Acouple of college students decided to start a business together after graduating. The two friends traveled the region in search of the ultimate buffalo chicken wings. After researching these other operations, the two returned to their town and started to put the wheels in motion to find a location and develop a business system. The idea was to open a small restaurant and focus on delivery within the local area, including the college campus. As luck would have it, a restaurant recently had gone out of business in a high-traffic area. The two young men found themselves meeting with realtors, bankers, accountants, lawyers, and town officials in an attempt to achieve their dream of opening a restaurant. After many negotiations, the two began planning for the opening of their restaurant. They decided to call it the Wing Shack and cater to the college crowd.

The restaurant had a small bar area, a pool table, a few televisions, a juke box, and 12 tables for dining. The menu consisted of chicken wings

(including boneless), chicken sandwiches, a few appetizers, and a few sides

(e.g., french fries). The chicken wings were meatier than those of most restaurants, and there were 20 flavors to choose from. For beverages, the owners decided to put 20 beers on tap, showcasing the regional microbrews.

Business was slow at first, but word of mouth quickly spread and the restaurant started to get more and more customers. One of the early strategies employed by the owners was to have all-you-can-eat wings on the slower nights of the week (Sunday to Wednesday). Eventually, the restaurant had people waiting in line to get a table, and the sit-down business was as good as the delivery business.

After three years of successfully running the business and seeing increased profits, the owners considered expanding. The business system was solid and the restaurant benefited from a good marketing strategy, including being a sponsor of the college’s athletic programs. Initially, the owners decided to open another restaurant in a city about one hour away. This required the owners to commute on a regular basis and put a strain on their partnership and relationships.

They felt they were spread too thin, and in hindsight they weren’t sure if this was the best idea. This led the young entrepreneurs to investigate the possibility of franchising. The profit after taxes for the original restaurant was approximately 28 percent of revenue. Franchise fees for restaurants in this category usually run around 3–4 percent.

Case Study Questions and Issues

a. What issues must the owners consider before deciding whether to open more restaurants on their own or to franchise?

b. Assuming the original restaurant is in the Northeast, what cities or towns would you suggest for the next five restaurants?

c. How many franchised units would they have to contract to make the same profit as they do in the original unit (assuming the revenue will be similar for all units)?