Marketing Plan. Jennifer Hall. April 3, 2012

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1 Marketing Plan Jennifer Hall April 3, 2012

2 Executive Summary Opening an Atlanta Bread Company franchise in Rhode Island is an enticing business opportunity that provides an outlet exceed in the local bakery café and fast-casual dining industries. The following report analyzes all aspects of entering into this market, including internal, customer, competitor, environmental, and overall market analyses. Followed by these evaluations, a marketing strategy and recommendations are provided as well. Although Atlanta Bread Company generated a rapid expansion in its early years of operation, a drastic downfall in 2004 led to the closure of 44 stores. However, the company has since been able to rebound from this trend, ultimately using the downtime as a means to improve within the competitive market. As the franchise is becoming more popular again, its products and services are constantly improving, creating a product differentiation among competitors, which serves as a substantial competitive advantage in the Rhode Island market. The company culture implies a warm and global environment, incorporating a soothing and comfortable setting with a menu filled with global flavors. 2

3 Table of Contents Executive Summary... 2 Atlanta Bready Company Background... 4 Franchise Information:... 5 Location in Rhode Island:... 7 Objectives For the First Year:... 8 Internal Analysis:... 8 Employee Capability and Performance:... 8 Appetite for Risk: Company Culture: SWOT Analysis (EXHIBIT 5): Financial Performance: Customer Analysis: Segmentation: Customer Motivations: Unmet Needs: Competitor Analysis: Panera Bread: Bagelz: Shaw s: Burger Shack: The URI Dining Halls Market Analysis: Trends and Developments: Marketing Risks: Profitability: Environmental Analysis: Marketing Strategy: Product Strategy: Pricing Strategy: Distribution Strategy: Promotion Strategy: Recommendations: Marketing Budget: Schedule of Implementation: Performance Metrics Works Cited

4 Atlanta Bready Company Background Atlanta Bread was founded 1993 by two St. Louis natives, brothers Bob and Rick Auffenburg, in Sandy Springs, Georgia. 1 However, in 1994 the Couvaras brothers bought the Atlanta Bread concept and immediately set out to turn the company into a vast growing chain. To achieve expansion, the brothers began franchising the concept in This same year, Atlanta Bread signed its first franchisee, which then proceeded to create a chain of Atlanta Bread bakery-café restaurants. The expansion that the Couvaras brothers strived for occurred at a rapid pace in the Atlanta area. By the end of 1998, the company was a 47-unit chain with stores along the east coast up to New York and out west to Texas. By the end of 1999 there were close to 100 restaurants and 70 franchisees. The restaurant then began to experiment with menu changes, including the addition of brick oven pizzas and pasta dishes, ultimately leading to 164 shops in 25 states by However, the company s stream of success took a turn in Rather than expanding, stores began closing, due partly to poor locations and problems with franchisees, as well as legal issues involving the company s senior management. The struggling economy in 2008 and 2009 also worsened the decline. As a result, there have been forty-four store closures since 2008, leaving the company with 74 units in 20 states. 3 Despite the shrinkage, Atlanta Bread Co. (ABC) has rebounded. Even though there were a lot of closures, they were paid off with rising sales at the remaining stores that were remodeled. The company realized that they needed a larger core of corporate stores, so they now own 1 News Atlanta Bread Company Website. Retrieved from Atlanta Bread Company International, Inc. Funding Universe Kaufman, Miller & Forman, P.C. Business and Commercial Law. Georgia Bread Franchise Retreats to "Rise" Above the Competition. Atlanta: Kaufman, Miller & Forman, P.C.,

5 thirteen and they also expect to open up to nine new company and franchisee-owned stores in the next year. Fortunately, sales have been up these past few years, where 2011 is said to be one of their most profitable years thus far. 4 The restaurant maintains a hybrid breakfast, lunch, and dinner concept, featuring wood floors, open fireplaces, and an all around soothing atmosphere. Franchise Information: EXHIBIT 1: Financial Information 5 Minimum Cash Investment $400,000 Total Investment/Capital Requirements $629,700-$831,300 Franchise Fee $40,000 Average and On-going Royalty Fee Advertising Fee Minimum Net Worth Required 5% of Gross Sales 2% of Gross Sales $1MM Liquid Cash Available $400,000 EXHIBIT 2: Other Requirements 6 Space Needed 4,000-4,500 sq. feet Employees Needed Grantham, Russel. "Atlanta Bread Company Franchisees Among Worst-Performing SBA Borrowers." Atlanta Journal-Constitution [Atlanta] 24 Oct Atlanta Bread Company: Franchisor Background. World Franchising Atlanta Bread Company: Franchisor Background. World Franchising

