Five Guys:

Market Type:

Increase in globalization have brought companies an opportunity to establish their businesses

abroad by crossing national borders. Such series of operations are classified into global,
multi-domestic, international and transnational [1]. Five Guys is a transnational market,
which has central control structure and power is more on coordinating the activities of local
market in achieving integrity and synergies among operating units. This kind of market is a
combination of global and multi-domestic markets. Transnational market has standardized
products & services that can be easily tailored to local markets [2]. Five guys have a
standardized menu, but the toppings are introduced based on local interests. They are large
and enters into market with a strategy to outperform local vendors effectively. Five Guys is
set to give its  franchise strategy a massive push by committing to almost quadrupling
its global footprint from eight countries to 28 over the next five years. The figure below
explains four categories of market with respect to local responsiveness and global integration.
Transnational market has high local responsiveness and high global integrity. The firm in this
type of market targets to aim local consumers response and benifits from global integration
too.[1]

1) Michael Porters Five forces

From the idea of how macro-environment influences Food industry, the Michael porters
five forces emphasis more on how industry is structured. This analysis provides an insight
on profitability and industry attractiveness of Food industry in China. Our analysis will be
 around the most influential forces of the Food industry, such as threats to entry,
Competition, bargaining power of supplier, bargaining power of buyers, entry and exit
barriers.

1.1 Threat of substitutes

The competition for Food industry is high. Cost alone will not be an only strategy to succeed
in this market, as there are plenty of substitutes. Major threat from its competitors like In-N-
Out, where burger at Five Guys starts at $7 while you can grab one at In-N-Out for $2.10 [3].
The preference for fresh and healthy food, choice of home cooking can play as substitutes. In
addition, convenience and availability are major drivers for consumers fast food preferences.
One other advantage for KFC over other giant food chains is, customization of menu
according to the Chinese food habits and tastes. There is threat of imitation from local
businesses as there is no strict regulations from government. Threat of substitutes is relatively
high.

1.2 Competitive rivalry

Fast food business is the most competitive business in the industry. Along with McDonald’s,
KFC, IN N OUT there are local fast food chains which are trying to fight with foreign
markets. While growing health concerns among people has forced to bring a change in menu
among competitor food chains. Shake Shacks undeniable success in its short history can be
attributed to the quality of food and their strive to differentiate themselves from other burger
destinations. Although Shake Shack is only 13 years old, they have already rivaled burger
companies such as Five Guys and In N Out. Competitive rivalry is high in China for fast
food. In China especially the number of outlets of Mc Donald and KFC are more, and the
figure explains the same. It shows the number of Mc Donald and KFC branches existing in
different cities of China (a) 1st-tier cities; (b) the2nd-tier cities; (c) the 3rd-tier cities; (d) the
4th-tier cities; and (e) the 5th-tier cities [4]. This explains, to start a food chain business in
any urban city of china, the competition exists.
 1.3 Threat of new entrants

The threat of new entrants in China has many contributors. The entry for new businesses in
china is favorable with the tax regulations. This is fact that China attracts international
players due to cheap labor, liberal government policies and potential in the country. There is
also pressure from new arrivals on low pricing strategy, new value propositions and
marketing tactics. However fast food industry requires heavy investment, marketing, and
product development before new entrant arrives sustains in China food market. Customers
choose to eat in giant food chains repeatedly due to taste, quality, service and minimal cost.
Threat of new entrants is medium for food industry in China. From the below figures, it is
sure that threat of new entrants grows, as the imports in the F&B industry has grown rapidly
from 2014-2019. [5]
 1.4 Bargaining power of buyers

Bargaining power of buyers in China is significant. There are local food chains and
restaurants and cafes in competition with Five Guys and Mc Donald, shows that the
market is saturated. Given with huge options in fast foods for the customer, the
competition in the market is high and effort to stand distinct is necessary. Investment in
branding, attracting new customers, customization of menu based on demographics
increases price war and competition. However, the demand from buyers grows rapidly
with every new day with respect to price, food, taste, offers etc. Bargaining power of buys
at the moment is high.

1.5 Bargaining power of suppliers

The giant food chains are maintaining reliable suppliers offering food of great quality
with low margin and high volume. Due to frequent and bulk orders, there are multiple
suppliers ready to provide raw material for Five Guys. The power of suppliers is low
unless they got special products to offer.

2) SWOT (strength, weakness, opportunities, threats):

With the analysis on external environment with PESTEL and Porters Five Forces on Food
Industry, this section will cover the internal environment of a specific company: Five Guys.
The objective of performing SWOT is to help organizations like Five Guys developing
awareness of factors involved in making a business decision. In this analysis the strengths
and weaknesses are internal factors and threats and opportunities are classified as external
factors.

