Strategic Assessment of Five Guys for European Market Diversification

This report presents a strategic assessment of Five Guys, focusing on its potential expansion into the Belgian market. It begins with an executive summary and introduction, followed by an overview of the company and the fast-food industry, highlighting key challenges Five Guys faces, such as maintaining food quality and addressing health concerns. The report then conducts an external environment analysis using the PESTEL framework, examining political, economic, social, technological, environmental, and legal factors specific to Belgium. A micro-analysis using Porter's Five Forces framework assesses the competitive landscape. The internal environment is analyzed through a value chain analysis, followed by an identification of competitive strategies, including Porter's Generic Strategies. Based on these analyses, the report offers strategic recommendations for Five Guys' expansion, including market, product, and service considerations. The conclusion summarizes the findings and recommendations, providing insights into future strategic directions for Five Guys in the European market.

Running head: STRATEGIC MANAGEMENT
Topic- Strategic assessment of Five Guys
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EXECUTIVE SUMMARY
The report is based on the strategic assessment of Five Guys, the American fast food
restaurant chain. Assessment of both external and internal environment is done and the most
favorable strategic factor for future expansion and sustainability is considered. Based on that
international expansion strategies for European market diversification specially in Belgium is
elaborated. Chances of success in the European food industry is deduced based on the various
strategic models for analysis. The main models used here include PESTEL framework, Porter’s
Five force Framework and Porter’s value chain analysis. Based on them the strategic
recommendation is developed and future competitive strategies are also developed based on
current market structure by the help of Porter’s Generic strategies of Competition framework.
Future strategic directions and expansion methods are recommended for Five Guys in
consideration to its markets, products and services offered. The company has simple vision and
mission which is- to keep it simple and product quality maintenance. Corporate ethics is simple
and compassionate to both organization and its employees. The rich cultural support help it
maintain its social responsibility well balanced and help avoiding any type of conflicts in the
organization. Stakeholders gain is focused in every operational mode and this is what that
differentiates Five Guys from all its competitors in this tough burger market competition. And in
recent times, the company is focusing on international expansion through its franchising option.

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
COMPANY AND INDUSTRY BACKGROUND......................................................................4
KEY CHALLENEGS FACED BY FIVE GUYS........................................................................5
EXTERNAL ENVIRONMENT ANALYSIS.................................................................................6
MACRO PESTEL ANALYSIS...................................................................................................6
MICRO PORTER’S FIVE FORCES FRAMEWORK................................................................9
INTERNAL ENVIRONMENT ANALYSIS................................................................................12
VALUE CHAIN ANALYSIS....................................................................................................12
IDENTIFICATION OF COMPETITIVE STRATEGIES............................................................14
PORTER’S GENERIC STRATEGIES.....................................................................................14
RECOMMENDATIONS...............................................................................................................16
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

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INTRODUCTION
The report is based on the strategic assessment of Five Guys, a fast food restaurant chain
in Washington DC, America. Strategic assessment is based on the external and internal
environment analysis and identification of strategic alternatives along with recommendations to
expand and strengthen its European market positioning in Belgium. In this section a brief
company introduction along with industry summary is provided. Key challenges faced by Five
Guys is also highlighted in this section.
COMPANY AND INDUSTRY BACKGROUND
Five Guys Enterprises LLC starting its operations back in 1986, is basically an American
fast food casual restaurant chain focusing on hamburgers, hotdogs and French fries. Trading
name is Five Guys Burgers and Fries. From 2003 the company started its franchising business
and has shown rapid market expansion and within a short span of time it became the fastest
growing fast food chain in the US (Fiveguys.com 2019). The name ‘Five Guys’ is because of its
founders, the five Murrell brothers. After huge success in America the company first opened its
location outside the country in UK and soon it gained huge popularity there also. At present Five
Guys is planning to expand its European market share by diversifying business in Belgium. This
report will thus focus on its Belgium expansion strategies.
A brief background of the fast food industry in this regard is important to have better
understanding of the strategic move by Five Guys. The fast food landscape in North America and
Europe are somewhat similar as per fast food trend is concerned (Aguilera et al. 2017).
Differences are there in market chain penetration, projected growth, economy size and consumer
preferences of tailor-made choices. European consumers find limited time to be factor for