6 Term of Franchise Agreement Preferred Sites 10 years, renewable Free-standing building or Storefront EXHIBIT 3: Services Offered by Franchisor 7 Real Estate Construction Training Operations Marketing The corporate Real Estate Department helps during the site selection process. They are also available to assist in the negotiation process with the landlord and recommend seasoned real estate counsel that have a proven track record, including experience with the franchise. The Construction Department provides a list of approved architects, contractors, manufacturers, and vendors during the building of the new store. They are also available throughout design and construction to answer any questions and advise accordingly. Atlanta Bread U has a comprehensive, handson training curriculum with extensive initial training sessions followed by continuing educational programs. Typically 10 days at headquarters, and 5 weeks on site. 8 The Operations Department will assist with opening the Bakery Café according to the ABC System specifications. There is hands-on support, regular evaluations, and ongoing consultations. The Marketing Department helps grow and sustain the business by advising franchisee s on their marketing strategy, planning, and execution. They also offer an array of salesbuilding materials for product promotion and program support. Advertising, public relations, 7 Franchise Opportunities. Atlanta Bread Company Website. Retrieved from 8 Atlanta Bread Company Int l, Inc. Retrieved from 6

7 creative development and point-of sale materials are available through the marketing team as well. There are brand managers and filed managers assigned to each store. Products Does not provide co-op, national, regional, or local advertising. Most products are prepared by ABC s affiliate, and then delivered to the store ready to be prepped and baked. Through a national purchasing plan, ABC can buy inventory in bulk and monitor excess, providing a better value for the franchisee s dollar. Location in Rhode Island: This franchise of ABC will open in the University of Rhode Island (URI) Emporium or close to the URI Campus in Kingston, RI. Although there is a Panera Bread five miles away, an Atlanta Bread Company on or near campus would be very attractive to students for numerous reasons, as explained further in the marketing strategy below. There are currently over 14,500 undergraduate students and just over 5,000 graduate students enrolled at URI. There are 3,117 freshmen, of which 90% live in the residence halls (2,805 students). 9 With that in mind, there is a housing capacity of 5,128 students on campus, with twenty dormitories and two campus-owned apartment complexes. 10 Aside from on campus living, the U.S. Census Bureau states that in 2010 there were 6,974 residents in Kingston, and 8,487 residents in Wakefield-Peacedale Pernicone, Brian. Record Number of Students Apply for Admission to URI. University of Rhode Island. [Kingston] 14 Mar URI Campus Housing College Prowler. Retrieved from 11 Kingston, CDP, Rhode Island. U.S. Census Bureau

8 Objectives For the First Year: To acquire a 20% market share in the South County region by the end of the first year of operations. To position Atlanta Bread Company as a local business, with strong ties to the community. To be perceived as the cleanest, most responsive, and best value quick service restaurant (QSR) in the South County area. To bring in enough sales to break even by the end of year one. To produce high quality food and drinks and provide quick, friendly service. To establish a loyal and stable customer base within the South County area. Internal Analysis: Employee Capability and Performance: One crucial factor to a firm s long-term prospects is the people who implement its strategies. A functional organization should contain employees who are motivated, challenged, and fulfilled. Being in the food service industry, it is important that the employees have the ability to maintain positive employee performance and attitude. Because ABC employees have a high level of interaction with customers, it is crucial that they reflect a positive attitude at all times. Also, ABC prides itself in their quick service and high quality menu items. With that being said, employees need to work efficiently. However, fast service is worthless if the quality of the product is subpar, therefore they need to be mindful as well. Overall, employees must be motivated to provide the customer with a great purchasing experience. 8

