during summer vacations and breaks From his studies. After graduation he returned from university with his friend, LesterBranson, and the two got an apartment in downtown Struan. Bradley continued to work at the pub, while Lester, because he and Bradley were uncomfortable with Richard and Jason’s reactions once their relationship was made public, decided to keep away from Fork and Dagger. He found a job as a salesperson at a local car dealership. After a while, though, Lester began to come to Fork and Dagger, and he and Bradley soon found acceptance by both Richard and Jason. Bradley eventually became the food and service manager, responsible for hiring, training, and managing the bar, dining room, and kitchen staff, and for ensuring that customers enjoyed their time at Fork and Dagger. He was very effective in engaging customers and finding out what they liked and what they wanted to see improved at Fork and Dagger. He was constantly considering the pub’s strengths, who its customers were, and where there might be additional opportunities to increase their satisfaction. Over the last couple of months Bradley has been entertaining the idea of changing the pub’s positioning strategy. Fork and Dagger was targeting a huge but undifferentiated market: people who lived and worked in Struan and the surrounding areas. With such a broad target market Bradley felt that all advertising effort was wasted, and that it might be better aimed at one or more concentrated market segments. If Fork and Dagger could attract a large, underserved segment, it could establish greater customer loyalty and hence reverse its revenue decline.
Then, one Friday night, Bradley thought he had an insight. Lester was sitting at a table with about a dozen of their friends when it dawned on Bradley that these weren’t the only gay customers in the bar; in fact, when he looked around the pub area, he realized that about 15% of the customers were LGBT. Bradley had read somewhere that about 10% of the population were members of the LGBT community, and if that were true, then Fork and Dagger was already attracting a good following within this market segment. No other pub in the Struan area was targeting the segment, and Bradley began to wonder whether there was an opportunity here. Furthermore, as a homosexual male, Bradley figured he’d be in a better position to identify with this market’s wants, allowing him to better attract the LGBT community. When developing his proposal, Bradley did some informal marketing research. He began by identifying friends he knew were homosexual and collecting information on their “per-person average expenditure” during their visits to Fork and Dagger. Over a two-week period he identified 50 tables where he knew the customers were all homosexual. Many of these customers were included several times, as they were regulars and often came to the pub with different friends each time. Among the 50 tables he included in his sample were 163 people; Bradley estimated this total as comprising about 82 unique individuals. For his Comparison sample he randomly chose 50 tables of people he knew weren’t homosexual. Among these 50 tables were a total of 145 people, translating to about 128 unique individuals. When he compared the cash register receipts, he found that those whom he’d identified as homosexual spent, on average, about 10% more than the other customers. Furthermore, they came in larger than average groups—3.3 people per table versus 2.9—and they seemed to be more loyal, since there were fewer unique individuals among this group compared with the comparison group. Bradley was unsure whether this last assumption was a valid one, but it did agree with what he believed to be likely. These results were far better than Bradley had expected, and the more he thought about it, the more convinced he became that targeting the LGBT community would be a greatidea. He was certain he’d get resistance from his father and brother, but he felt that now was the time to make his pitch. Fork and Dagger certainly couldn’t continue to lose revenue if he and Jason were to have a long-term successful business.
JASON’S PROPOSAL: MARKET PENETRATION
After graduating from high school in 2006, Jason Lynch began working at Fork and Dagger as a bartender. Over subsequent years he worked in every area of the business, from waiter, to cook, to buyer. He eventually gravitated to internal operations, becoming responsible for purchasing food, alcohol, and supplies; for scheduling staff to ensure that adequate people were on hand to meet the pub’s needs throughout the week; for organizing costing information about purchases and wages so that it was available for the pub’s accountant; and for handling the accounts payable, including issuing cheques each week to staff. Over the years he gained considerable technical knowledge of how to manage the pub. He was interested in all aspects of the business, although he lacked Bradley’s engaging personality and was less interested in the pub’s customers. When hearing from his father that the pub’s sales were declining, Jason wasn’t surprised: he’d been noticing that his purchases were getting smaller and that he’d often have to send staff home early when he miscalculated demand. In his opinion, the main reason Fork and Dagger’s revenues were declining was that the customers were becoming bored with the place and starting to visit other venues. The walls had been the same colour for years, and the decorations were the same as when he first started to work in the business. The wall-mounted televisions were getting old and there were no exciting attractions to set the pub apart from its competitors.