2.1 Strengths:

Five Guys has reputation in market and it’s a top pick among burger joints in US & UK.
Being a fastest-growing food chain, it has spread over 1000+ locations all over United States.
High quality and fresh foods with zero freezers and no trans-fat. With no frills and lots of
taste, the burgers menu is pretty simple [6]. Although customers can select favorite burger
and toppings from a wide list. The focus of Five Guys is on customer experience and on word
of mouth rather than public advertisements. Employees are given good wages and high level
of dynamic training, replacing advertisements money. They have strict brand control and
secret store visiting. The Murrell company franchises only to well-qualified applicants. Five
guys have great Customer Service (free refills, free peanuts while waiting, cleanly
environment). For example, Five Guys started as a franchise in UK and the revenues are
calculated as following from 2013 – 2018.[8]
2.2 Weakness:

Five Guys lack investments in advertisements. It has low brand exposure and market share
compared to other global food chains like KFC and Mc Donald’s. Providing healthy food
practices with the use of peanut oil, however it also eliminates clients which are allergic to
peanut. Five guys have higher prices compared to other food chains and lack of healthy
options in the menu (traditional burger/fries/hotdog joint mostly). Franchising cost &
regulations incurred for a local partner to start a food chain.

2.3 Opportunities:

Expanding to global markets in emerging markets and increasing brand awareness. Plans to
introduce new menu items and customized menu for kids. Five guys can also look at different
food options by introducing vegetarian menu. Start advertising their fresh food choices and
offer catering services to corporate events (party’s, picnics, etc.). Introducing delivery
services through third party companies such as Uber eats can boost sales and brand exposure.
Developing eco-friendly packing techniques to overcome complexities in food industry.

2.4 Threats:
Threat from competitors like Mc Donald by expanding globally and willing to customize
menus in foreign countries. In the era of consumers choosing healthy food, five guys have
high calory food [9]. Health concerns over flu epidemic could affect business. Cattle
contamination can affect the business, since they have specific sources for their beef.
Awareness on allergies, especially peanut, in the younger generations. High tax and currency
exchange barriers by going international. Franchise model have concerns regarding quality
and consistency in service. Increase in competitors can reduce market share, the three top
competitors are McDonalds, IN N OUT burgers and smash Burger LLC. From Figure below,
nutritional breakdown of giant food chains burgers and fries [9].

Conclusion:
From the series of external and internal analysis conducted, we can say, China is a flourishing market
with constant change and evolution. The rapid economic growth and stable political conditions make
the fast-food industry lucrative to investors. Although Five Guys has to face competitive challenges,
it’s a giant food-chain with reputation in terms of quality, service and price. The scope for Five Guys
is attractive, due to immense demand for fast foods in the Chinese consumers, evolution of
consumer tastes and interests. According to the opportunities & threats identified in our analysis,
firm can understand and adapt (advertisements, menu choices, third party food delivery apps) to the
local market to sustain in long run.

References 

1. Bartlett & Ghoshal. (2017). Manage across borders. https://www.business-to-

you.com/international-business-strategy/ 

2. George Boykin. (2019). The differences in International and Transnational

businesses. https://bizfluent.com/info-8721175-differences-international-
transnational-businesses.html
3. Melody hahm(2018). This is America's favorite burger brand
https://sports.yahoo.com/americas-favorite-burger-brand-150335844.html
4. Yikang Rui, Huang huang, Min Lu, Bao Wang. (2016) A comparative analysis
of distributions KFC and McDonald’s outlets in china https://www.mdpi.com/2220-
9964/5/3/27/htm
5. Zoey Zhang, CHINA BRIEFING. (2020) https://www.china-
briefing.com/news/tapping-into-new-growth-opportunities-in-chinas-fb-market/
6. Bernice Chan and Alkira Reinfrank. (2018) South China Morning Post
https://www.scmp.com/lifestyle/food-drink/article/2176531/hong-kong-burger-battle-
five-guys-shake-shack-we-taste-test

7. Five Guys https://www.fiveguys.com/fans/the-five-guys-story

8. Statista (2020) Annual revenue of Five Guys JV Limited in the United Kingdom
(UK) from fiscal year 2013 to 2018 https://www.statista.com/statistics/899091/five-guys-
revenues-in-the-united-kingdom-uk/
9. Daily Mail by IMOGEN BLAKE FOR MAILONLINE, (2016)
https://www.dailymail.co.uk/femail/food/article-3810043/Which-fast-food-chain-calories-
FEMAIL-compares-burgers-fries-salads-milkshakes-Britain-s-popular-restaurants-surprising-
results.html