Introduction

Golden Krust Caribbean Bakery & Grill ("Golden Krust"), a privately held corporation, is a manufacturer and distributor of Caribbean food products and franchisor of Caribbean restaurants.

The company’s products can be found in its franchises, supermarkets, hospitals, schools, correctional institutions and food service facilities, sporting facilities, other retail outlets and at special outdoor events throughout the United States.

Golden Krust Caribbean Bakery & Grill is the brainchild of Ephraim and Mavis Hawthorne, founders of Hawthorne & Son’s Bakery in St. Andrew. In 1989, Lowell Hawthorne, President and CEO, along with his wife Lorna, four of his siblings and their spouses, pooled all their resources to open the first Golden Krust retail location on East Gun Hill Road in Bronx, NY.

By 1996 they owned 17 Restaurants throughout New York City. In that same year, Golden Krust became the first Caribbean-owned business in the U.S. to be granted a franchise license.

Today, Golden Krust Caribbean Bakery & Grill operates a chain of over 100 Restaurants in nine states (New York, New Jersey, Connecticut, Pennsylvania, Georgia, Florida, Maryland, North Carolina and Massachusetts), and is the answer to an increasing demand for Caribbean type fast food, for the Caribbean migrant community, as well as persons who enjoy experiencing an island flavor.

Golden Krust provides its customers with authentic, tasty Jamaican patties and a variety of Caribbean cuisine in convenient settings and sizes, outstanding customer service, employees operate in an environment that is rewarding, fun, and aspirational.

Tuesday, April 3, 2012

Porters Five Forces Analysis

Five forces – Restaurant Industry – Golden Krust

1. Threat of New Competition – Medium

• If the industry is profitable, it is more attractive to new entrants and this will decrease profitability. Barriers to entry includes:
• Start up costs – in 2010, the average start up costs for annual sales of $425,000 is $125,000 with no land purchase.
• Consumer Skepticism – Brand loyalty takes time to build and consumers are very wary of new brands.
• Golden Krust is a well-known brand in the Caribbean community and beyond.
• Additionally, there is Franchising where standards are set which each store has to follow. 
• Location – Location is most important to success of this kind of business. If there are many competitors, then, this will impact sales volume. 
• Marketing – Required extensively and needs a budget, strategy and time. As a Franchisor, the marketing strategy is done at corporate and filtered down to the individual stores. 

 2. Substitute Products and Services – Medium to Low

   
     a. Other ethnic restaurants

         i.  For example: Manhattan location has within it’s vicinity Indian, Chinese, Thai, Mexican,
             American, Greek and Others.

        ii.  Prices are comparable: within $7-10 range

 
   b. Propensity to substitute: High in non-Caribbean
         concentrated areas, Manhattan; Low in Caribbean    concentrated area such as Brooklyn, Queens
         and Bronx

3. Bargaining power of Buyers – Low

• Large number of customers with relatively small purchases
• Customers have low switching costs
• Buyers do not need a lot of information about the product – except in specialized market such as New York where calorie count is required for each menu offering
• Customers are highly price sensitive and cut back quickly in times of hardship
• Product has some degree of uniqueness (ethnic) and has accepted branding

4. Bargaining Power of Suppliers – Medium to Low

• Inputs are standard – material, labor, supplies etc
• Can switch easily between suppliers and there are many potential suppliers
• Cost of purchase has significant influence on overall costs
• Labor is cheap and non-unionized

5. Intensity of Competitive Rivalry – Medium to Low

• Main Competitor: Royal Caribbean Bakery, 
•  Other: localized Caribbean eateries
•  Industry growth – moderate
•  There is intermittent overcapacity
•  Fixed costs are relatively high portion of total costs
•  There is a significant brand identities between competitors
•  Competitors are not the same size
•  Product is not complex and does not require understanding on customers part