9 EXHIBIT 4: Individual Responsibilities: 12 Manager/ Shift Manager Catering Manager Pizza/Pasta Chef Line Workers Bakery Worker Cashier Arranges employee schedules. Monitors employees. Customer Service. Collects annual inventory. Opens/closes the store. Counts days sales. Works in the areas that need assistance during shifts. Work with customers arranging the event through meetings. Arranges the order and works with the staff to include the right amounts of food. Hourly associate. Opens the store and helps prepare breakfast food (omelets and potatoes). Hand makes pizzas and pasta dishes. Hourly associate. Opens the store and prepares food in the morning. Make either sandwiches or salads. Serve food directly to the customers. Hourly associate. Opens the store-makes coffee and prepares breakfast items. Makes warm drinks, frozen drinks, and smoothies. Works with cashiers. Customer Service. Helps prepare catering and large bakery orders. Takes inventory at the end of the day and prepare goods to be donated. Hourly associate. Takes orders from customers. Helps the Bakery. Makes drinks. Customer Service. 12 Interview with Jeanne Temple, manager at Atlanta Bread Company in Lawton, Ok. 9

10 Busboy Baker Hourly associate. Cleans the eating area, as well as all of the equipment used by the other staff. Works over night to prepare early morning bakery goods and breads. Appetite for Risk: Buying a franchise is risky regardless of the company or industry. As an ABC franchisee, there are numerous things to keep in mind. The most important risk to regards the downfall that the company faced after As mentioned before, many stores began to close due to poor locations. Choosing the right location involves a lot of risk because it is based on a prediction of how customers will respond. These closings were also a response to legal issues regarding the Couvaras brothers and franchisees. The first legal conflict occurred when the Couvaras brothers were charged with criminal charges of securities fraud in their native South Africa. After pleading guilty, the brothers were forced to pay a fine of $310,000. Not long after, Atlanta Bread was hit with a $5.5 million settlement as result of a lawsuit with a former Atlanta franchisee. Although the company has gotten back on it s feet, there is still the risk of another downfall. Company Culture: The company s culture is very warm, modern, and flavorful. The restaurants express this through wood flooring, open fire places, soothing music and earth tone colors. This inviting environment attracts a casual clientele looking for a quick, relaxing meal. The company also incorporates a cultural feel in everything from their menu items to their kids menus to the bread man logo. 13 This logo consists of an abstract, asymmetrical figure carrying a round loaf of bread. The bread man supposedly Atlanta Bread Company Identity. One Page Magazine. 4 Mar Pg

11 represents the heart and soul of Atlanta Bread part global traveler, part old school baker and part next door neighbor. 14 The company has been going through an extensive rebranding campaign, shifting its focus to this global mantra. With that, a new line of products is soon to be released. Such items include baked goods, a chicken salad made with peppadews, a sweet/spicy pepper from South Africa; and a turkey sandwich with French brie and lingonberries, which come from Scandinavia. It has also rebranded it s catering operation, which it now calls Pronti. 15 Atlanta Bread also states that serving the community plays a significant role in fostering their personality and culture. 16 The company supports various arts organizations and philanthropic groups like the Dekalb Medical Center Foundation, with the hope of making a positive impact on other people. At the end of each business day, each location also offers all unsold baked products to local charities. SWOT Analysis (EXHIBIT 5): STRENGTHS Diverse, healthy, and flavorful menu items. Ranked in Zagat Fast Food Survey as Top 5 large chains Healthy Options and Facilities Categories. Parents magazine rates as one of the Top 10 Fast-Casual Restaurants for Families. Health magazine rates it as one of the Top 10 Healthiest Fast Food Restaurants. 17 Loyal customer base Fast service and high quality products OPPORTUNITIES Offers pizza, pasta dishes, calzones, and omelets different from competitors WEAKNESSES Downfall from 2004-closing 44 stores. Rely on franchisees as key to expansion. Only located in 20 states Decentralized Distribution Little corporate store presence THREATS Competition: fast food and sit down restaurants, eating at home (76% of meals 14 Hembree, Ryan. Meet the Bread Man from Down Under. Underconsideration: Brand New. 26 June, Stemle, Cary. Bakery Cafés Lead Segment Growth. Fast Casual. 24 Jan News Atlanta Bread Company Website. Retrieved from Atlanta Bread Tops in Healthy Options, Facilities. QSR Magazine. 3 Sept

