I. Summary of the case.
When two people from different backgrounds (experience and education) meet and share their ideas about opening a business, a new era of restaurant ownership begins. Dan Gordon and Dean Biersch created a new trend in the restaurant business by combining their experiences with an idea of micro-brewing beer that is served in a restaurant. On one hand, we have the talented first ever (in 30 years) American who completed his Dpl. BR. Ing degree – which is the highest technical degree in brewing engineering from Germany – and on the other hand: a passionate man who wants to do something that he loves, which is food and cooking. Not only does Dean Biersch have passion for his work but he also has a wide range of multicultural learning experiences.
In four years the duo opened three successful locations which are Palo Alto, San Jose and Pasadena. Soon, they became one of the major suppliers of micro-brewing beer in that area, and catered to things such as San Jose Sharks games and the San Francisco airport. [“Write my essay for me?” Get help here.]
Once people are successful their tendencies are to open more businesses and they wonder how they will get more success. These two visionaries want their business to grow nationwide and create a brand name by expanding the whole infrastructure to create 100 restaurants. Now, when they are planning for a massive expansion which requires a lot of managerial experience and of course a lot of money, they are paling and looking for investors who they could work with and at the same time who they can make sure the standard which they created can be continued in new restaurants. So they talked with venture capitalists such as the Fertitta family, as well as banks.
II. Critical Issues – What are the major problems facing the entrepreneur in this case? Be sure to categorize identified problems into one (or more) of these groups:
A. Marketing problems: We know that Gordon and Biersch have no experience of marketing in a large circle. They opened a couple of restaurants and they did not choose any marketing strategy except word-of-mouth marketing. This can be a good strategy in a small area, but when you are going to nationwide, you have to have a certain marketing strategy. When we see any restaurants like Applebees or the Olive Garden, we see various types of TV advertisements. Or they promote their brands in other ways. In the expansion, there is no certain marketing plan. As a result, they have three locations, not the 100 that they want. But there are other problems. [“Write my essay for me?” Get help here.]
B. Management problems: One of the keys to the success of their three restaurants was Mack Tilling, who worked day and night with his passion to make each restaurant successful. If within the massive expansion process they could hire a bunch of MBAs and managers, they might not find the same enthusiasm which they found in Mack Tilling. The new employees might not be efficient; besides, they do not have knowledge of the right Performa of hiring people and how to place them in the right order. They have only managed three restaurants so far, and they have to know that managing three and managing 100 is not the same.
C. Operational problems: Gordon was in charge of brewing and Biersch was in charge of food and the restaurant. When they have three restaurants, Gordon can make sure that the quality of his beer is nearly perfect. Since he is the only person who knows about the brewing engineering, he cannot physically brew on all proposed locations. He needs to train at least 25 people in different regions where the potential restaurants would be located. He needs people who can represent Gordon’s standard. But in this process, they have to build a training facility to train the employees, which is not in their business plan.
D. Financial problems: Another major problem in this expansion is finding a reliable source of money. On one hand, we have Lorenzo Fertitta, who is from a well-known casino business family who has a very lucrative offer of $11.2 million and $42 million post-money valuation, which is coming with a huge amount of managerial experiences from the Fertitta family. But in return they have to give away the controlling interest of the company.
E. Strategic problems: In the restaurant business, the weather and surrounding the environment has a great impact. A seafood restaurant may be doing very good in the west coast but in east coast it might be not work perfectly. So far, Gordon and Biersch had been succeeded in few restaurant and micro brewing bar. They have no particular idea or a survey about the whole United States micro-brewing industry.
F. Other problems: Not only does Lorenzo Fertitta want control over the company, he is also offering Gordon to make microbrewery for all of their casinos by which he will eventually know the secrets of Gordon’s brand of beer and then there will be no problem for him to get more control over the company.
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III. Critical Analytic Tasks/Results – In this section you identify the steps necessary to adequately analyze the critical issues in the case. What research mechanisms must you explore, quantitative methodology needed, who do you need to talk to, etc., and why, in order to understand and make solid recommendations related to the case. Once you describe the work required, you need to explain the results of your research and analysis.
There needs to be an analysis of the competition. There are market segments where other companies are beating the men’s business. This is in areas where the men aren’t catering to the tastes of the locals.
There also needs to be more information about what the bank is willing to offer the men and when a response is expected from the bank.
Interviews need to be conducted in order to find out if there is anyone able to do the type of work that Mick Tilley was doing. Also, is there anyone out there who is skilled enough to brew the beer to the level that Gordon brews it?
