Location Analysis Of A Franchise Restaurant

Location Analysis Of A Franchise Restaurant

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Location Analysis of a Franchise Resturaunt

Problem Statement:
Boston Pizza International Inc. is a Canadian owned and operated
restaurant. It has many facilities in Canada and has opened facilities in the
United States and in Southeast Asia. Boston Pizza is penetrating further into
the Canadian market and is opening at a new location on 8th Street in Saskatoon.
The chosen location has been the home of many previous restaurant failures. It
seems odd that any restaurant would want to open in a location which has proven
to be unsuccessful. What characteristics does Boston Pizza have that other
restaurants don't have that may allow this location to be successful? This new
location will be the second Boston Pizza franchise in Saskatoon, complimenting
the facility operating on 50th Street. Will the market areas of these two
restaurants overlap? * * * * *
The early beginnings of this restaurant occurred in Edmonton,
Alberta. In 1963 the first Boston Pizza and Spaghetti House opened. The name
of the restaurant is seemingly odd because Boston is the name of a city in the
United States, and has nothing to do with a pizza restaurant located in Edmonton.
Ron Coyle, the original owner, named the restaurant 'Boston' because the Boston
Bruins NHL hockey team was the favorite of the Edmonton area in the 1960's and
he wanted his business to use sports as a promotion. Another reason, which may
have been more of a coincidence, was that his accountant's surname was Boston
("only way", 37).
Boston Pizza and Spaghetti House became a popular restaurant and in 1968
it began to operate as a franchise. In mid-1968, Jim Treliving, a former drum
major for the RCMP, and his friend Don Spence bought the franchising rights for
British Columbia with the exception of Vancouver. They opened their first unit
in Penticton, British Columbia, and in the first year of operation the pizza
restaurant grossed $52,000 and the nightclub which was co-located with the
restaurant grossed $80,000 (Cameron, 16).
Meanwhile, franchise units opened in Edmonton, Winnipeg and Vancouver.
As the pizza chain grew, Treliving and George Melville (who had become involved
with Treliving's restaurants as a financial planner) became involved in real
estate ventures in Hawaii and the Okanagon Valley and also in oil investments in
British Columbia (Cameron, 16). In 1983, these two men purchased Boston Pizza
Spaghetti House from the original owner Ron Coyle for $3 million. This money
was raised from private lenders ("recipe is simple", 16). During that same year,
the headquarters of Boston Pizza was moved from Edmonton, Alberta to Richmond,
British Columbia where it is found today.

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In the past decade, #1601 8th Street East has not been a very successful
location from which to operate a restaurant. Since 1985, four different
restaurants have occupied the facility. This location originally housed
Ponderosa Steakhouse from 1975 until 1984. The restaurants which occupied the
facility over the past decade were: Geno's Pizza (1985-87), East Side Sids (mid-
1987-88), Taster's Whole Earth1(1989-1990), and Just Buffets (1991). Since 1992,
the facility has been vacant.
In 1994, Boston Pizza became interested in this location. Although the
location had been unsuccessful in the past, a new Boston Pizza facility will
more likely operate successfully. The previous building, torn down only a few
months ago, was a dull brown color which didn't attract attention. The new
Boston Pizza building will use the kitchen of the old facility, but the service
area is being constructed similar to other Boston Pizza restaurants. It is
shaped and colored in a way that will grab the attention of vehicular traffic.
The building has an angular bright red roof and will have a bright red and blue
sign when construction is complete.
When the 8th street location opens its door, a market will already exist.
People working at the nearby businesses Bank of Montreal and Jubilee Ford, may
decide to eat lunch at Boston Pizza. In the evening, after work these same
people may stay and relax at BP's lounge. Families looking for a convienient
place to eat quality food may decide to eat here.
One problem remains, and it is a problem that Boston Pizza can not change.
The center barrier on 8th Street makes Boston Pizza accessible to vehicles
traveling west only. Vehicles traveling east would find it difficult to access
Boston Pizza. Therefore many potential customers will pass by and find another
place to eat.
The location of this new Boston Pizza will not affect or be affected by
the operation of the 50th street location which has been in operation since 1987.
The 50th street facility has not been a very successful operation since its
opening. Its location has, however, provided transient customers on weekdays.
Many employees who work at nearby industrial facilities eat lunch here.
The 50th Street Boston Pizza is located relatively close to the Saskatoon
Airport and Saskatchewan Place. The Airport and Saskatchewan Place have also
provided some of Boston Pizza's customers. However, although it is close to
the airport, Boston Pizza is not close to any hotels or motels and so only a
limited number of travelers come to eat. After large events at Saskatchewan
Place, Boston Pizza is a popular restaurant. After Billy Graham spoke at
Saskatchewan Place in late October, the restaurant was packed. Usually, this
location has only a few late evening visitors. It has not been very successful
at attracting families because of its inconvienient location. An alternative
location for a Boston Pizza in the north end of the city would be on Idywyld
Drive. Traffic flows to and from the Airport and Saskatchewan Place are much
larger on this street. This street is also much more accessible to families.
Business success can be attributed to the use of a franchising system.
When Treliving and Melville bought Boston Pizza in 1983, "the two men owned 16
of the 36 existing outlets, but sold them all to new franchisees" ("recipe is
simple", 16). Treliving didn't want to compete with franchisees that were
recruited. Instead Treliving and Mwlville wanted to look after the other
people's stores so that there would be no favouritism. In order to concentrate
on franchising, Treliving and Melville created a "management consulting firm"
("recipe is simple", 16).
According to Treliving, "The system [franchising] provides franchisees
with a brand name, a proven business system and ongoing support" ("30 years",
81). A franchisee takes a smaller amount of risk than starting his or her own
business because he or she buys into a system for which the unexpected has been
planned. The problems which a franchisee may experience have already been
encountered by the franchisers over the years. Thus, the franchiser has
learned how to overcome the obstacles which may come about and the franchiser
can provide answers to all the important questions: "What type of location is
successful? What size trading area will ensure a large enough customer base?
What are acceptable labor costs? What lease cost is acceptable? How much
parking does a location require? What upcoming demographic changes will affect
the business?" ("30 years", 81)
Boston Pizza uses the business format franchise:

