Lizarran Case Study External Analysis

This assignment tasks students with performing an in-depth external analysis of Lizarran, a Spanish tapas restaurant chain. The analysis examines the foodservice market in Spain, including trends, competition, and the franchising model. Students must identify Lizarran's competitive advantages and evaluate the opportunities and threats presented by the market.

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Assignment questions for the Lizarran Case Study
Prepare an External analysis for this case:
1. What market do you plan to analyze?
Foodservice
2. Size of the market, growth, structure
-Size of the market:
 244 main foodservice groups operating in Spain
 According to the September 2017 Alimarket report, in 2016, the main
foodservice groups sold €7,950 M, representing a 7.9% growth rate on 2015.
 In 2015, the industry employed 418,124 people.
-Growth:
 The rising number of tourists have ensured a constant increase and development
of the foodservice industry all across Spain. Growth cannot only be explained
by the newly opened establishments, the 3% growth in sales per establishment
was an important factor leading to total average sales by establishment in 2016
of €720,000 in the main groups according to Alimarket.
 Habits and preferences of locals and visitors: Spaniards are used to eating out
and frequent bars and tapas restaurants. Consumption by locals has increased by
6.2% from 2015 to 2016 and the average family expenditure has grown by 5.8%
and amounted to €2,507 in 2016.
 The expectations for the future are optimistic. In 2017 the number of visits per
person in a year to foodservice establishments was 25.
-Structure: The foodservice industry consists of accommodation outlets, pubs,
clubs and bars, full-service restaurants, quick- service restaurants and fast food,
and others.
 Accommodation outlets: restaurants, bars and coffee shops located inside
hotels, hostels, motels, and bed and breakfast hotels.
 Full-service restaurants: usually prepare food on demand and offer waiter
service to serve food to customers at their tables.
 Quick-service restaurants (QSR) and fast food chains: offer a limited menu that
is cooked in bulk in advance for faster delivery to customers. They are
professionally managed and generally part of franchise operations that provide
standardized ingredients delivered to each restaurant through controlled supply
channels.
3. Main segments
 Bars and cafeterias – 50%- 21,095 euros in sales
 Meals in restaurant -32%- 12,956 euros in sales
 Set menu -11%- 4,513 euros in sales

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 Fast food and take-away-7%- 2,827 euros in sales
4. Customers: consumer behavior
 Both Spaniards and Tourists enjoy eating out.
 Customers tend to view tapas as a non-essential item, that can be
disregarded easily during the financial crisis or in times of low
disposable income in order to retain clientele, Lizarran needs to offer
constant and continued innovation.
 Lizarran attracts customers in all time periods during the day by offering
different meals during breakfast, lunch and dinner times. Usually
customers tend to spend less time in the restaurant during the day. In the
evenings, groups of customers, families and friends spend more time
while enjoying a full meal and the socialization side of the experience.
 Most customers (71.3%) are between 30 and 45 years old from the
middle and upper-middle working class, with families
 the most popular time for tapas consumption is in the evening or at night
(50%). Mid-day/lunch time is another highly popular time for eating
tapas, with 34%
 The top most consumed: patatas bravas, traditional Spanish tortilla,
croquettes, Russian salad and Spanish ham
 While eating at tapas restaurants, 96% of customers drink alcoholic
beverages.
5. Competitive analysis (include substitute products if relevant)
 Highly competitive market (since the demand is so high)
-Direct Competition for Lizarran: groups like Zena-Alsea, Casual Beer & Food,
Restalia
-Other competitors: Cerveceria Catalana, Bodega Biatrritz and Vinitus
 Competitive advantage:
-Lizarran adds an original touch to its dishes. Simple and classic products are constantly
under innovation, which allow them to adapt. wide range of product offerings.
-Lizarran tries to increase revenues in each establishment by covering all time slots
during the day (breakfast in the morning, midday offerings) and using promotions such
as happy hours, to influence demand at low peaks.
-It offers a traditional ambience with modern flair. Lizarran can be differentiated as
being an ethnic, trendy and innovative establishment amongst others in the industry.
-Additional services: television system Wi-Fi, outside smoking areas, sometimes a
terrace and blackboards showing updates about latest offerings, exclusively for
customers.

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6. Franchising situation in Spain. Advantages and disadvantages for the
franchisor and the franchisee.
* Franchising situation in Spain:
- The second most important sector in Spain using franchising is foodservice
- By 2016 the number of the franchised fast food brands and quick- service restaurants
in Spain was 40. Between 2010 and 2015 the average number of tapas chains (brands)
was 20. In 2015 this number grew to 22.
- In foodservice, franchising continues to be the main mechanism for the expansion of
the industry. In 2016, 56.5% of the locations were franchisees and 38.6% were privately
owned. Steady growth is expected in the coming years.
-From 2015 to 2016, franchising in all Spanish sectors has seen a 2.3% increase in
turnover, from €26.482 billion to €26.992 billion.
*Franchisor
-Advantages:
 Development of its brand and overall business growth
 Expansion by leveraging the franchisee’s capital.
 The franchise agreement provides the franchisor with the necessary degree
of control over the franchisee’s structure and operations.
 More business unit creation.
 Popularization of brand overseas.
 Increased employment
-Disadvantages:
 Difficult for Lizarran to find good locations for new establishments.
 Difficult to control every aspect of the different locations.
*Franchisee
-Advantages:
 Opportunity to build its business, based on well-known customer brands.
 Transfer of the know-how of an already proven business model increases
the chances of survival and further development.
 The guidelines and support that the franchisee receives from the franchisor
to market and sell its products
 Controlled and centralized administration by the franchisor helps brand
building and the brand management process, while reducing costs, as the
franchisor can negotiate better discounts for all establishments

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-Disadvantages:
*Franchisor’s expectations and control=
 Rules set out by the Franchisor that can sometimes be hard to follow
 Goals set by the franchisor that are unattainable.
7. Market trends
 New technological developments: Online technologies and software apps for all
kind of devices (mobile phones, tables or laptops) have enabled new order and
delivery options via company websites.
 Gluten-free restaurants
 Organic products
 Brunch and fusion cuisines
 Food delivery and take-away services
 Franchising