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preparing food at home or sit for a long-time family dinner in some cozy restaurant and this is
the reason for preference of quick-service fast foods specially burgers and fries. Whereas in
North America the market share of fast food is almost half (44%) of the total restaurant sales
(Alon 2014). Independent fast food restaurant chain operations are growing faster in European
countries as well but unlike American counterparts the penetration rate is considerably lower
(Azar 2014).
KEY CHALLENEGS FACED BY FIVE GUYS
Five guys are having rapid expansion in one hand and is also facing criticism on the
other. A popular magazine, Men’s Health has opined that the meals of Five Guys are unhealthy
and have higher calorific values and full of saturated fats. French Fries of Five Guys was also
mentioned in the ‘top 10 worst fast food meals’ in America (Fiveguys.com 2019). This is one of
the major hindrances in tis overseas operations as food criticism will leave its new unknown
market expansion at risk. However, leaving all criticism aside the challenge is in itself. The
company is finding it difficult to maintain the Five Guys experience of staff enthusiasm and food
quality intact. Both financing and franchising are also creating problems in recent times and the
company is finding greater opportunities for its European expansion specially in Western Europe
(Boje, Haley and Saylors 2016). Social media is also creating issues in its no food photography
policy and is hampering its ‘no advertisement policy’ and in recent times the company has
changed its advertisement mode and using digital ads to remain in e-space. Also, there is no
delivery options available for Five Guys which is another reason for its competitive disadvantage
among other fast food restaurants like McDonalds, Wendy’s, burger king and Freddie’s
(Fiveguys.com 2019). And above all, European people are becoming more health conscious and
the country also has lowest projected growth rates in comparison to American market which are

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increasing the challenges for Five Guys in its expansion strategies and Five Guys need to be
more cautious in developing the right strategy for its international expansion.

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EXTERNAL ENVIRONMENT ANALYSIS
In this section of the report external environment analysis is conducted for identifying
key opportunities and threats. Both macro and micro factors are considered for analysis. Macro
analysis considered PESTEL framework identification and micro analysis is based on Porter’s
Five forces framework for industry structural analysis and also for identification of the nature of
competition (Cadle, Paul and Turner 2014). All external analysis is based on the chosen country
Belgium.
MACRO PESTEL ANALYSIS
The fast food landscape in the Western European nations are estimated to grow in the
next three years by $10.3 billion and Belgium is one such nation (Davis et al. 2018). Belgium has
negative growth statistics in regard to fast food industry. Food halls are much popular in Europe
than the fast food restaurant franchise stores. A well-articulated PESTEL analysis is provided
below. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal
factor analysis (Grant 2016).
P-Political factors:
Belgium is one of the politically stable European countries. The type of Government here
is Parliamentary Democracy supported by a constitutional monarchy. Government is divided into
three levels namely federal, regional and linguistic community (Sui and Baum 2014). Political
structure is quite complex and is stable though. It is the best place for business
internationalization and a number of companies from US, UK, Germany, Australia and France
have stable market presence in Belgium (Eriksson et al. 2015). Five Guys will have added
advantage in new market expansion due to stable political framework in Belgium.

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E-Economic factors:
The Economy of Belgium is open and modern. It is basically private enterprise-based
economy. It is centrally located European Union asper geographic location and have well
developed transportation networking and diversified commercial and industrial base. Though it
does not have any natural resource base but is one of the leading players in world economy
(Lasserre 2017). Past statistics revel that the GDP of Belgium was $414 billion which is quite
fair. In terms of trade it ranks 15th. It exports large quantities of manufactured goods and is a
matured economy. Its currency being Euro help in better international trading. Five Guys will
have added advantage for the economic scenario as well.
S-Social factors:
The society of Belgium is liberal towards new businesses and is quite adoptable to new
products and services. The Belgian ethnic group includes mainly 58%, 31% Walloon and rest
11% other groups (McDowell, Harris and Geho 2016). Dutch, French and German are spoken
widely and all three are official languages in the country. Roman catholic is the main religion
and most of people live in urban areas. People are mostly educated and employed.
Unemployment rate is quite lower. The social environment will support the expansion of new
fast food business of Five Guys in the country and franchising option will work here
significantly (Ho 2014). Though having workforce can be problematic due to lower rate of
unemployment.
T-Technological factors:
Technological advancements are quite prominent in Belgium. The country has extensive
cable networking services and a well-integrated telecommunication sector. Latest technological