From talking to some of his friends who were regulars, Jason concluded that renovations would improve the pub’s atmosphere and make it a more enjoyable experience. He hadn’t given promotions a lot of thought, but he knew there had to be many possibilities for better promoting the business. He was thinking about the traditional ones: ladies’ night, happy hours, etc. He was also wondering if the pub could leverage social media somehow, since he’d heard of some restaurants that promoted specials through Twitter and others that provided online coupons. What he knew for sure was that people were no longer looking for a place to simply eat and drink; they were looking for entertainment and excitement. They wanted to be engaged, to feel part of the business where they spent their money. Because the pub was operating well below full capacity, Jason thought it would be a good idea to replace a few tables in the bar area with pool tables—and with some creative organization, he’d need to get rid of only eight bar tables. He estimated the cost of four fully equipped pool tables to be about $5000 each. Jason also wanted to install a karaoke system, which he thought would cost about $1500, and to hire a DJ and some live music for special events throughout the year. DJs usually charged between $75 and $125 per hour. Musicians and live bands could vary from $40 per hour for a single singer or musician to as much as $200 per hour for a three- or four-person band. Of course, he’d vary the music depending on time of day and whatever group of customers might be in attendance at any particular time. Repainting the pub’s interior would cost about $6000, and new seating would cost about $900 per bar table (including four chairs), $2000 per dining room table (including four chairs), and $2500 for each new booth.
THE FUTURE OF FORK AND DAGGER
After listening to both Bradley and Jason, Richard was concerned that their views for the Future of Fork and Dagger were so very different. He was wondering which approach the business should take. Should the pub target the LGBT community and shift to a narrowly targeted population? Or should it change its decor, modernize its seating, and add new forms of entertainment to compete with some of the newer pubs in the area? Was there a way to accommodate the wishes of both Bradley and Jason, given that both would need to be happy with the pub’s direction if they were to remain committed to its success? Richard wasn’t pressed for a rush answer, but he knew he couldn’t retire until the issue was resolved. He wanted to leave a sustainable, if not growing, business. He certainly didn’t want to abandon the place when it was in decline.
Mr. Lynch must make an appropriate decision, one that does not only safeguard the future of the business but also safeguards the future of the relationship of his sons. This implies that he must permit the two to experiment with the business by consolidating the ideas the two present. The Renovating the pub will place it in the modern society. The renovation will seek to satisfy the demands of the modern day customer. In renovating and expanding the pub, the management must consider the demands of the modern day customer thus safeguarding such features as convenient and comfort. As stated earlier, renovating the pub is inevitable. This implies that Mr. Lynch and his two sons must determine the most appropriate ways of renovating the pub thus positioning the business strategically in the modern society. While doing this, the management must narrow the pub””s target market a feature that will enhance the management. In doing this, Mr. Lynch must consider the importance of diversity in enhancing the profitability and longevity of business in the contemporary market. In expanding and renovating the pub, Mr. Lynch can therefore develop a section of the pub and permit Bradley to customize it strategically for its LGBT target market. Jason should then manage the other section that targets the general consumer. This way, the business diversifies its services while safeguarding the peace and unity of the two siblings. Such is an appropriate approach that will serve as an effective marketing research and analysis tool that will provide the two sons with the most appropriate trends in the market thus enabling the two to change the structure of their business based on the response of the market.these are the alternatives that should be stated in the qualatative and quantative charts instead of the information that already in the charts right now but read how the chart is done to apply this information to the last 2 chat q&q charts correctly-this is what should be done in the sawa document and also place the financial breakeven analysis in the sawa document as well.thanks
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