[The] business format franchise involves the use of not merely goods and
services identified by a trade mark or invention, but a package or 'blueprint'
containing all the elements necessary to establish the business and run it
profitably on a predetermined basis. The package or blueprint is carefully
prepared from the company's wholly-owned and/or pilot operations, thereby
minimizing the risks involved in setting up a conventional small business
(Felstead, 48).

Boston Pizza provides plans for a building, helps the franchisee to
choose a location, and provides training for franchisees before they begin to
operate their new franchise. "There are two months training and two meetings
each year attended by all franchisees..." ("recipe is simple", 16). In order to
provide training, "one company-owned unit in Richmond serves as a classroom and
training headquarters" ("only way", 36-7).
Franchising has proven itself a strong system that works. In 1989 16,500
franchised establishments were operational in Canada, and that number grew in
1992 to 20,200 ("30 years", 81) . "Franchising businesses account for 42 cents
out of every dollar spent on retail goods and services today, and that number is
expected to grow to 50 cents by the year 2000. Quite simply, as a business
system, franchising works" ("30 years", 79).
A person with no previous experience who opens a new business runs a
considerable risk. This risk can be seen by considering the following
statistics: Half of all non-franchise restaurants close within the first year
and the United States Department of Commerce has stated that 90 percent of
franchise businesses are still in operation after 10 years, compared with 18
percent of independent businesses ("30 years", 81).
Treliving also compares his franchise method, which is exclusively
franchising, with the methods used by other successful restaurants. "Restaurant
chains like McDonald's, Burger King and Pizza Hut have a mix of franchisees and
corporate managers" ("30 years", 81-2) . Boston Pizza uses the franchising
system exclusively and believes that franchisee entrepreneurs are more motivated
than managers, because they have invested their own money and therefore are more
likely to succeed.
Treliving has attributed his success to the use of a franchising system,
gourmet pizza, and diverse menu (Cameron, 16). He believes that "Ma and Pa
pizza operations [which specialize in delivery out of a small facility] are
going the way of the dinosaur" because "they can't keep up with our high-tech
society and emphasis on gourmet pizza" (Cameron, 16). In the past, a lower
quality of delivered pizza was accepted because the person responsible for
making the pizza was far away, and the delivery person was gone by the time you
began to eat so there was no one to complain to. However, in a restaurant where
people sit down and have a meal, they complain to the server if the food is sub-
standard. These complaints are inevitable because nothing is perfect. Customer
complaints can be used as opportunities to learn about customers problems.
"Research has shown that one of the best and most loyal customers is the one who
had a complaint that was satisfactorily resolved" (Lewis & Chambers, 72).
Because Boston Pizza also delivers pizza, Ma and Pa are either forced to
generate a higher quality product or go out of business.
Advertising a diverse menu has been one way Boston Pizza has drawn
customers. Boston Pizza has always prided themselves on using only fresh
ingredients when making their gourmet pizza. In 1986 Boston Pizza went one step
further and introduced salad into their menu. This addition was found to
attract female customers (Cameron, 16). Since then Boston Pizza has become
dedicated to offering and highlighting a diverse menu which can satisfy a
broader range of consumers (Mackin "more than a feeling", 24). The restaurant
"offers exotic pizza flavors and a broad menu of pastas, salads and grill fare"
("Boston Pizza says, 3). They have reflected this diversity in their latest
broadcast campaign which was released in late 1994 across western Canada. A new
slogan ,"'Come and get it all'...conveys the message that Boston Pizza serves