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automation helps in better networking and more than half of the people are internet users. So, the
scope of online marketing will be higher for Five Guys in the country. Increased digital
marketing will help in quick market recognition for the new entrants like Five Guys.
E-Environmental:
Belgium promotes environmentally safe products and services and people here have
higher environmental awareness. A number of companies promote Green Movement and the
policy in the country is also environment-friendly (Rhou and Koh 2014). There is a separate
federal ministry of Environment that look into the environmental concerns. In this regard Five
Guys need to be cautious and its meal calorific counts need to be revised to support healthy
living index (Fernqvist, Olsson and Spendrup 2015). Though Five Guys abolished use of plastics
previously but still it needs to be more environmentally cautious in diversifying its business in
Belgium market.
L-Legal factors:
The legal system is based on the French Civil Code framework. The laws and legislative
norms are mandated and modified based on the European union conformances. In regard to
international law in organizational participation the compulsory ICJ Jurisdiction and ICCt
jurisdiction is followed. There is no any major restriction for international traders and investors
can have good investment opportunities in the country (Manning 2015). Afterall, Belgium has
liberal policy towards both national and international businesses. Such well supported legal
framework will add advantage to expansion decision for Five Guys.

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MICRO PORTER’S FIVE FORCES FRAMEWORK
Porter’s five forces analysis tool help Five Guys to know about their industry profitability
and market attractiveness. The five forces framework that help in shaping the industry
competition is shown and discussed below.
The five forces framework basically has the following factor analysis of competition, new
entrants, buyers, suppliers, and substitutes.
Competition:
Five Guys have a strong existing competition from other restaurants in the fast food
sector in America. Its franchising success has increased its global recognition and has
Rivalry
among
existing
competitors
Threats of
new
entrants
Bargaining
power of
buyers
Threat of
substitute
products
and services
Bargaining
power of
suppliers

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considerably increased its global competition as well. Its direct and most influential competitors
include Mc Donald’s, Wendy’s, burger king and Freddie’s (Fiveguys.com 2019). External
competition plays a strong role in the operations of Five Guys. The major factors that support
strong competition are increased number of fast food consumption and thus increased number of
same type of restaurants, high variety of firms and low switching cost of consumer transfer from
one restaurant to the other (Hitt and Duane Ireland 2017). The fast food market is saturated by a
number of firms of varying sizes. Key product delivery and market focus are similar for all firms
and this increases the degree of competition. In order to cope up with this competition it is easier
to diverse market in unknown regions where the level of saturation is lower.
Bargaining power of buyers:
Consumers play a significant role in affecting the performance and market valuation of
fast food restaurants and the whole food industry environment (Hitt, Ireland and Hoskisson
2016). The major forces strengthening the buyer bargaining power includes low switching cost
from one restaurant to the other, availability of higher substitute products in fast food categories
and relatively moderate presence of consumer firms. Customer’s decision-making will directly
affect the business of five Guys (Fiveguys.com 2019). Five Guys specializes in hamburgers,
hotdogs and French fries only but higher product substitutes are available in the market and
customers can choose from them as well. The presence of consumer Unions has supported the
increased bargaining power of the end consumers.
Bargaining power of suppliers:
Suppliers’ bargaining power is comparatively low in fast food restaurants like Five guys.
The reason being five Guys manufacture most of their primary ingredients required for burgers

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and hotdogs. Both pricing and raw material supply control affect the performance of the
company but to a lower extent. The FoodLogiQ connect platform is used for global supply chain
management for increased visibility, supplier streamlining, quality tracking and reporting
(Fiveguys.com 2019). Suppliers are countless because of the most abundant and common raw
material usage and thus bargaining power is lower for them. Suppliers also have low forward
integration and have low degree of control in distribution and sales.
Substitution threat:
The product line of Five Guys is narrower and is limited to only hamburgers, hotdogs and
French fries. The fast food industry is growing globally at a higher pace and the product
diversities are also increasing. In this regard the major factors that strengthen the threat of
substitution are low switching cost for customers, increased product range availability and
satisfactory substitute performances (Manning 2015). This includes taste, cost and quality.
Substitute products are becoming popular and people are shifting to new products which is
causing the major business threat to Five Guys.
New entrants:
The threat of new entrants is not much impactful and moderate in terms of fast food
chains like Five Guys. The factors include strong effect of lower customer switching costs,
moderate cost disadvantage and moderate cost of new business start-ups (McDowell, Harris and
Geho 2016). Moderate cost disadvantage will not hamper the economies of scale of large firms
like Five guys and this could in turn create financial challenges for the new entrants themselves.
So, new entrants cannot influence the performance of Five Guys to a significant level.