12 Growing number of stores nationwide. Popular lunch crowd can be used to generate more breakfast and dinner sales. are eaten at home), and other fast casual restaurants Legal conflicts in senior management from the past. Financial Performance: In the past year, sales were only $122 million. 18 However, this measure is easily affected by short-term actions, which in this case is the recovery of the recent downfall. In reality, the company has been increasing in sales over the past few years. Revenues for the company were about $256 million in Customer Analysis: The customer analysis is used to identify who the customers are, why the customers choose to buy from ABC, and why customers leave the company. The consumer trend of bakery cafés has increased since Today, 71% of consumers have visited a bakery café, and of that, 72% visit at least once a month. The patronage for the bakery café industry is in the middle between full-service and fast food restaurants. 19 Segmentation: Segmentation is often the key to developing a sustainable competitive advantage, and refers to the identification of customer groups that respond differently from other groups to competitive offerings. The biggest customers are those looking for a fast, high quality meal. The most profitable consumers are typically those that come during the lunch rush. In this case, this would be students going up to the Emporium between classes or instead of the dining halls. This 18 Grantham, Russel. "Atlanta Bread Company Franchisees Among Worst-Performing SBA Borrowers." Atlanta Journal-Constitution [Atlanta] 24 Oct Noone, Patrick. The Bakery Cafe Consumer Trend Report. Chicago: Technomic,

13 group also includes students that are looking for a warm and inviting environment to get work done throughout the day as well. Aside from students, professors would be profitable customers as well. As a relatively older group, they tend to expect higher quality food. They are often just as pressed for time too, making the fast paced service ideal for meals between classes and office hours. The most attractive potential customers would those coming for breakfast. Although there are other breakfast places in the Emporium, ABC provides an array of breakfast options other than simply coffee and a bagel. These consumers have numerous coffees, espresso drinks, and teas to choose from, as well as pastries, muffins, bagels, breakfast sandwiches, and omelets. EXHIBIT 6: CUSTOMER CHARACTERISTICS Geographic Type of Organization Lifestyle Sex Age Occupation The URI community and surrounding area A warm and inviting restaurant with fast service and high quality products Maintaining a good level of quality food, while trying to keep spending down. Both male and female Typically 18 and older. (College students, local residents, and professors) Students, professors, campus employees, local business owners and workers. PRODUCT-RELATED APPROACHES: User Type Usage Benefits Sought Competitor Consumers seeking a good quality meal in a short amount of time. Occasional patrons, typically weekly or monthly. Customers may be daily as well. High quality food at a fast pace and reasonable price Consumers that enjoy products from competitors such as Panera are apt to come to ABC 13

14 Brand Loyalty Those committed to ABC restaurants Customer Motivations: This section pertains to the aspects of the restaurant that consumers value the most. The Technomic Bakery Café Consumer Trend Report conducted a study with 1,500 consumers regarding how important various characteristics are when determining which bakery café to visit. The results state that 89% of these consumers deem the quality of the food as the most important aspect. The next prevalent factor is the overall value, followed by the price. The last two factors are menu variety and then the use of premium ingredients. Overall, high-quality food is key at bakery cafes. Significantly more consumers place high importance on the quality of food than overall value and price when deciding which bakery café to visit. On the other hand, quality speaks to taste and value is something consumers expect from bakery cafes. Atlanta Bread Company provides all of these aspects, but at a reasonable price. 20 Once again, the customer s objective is to obtain a high-quality meal or product at a good price and in little time. They are also looking for an inviting environment to enjoy them in, should they wish to dine in. They are also looking for a comfortable setting to do work, meet with friends or colleagues, or things of that sort. The priorities of each segment are relatively similar, however there are some differences that can be recognized. For instance, students are more focused on the price and the environment, whereas professors, residents, and business professionals are keener towards the quality of the products and the speed of the service. 20 Noone, Patrick. The Bakery Cafe Consumer Trend Report. Chicago: Technomic,

