CASE STUDY FOR CHAPTER 3

GOLD STAR CHILI: CUSTOMER AND MARKET FOCUS

Gold Star Chili, Inc., based in Cincinnati, Ohio, was founded in1965 as a family-owned system of franchised and company-ownedrestaurants. Gold Star operates over 100 regional locations (mostof which are franchised, with a few being company restaurants orare co-owned). The Gold Star menu is based on a unique,“Cincinnati-style” chili recipe, flavored with a proprietary blendof spices from around the world. The chili is prepared in a centralcommissary, designed to reduce equipment needs at individualrestaurants, promote consistency, and reduce labor costs. Mostlocations have both in-store dining and a drive-through. Gold Staroperates in a highly competitive market against other multilocationchili firms and traditional fast-food competitors such asMcDonald’s, Taco Bell, and Kentucky Fried Chicken. It trails itsmajor competitor, Skyline, which has a larger advertising budget,in market share. Gold Star Chili is an active participant with theCincinnati Restaurant Association and the National RestaurantAssociation. These connections help maintain awareness of businesstrends, and advances in new technology. Changing business needs areassessed by reviewing the annual reports of competing restaurants,and an annual market research study that permits benchmarkingagainst the restaurant/convenience food industry in general.

Gold Star Chili defines two key customer groups: directcustomers who use Gold Star products and services, and indirectcustomers with whom Gold Star has other relationships. Directcustomers are divided into six customer segments, determined byproduct use: restaurant customers, franchisees, franchiseapplicants, retail customers, retail wholesalers, and mail-ordercustomers. Indirect customers include product suppliers, servicesuppliers, co-packers, brokers/consultants, shareholders, andregulatory agencies.

Gold Star’s mission is to create lasting relationships basedupon respect, trust, and support given to customers. More than70 percent of customers eat in a Gold Star restaurant at leastonce a month, and 20 to 30 percent eat at least once per week. Theloyalty of the customer base permits servers and store managers toget to know customers personally and learn much about consumerneeds.

Franchisees are attracted by the relatively low investmentrequired to join the Gold Star family of restaurants, theopportunity to operate a profitable business, and to benefit fromthe strong brand equity built into the Gold Star name. Alldepartment heads treat franchisees as internal customers, and havesigned a pledge guaranteeing to return calls within 24 hours. If afranchisee reports a problem with product quality, Gold Star oftenhand-delivers replacement product the same day. Many franchiseesbuild relationships through local store marketing. Manyowner/managers are active in the community with sponsorships ofteams or school programs. Gold Star provides owners with schoolachievement awards they can distribute to local schools.

Visit the company’s website at www.goldstarchili.com to gain aperspective about the company, its menu, activities, and culture.Click the “About Us” link to read about the history and mission ofthe company. Using the information provided in the case andconcepts developed in this chapter, answer the following:

QUESTIONS TO ANSWER FOR HW1 FROM CHAPTER 3

1. What would be somemoments of truth in Gold Star’s environment?

2. What implications wouldthe segmentation of Gold Star’s customers have on theircustomer-focused practices?

3. What types ofapproaches should Gold Star consider to listen and learn fromdifferent customer segments?