more than pizza..."(Boston Pizza says, 3).
The newly released broadcast campaign also featured television star John
Ratzenberger, who is known as Cliff the mailman from the Cheers television
series. The Boston city location of the Cheers bar was one connection which
helped in selecting this character, but there was also another factor. Boston
Pizza serves 3 distinguishable markets: business lunch, a family enjoying a
dinner together, and a late night post-cinema, or post-ball game crowd ("only
way to go", 37). "Ratzenberger's klutzy mailman evinced a certain 'humor and
humanity' the restaurant would like to project... [and] the character also
appeals to viewers across generational lines" (McCullough, 3) making him a fine
choice to speak to Boston Pizza's diverse market.
In 1986, Boston Pizza were fortunate to have three outlets on the site of
Expo 86. Treliving and Melville both remark that this location is responsible
for making Boston Pizza "known internationally" ("pans out", D7). The publicity
that was attained through Expo 86 spawned interest from businessmen in other
countries which would later result in growth. The restaurant took its first
steps to expand into the international market when the first Asian outlet was
opened in Tai-chung, Taiwan in the year 1988.
Further development of a stronger network of Boston Pizza restaurants
throughout the Pacific Rim is of primary interest. Treliving has spoken for
Boston Pizza: "Our plan is to develop the Asian market through joint ventures
with Asian partners" ("30 years", 79). By developing through joint ventures
with Asian partners, Boston Pizza can "tap into the local culture"("30 years",
79) as it moves into the foreign markets. Boston Pizza can then become
familiar with the differences between the foreign market and markets in Canada
and the United States. The new markets can be treated accordingly.
In August 1992, Boston Pizza opened the "first pizza restaurant in
Guangzhou, China." (Mishima, D2) . The agreement was a joint venture between
Boston Pizza International, the Chinese Government and a local franchise
operator, T.K. Wong. The three parties made an arrangement to share the profits
("Boston Pizza.", B17). The Chinese like the style of the restaurant because it
possesses a "North American concept" (Mishima, D2), but the menu had to be
changed in order to suit the culture better: no alcohol would be served, and a
smaller pizza size, corn soup, and a salad bar would be available.
The restaurant franchise has proven that they can overcome cultural
differences by opening many successful facilities in Southeast Asia. The
franchising system allows them to do the same at a less significant level within
more familiar markets: "We accept that there are regional differences that we
have to adapt to. The franchising system is the only way to go because the
owner lends his or her personal touch depending on the location." ("only way to
go", 37). If Boston Pizza located on 8th Street in Saskatoon is to succeed it
will probably be due to the fact that it is a franchise operation which is
nationally advertised and is known for its quality food.


"Boston Pizza exclusive." Canadian Hotel & Restaurant v.64(1) January 1986: 10.

"Boston Pizza opens new headquarters." Vancouver Sun. January 22, 1992: B5.

"Boston Pizza splits with agency." Marketing v.98(42) October 18, 1993: 1.

"Confucius say, 'Mama mia!'" Marketing v.93(32) August 22, 1988: 7.

Felstead, Alan. The Corporate Paradox: Power and control in the business
franchise. London: Routledge, 1993.

Hogben David. "Expo 86 keeps pizza order coming." Vancouver Sun. July 5, 1991:

Jones, Ken & Simmons, Jim. Location, Location, Location: analyzing the retail
environment. 2nd Edition.

Mackin, Bob, Jr.. "Boston Pizza expands to untapped Chinese market: Guangzhou
Restaurant opens this summer." Marketing v.97(6) February 10, 1992: D2.

Mackin, Bob, Jr.. "Boston Pizza moves $1m AOR business to Glennie Stamnes."
Marketing v.96(45) November 11, 1991: 4.

Mendelsohn, Matin. The Guide to Franchising. 3rd Edition. Toronto: Pergamon
Press, 1982.

"New account for Grey." Marketing v.92(7) February 16, 1987: 16.
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