15 Unmet Needs: Unmet needs are those that are not being met by the existing product offerings. These needs are strategically important because they represent opportunities for ABC to break into the market and eventually increase its market share. They can also represent threats to established competitors in order to disrupt their current position. Unmet needs pertaining to ABC are relatively noticeable and typically occur when a customer is not given what they are promised. In other words, receiving an incorrect order, having a long wait time, or sitting in an unmaintained dining room are examples of unmet needs of quality and service. Competitor Analysis: There are numerous competitors for the ABC franchise, including both direct and indirect. It is important to remember that Atlanta Bread is essentially a hybrid between fast-food and full-service restaurants. With that in mind, major competitors consist of the Panera Bread (direct) in Wakefield, Shaws in Wakefield, and the numerous restaurants in the Emporium, primarily Bagelz, Burger Shack and the URI Dining Halls (Butterfield and Hope Commons). Panera Bread: Panera Bread is certainly ABC s biggest competitor because it provides the same services and attracts a similar market. According to the Bakery Café Consumer Trend Report, Panera 15

16 Bread is the clear leader in fast-casual dining segment, and has further strengthened its position in the bakery cafe arena over the past few years. About 69% visit and purchase food from the chain at least occasionally, and among Panera's visitors, 69 percent go at least monthly. 21 STRENGTHS Strong and loyal customer base both in Wakefield and throughout New England Provides healthy alternatives Variety of menu options Located in the Wakefield Mall, making it convenient for customers in the area More convenient for students and residents that live towards Narragansett Students can use their RAM Account for purchasing goods. WEAKNESSES Further from campus, making it harder and inconvenient for people on campus Limited presence in the south and west, therefore the brand awareness for students from those locations isn t as powerful. Bagelz: Bagelz is located in the Emporium and is a small café that is locally known for their coffee and bagels. The store also sells sandwiches served on fresh bagels and an array of bakery items. STRENGTHS Established reputation locally and around campus High quality bagels (freshly made in-store) Strong breakfast crowd Conveniently in the Emporium Also sells art pieces WEAKNESSES Limited sitting space and close environment Only one or two employees at a time, creating long wait times during rushes Limited sandwich options; can only be served on bagels. 21 Noone, Patrick. The Bakery Cafe Consumer Trend Report. Chicago: Technomic,

17 Shaw s: Although Shaw s is an indirect competitor for ABC, the competition is still highly relevant. For instance, 76% of meals are consumed at home 22, and the food for these meals is provided by grocery stores such as Shaw s. With that in mind, this store sells more than food for the consumer to prepare, but already prepared products as well. STRENGTHS Wide portfolio of store brands-low prices Large variety of food options Consumers always need food, therefore they will always visit a grocery store. Offers other businesses such as in-store pharmacy, bakery, florist, and bank. WEAKNESSES There are numerous businesses that operate in a similar manner Consumers have to prepare the meals themselves Already prepared food is lower quality Burger Shack: Burger Shack is a relatively new restaurant in the URI Emporium and an indirect competitor for the Atlanta Bread franchise. The store prides itself on its great food, friendly service, and an atmosphere unmatched by others. 23 Its menu offers a variety of items including burgers and chicken sandwiches, wraps, and salads. STRENGTHS Established reputation across the URI campus. Fresh, never frozen beef. Popular for longer lunch periods and dinner. Delivers to on-campus housing. Highest rated restaurant in the Emporium. 24 WEAKNESSES Limited array of healthy food options. Located in the back corner of the Emporium, making it hard for consumers to see The Burger Shack Website. Retrieved from 24 URI Emporium Website. Retrieved from 17

18 The URI Dining Halls Students at URI have the opportunity to purchase meal plans that give them access to the campus s dining halls-butterfield and Hope Commons. Both dining halls offer customized sandwiches, hot entrée items, and a salad bar and various soups and dessert options. Aside from that, Hope also offers a pasta and stir-fry station, as well as burgers and hotdogs. In turn, Butterfield has an omelet waffle stations. STRENGTHS On campus residents and commuters can purchase the meal plan. On-campus residents have unlimited uses throughout the day. Conveniently located. Wide variety of food options. WEAKNESSES Cannot take food out of the dining hall. Hours aren t always convenient (ex. Hope: 11:30-3:30; 4:30-7:30) Dining hall food has a reputation for upsetting consumer s stomachs. Served buffet style, which can produce health concerns. Lower quality food. Market Analysis: The primary function of this section is to determine the attractiveness of the market to current and potential participants. The market s attractiveness, or its profit potential as measured by the long-term return on investment achieved by its participants, provides important input into the product-market investment decision. 25 Trends and Developments: Over the past several years, the bakery café segment has become a leader in the fastcasual dining industry s growth. As mentioned before, marketing research firm Technomic 25 Aaker, David A. Strategic Marketing Management. 9th ed. Hoboken, NJ: John Wiley & Sons, Pg