Also, is there the managerial know-how to complete the tasks and general running of the business that would be facilitated by adding the Frititta family to the mix? Interviews should also be conducted to discover this.
IV. Recommendations – what should the entrepreneur do to address each problem identified in part II? You MUST support your recommendations with a discussion of the implications and feasibility of each recommendation. Which recommendations, in your opinion, are most important to turning the situation around and why?
A. Marketing problems: The word-of-mouth advertising is some of the strongest there is. This creates loyal customers from the advice of customers who are already loyal. However, this method doesn’t get to as many people as the men would probably like. While a company like Starbucks can get by from word-of-mouth advertising, a company such as Biersch can’t. This is because there is a Starbucks on so many streets. It’s hard to miss a Starbucks. But Biersch doesn’t have the number of locations that Starbucks has. This is why they need an advertising approach. An effective method at restaurant/bars is to create events. They may want to market to local sports teams, with specials on that night. The men don’t have the budget to market on TV, so they could pay for promos in elevators of buildings, for example. The radio is also a cheaper alternative to television advertising.
B. Management problems: Mack Tilling has to work excessively in order to run the three restaurants. This says there are already problems in the management. Before the men can take expansion seriously, they need to be able to get the three restaurants to a point where they are running efficiently. There shouldn’t be a member of the management team who is working day and night. This is unreasonable and there must be an issue with recruitment or money if this is happening. The men have a lot to learn about what it takes for the company’s management to be working effectively before they can expand.
C. Operational problems: Because Gordon is the only one who knows how to brew the beer in the best way possible, he needs to find apprentices that can carry on his recipe in the other restaurants. I recommend that he can begin by training one person. Once he finds the right person, that employee can be transferred to a new location. Gordon won’t be able to brew at all locations, so it is necessary for him to find someone who is willing to relocate. Essentially, he will need a brewer at each location, or someone who can travel and brew at various locations. This would depend on the frequency of brewing that is needed.
D. Financial problems: The process of securing funds from an investment bank proved to be too long of a process, so financing wasn’t secured to expand their five existing restaurants. Because the funding wasn’t secured, the Fertitta family approached the men and offered the money in exchange for a portion of the company. The owners should hold tight and they shouldn’t offer the Fertitta brothers a stake in the company. Gordon and Biersch might not even be ready to expand and if they can secure money from the bank, then they only have to pay that money back with interest. The bank will have no control over the operation of the business, and they won’t be entitled to a percentage of the revenue. [Need an essay writing service? Find help here.]
E. Strategic problems: A strict analysis of the competition needs to be compiled before the men can think about expanding. Due to the competition in some areas, the men need to figure out what type of dining they should cater to. I believe the restaurant should take into consideration to type of foods that can be found in that area. For example, Atlantic salmon could be a menu item in Maine.
F. Other problems: Because the Fertitta family could become familiar with the brewing process and take further control of the company, the men should refrain from going into business with the Fertittas. The microbrewery and restaurant is such a good idea that it should be kept to the men. The beer recipe could be the strategic advantage, and Gordon and Biersch should be careful about who they bring into “The Know.” They need to be patient and wait for that bank loan.
V. Answers to Case Questions
The questions from each case (when supplied) must be answered (in detail) in this section.
1. Identify the key factors responsible for the success of Gordon Biersch to date. What concerns, if any, do you have as the company looks ahead?
The company has been successful so far because they have a niche that people haven’t really tapped into yet. The company has taken advantage of some recent change in legislation that allows them to brew and sell beer on the premises. Because they had enough capital to open up their restaurants and they were knowledgeable in the business, they were able to build a company that is successful.
2. Evaluate Gordon Biersch’s organizational alternatives to realize its growth ambitions. Recommend a course to follow.
The company could advertise more. Gordon needs to find an apprentice so that he has someone who can facilitate the brewing in additional restaurants. There also needs to be an evaluation of the competition, so the business knows where to expand to.
3. Evaluate Gordon Biersch’s efforts to raise outside capital. What would you have done differently?
I would stay patient and not take the offer from the Fertitta family. There is too much risk from the family taking a large share of the company. If too much is given up, Gordon Biersch won’t be able to expand in the way that it wants. The company should wait until they find out about their bank approval.
4. Which offer, if any, should Gordon Biersch accept? Why? How should they proceed?
They haven’t been offered anything worthwhile, at this point. They should wait for an offer from the bank. However, I think it is unlikely that they will receive an offer from the bank that is as large as the offer from the Fertitta family. The growth might be slower if they wait for the bank, but I think they should be patient. There is no need for them to be greedy by opening up so many locations.