19 released the 2011 Bakery-Café Consumer Trend Report, examining the purchasing behavior, attitudes, and preferences of 1,500 consumers. The bakery café industry accounts for about $5 billion in annual sales and more than 3,600 units nationwide. It has also been able to successfully navigate the growing fast-casual segment to overtake the overall restaurant industry sales and unit growth for the past three years. Over these past three years, total bakery café units increased 4.2%, and bakery café sales increased 12%. 26 Technomic also finds consumers fueling growth in this fast-casual submarket by visiting bakery cafes in larger numbers and by becoming frequent customers once they do visit. Data from this report also indicates that consumers are looking for more fast-casual breakfast options. Roughly 34% of consumers strongly agree that they would visit bakery cafes more often for breakfast if their menus offered a wider variety of breakfast items. Also, 75% of these consumers report that the quality of service is very important when deciding which bakery café to visit, and about 66% consider the speed of service to be very important. Another trend states that wraps and sandwiches featuring artisanal breads are a primary focus of bakery café s menu positioning. The most prevalent bread types for lunch and dinner sandwiches show tortillas as the mostfrequently mentioned sandwich bread, at 11.7%. Focaccia ranks second at 9.1%, and ciabatta, sourdough, and pumpernickel have all increased significantly on menus since Marketing Risks: Many risks will arise when entering the market, including competitive risk and market changes. The most prominent risk for the ABC franchise is competitive overcrowding. This occurs when too many competitors are attracted by a growth situation and enter with unrealistic 26 "Technomic: Strong Growth Continues for Bakery Cafes." Fast Casual. 10 Oct. 2011: Pg Noone, Patrick. The Bakery Cafe Consumer Trend Report. Chicago: Technomic,

20 market share expectations. In other words, the number and commitment of competitors may be greater than the market can support. For instance, because the surrounding area is relatively small and Panera has such high brand awareness, there is certainly a risk that consumers will remain loyal to that competitor. Another risk is the chance of a competitor introducing a low-cost advantage or superior product. As it stands now, all of the competitors offer relatively similar products at essentially the same prices, with sandwiches averaging at about $6.50 and coffee drinks between $2 and $3. Market changes such as new technology are another risk that the franchise may face. As a new store, there may not be enough money to adapt to the system, and corporate limitations may have an effect as well. Another market change involves a failure in the market growth to meet its expectations, forcing ABC to lack in sales. Profitability: When determining the profitability of the industry, it is important to consider Porter s Five Forces. An analysis of these forces is as follows in EXHIBIT 10: Factor Analysis Impact Threat of Substitute Products Bargaining Power of Suppliers Substitute products are easily accessible (eat at home, convenient stores, etc). Economic downturn limits disposable income, making substitute products more appealing. Franchises receive their products from corporate suppliers. Atlanta Bread Company has power over the suppliers because they High Low 20

21 Bargaining Power of Customers Competition among Existing Firms Threat of Potential Entrants have multiple options to source each ingredient they use. Economic downturn s affect on consumer eating behaviors lead to eating a cheaper meal at home. Nationally, there are numerous direct competitors that can have an affect on ABC s brand loyalty. The RI competitors such as Bagelz, which is attractive to local customers because they are smaller, businesses. Differentiation and continuous menu changes in order to appeal to customer preferences. Barriers to entry, such as required capital investment, economies of scale, distribution channels, and product differentiation, are all significant. There is a high investment threshold to enter the market, and the product line is relatively common. High High Low Environmental Analysis: The environmental analysis is typically very broad and involves any trend that can affect the business strategy. Useful aspects of this analysis are technological, government, economic, 21

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