Who's strategy should heinvest money to improvise the Fork and Dagger in order to make profits again? Why? Provide a implementation alternatives, and a recommendation.

Fork and Dagger Massine Bouzerar and H. F. (Herb) Mackenzie In October 2012, Richard Lynch, owner and founder of the Fork and Dagger pub in Struan, Ontario, was getting close to retirement and wanted to transfer the business ownership to his two sons, Bradley and Jason. Both sons had been working in the busi- ness for quite some time: Bradley for more than 15 years, and Jason for more than 12. Between them, they had experience with all aspects of running the pub, and Richard felt confident that they'd be able to manage the business. But he also knew that his two sons had very mixed views on how to grow the pub: Bradley wanted to completely change . Fork and Dagger's positioning, targeting the lesbian, gay, bisexual, and transgendered (LGBT) community, while Jason simply wanted to focus on developing the pub's pro- motions and doing renovations to attract a larger crowd. Richard had asked his two sons to present their plans for the future of the business so that he could make the final deci- sion about what would or wouldn't happen at Fork and Dagger before his retirement. Richard was concerned that if he retired without having resolved the issue, the struggle that could result between Bradley and Jason could escalate, management of the busi- ness could be affected, and ultimately the business could simply continue to lose revenue-as it had been slowly doing over the past few years. Copyright @ 2012 H. F. (Herb) Mackenzie. This case was written by Massine Bouzerar and H. F. (Herb) Mackenzie, Goodman School of Business, Brock University. It was prepared as a basis for class discussion and is not intended to illustrate effective or ineffective handling of a management situation. Reprinted with permission. 63Case 11: Fork and Dagger 64 Massine Bouzerar and H. F. (Herb) Mackenzie COMPANY BACKGROUND EXHIBIT 1 Fork and Dagger's Year-End Income Statements, April 30, 2008-2011 Fork and Dagger was founded in 1993 by Richard Lynch, who saw potential growth in Struan's food and hospitality industry, specifically its pubs and bars. Having worked as 2008 2009 2010 2011 kitchen manager for a large chain restaurant, Richard felt he could provide the Struan com- REVENUES munity with a more casual dining atmosphere while still serving good-quality food at rea- Alcohol $1 209 350 $1 168 001 $1 125 964 $1 056 709 sonable prices. That was how he came up with the pub's slogan: "Where the beer is hot, Food $1 273 000 $1 229 475 $1 185 225 $1 112 325 the food is cold, and the servers are-delicious!" As a way of attracting business, Fork and Dagger provided both a quiet, semi-formal Merchandise $63 650 $61.474 $59.261. $55 616 dining area for those wanting a better dining experience and a bar area where many people TOTAL REVENUES $2 546 000 $2 458 950 $2 370 450 $2 224 650 came simply to socialize and share a few drinks, sometimes with light snacks or "pub EXPENSES food." Richard believed that attracting such a broad market gave the pub a competitive Cost of Goods Sold advantage, and that this was a sustainable strategy for his business In order to compete with other restaurants in the area, Richard felt that Fork and Liquor $76 380 $73 769 $71 114 $66 740 Dagger needed all the features the current market offered. Therefore, within the first year Beer $152 760 $147 537 $142 227 $133 479 of operations, he invested in 10 wall-mounted televisions and a cable subscription. Sporting Draft $203 680 $196 716 $189 636 $177 972 events played continuously on the screens in the bar area, while in the dining area pro- Wine $45 828 $44 261 $42 668 $40 044 gramming varied depending on the time of day (with sporting events seldom shown). In that same year the 1994 Winter Olympics were broadcast live from Norway, with the time Food $547 390 $528.674 $509 647 $478-300 sports difference meaning that events were on late at night. A large crowd of late-night sports Total $1 026 038 $990 957 $955 291 $896 534 enthusiasts was attracted to the pub, and this quickly helped create awareness for Fork and Operating Expenses Dagger. Sales increased rapidly and the pub gained a reputation for being a fun place to Wages* $611 040 $598 148 $579 908 $556 916 meet and socialize. At first, Richard relied heavily on this word-of-mouth advertising to help his busi- El expense $15 276 $14 954 $14 423 $14 048 ness get started. The sports crowd was supplemented by family friends and a large Casual labour $30 552 29 507 28 445 $26 696 group of students from the nearby college. Students were particularly attracted on CPP expense $22 914 $22 131 $21 334 $20 022 Thursday and Friday nights, with a number of faculty members also showing up WCB $9 165 $9 165 $9 165 $9 165 on those nights. Many people from the local business community came in at the end of Benefits $7 638 $7 377 $7 11 $6 674 the workday for a beer or two, but most stayed only an hour or so, and only occasion- ally did they order food. Saturdays and Sundays were especially popular for food sales, Total Payroll $696 585 $681 282 $660 386 $633 521 with many from the local community coming in for lunch or dinner on those days. Fork Advertising $40 736 $40 343 $40 027 $40 594 and Dagger eventually grew to include 28 bar tables, each with four movable stools; Restaurant supplies $68 742 $66 392 $64 002 $62 066 12 more-formal dining tables, each with four to six-chairs; and six booths, each with Entertainment $127 300 $125 948 $122 523 $123 233 seating for four to six people. Tota $933 363 $913 965 $886 938 $859 414 General & Admin Sales Revenue, 2009-2012 Bookkeeping $25 466 $25 550 $25 254 $25 330 Richard was concerned when it became apparent that Canada was in a recession in 2008, Cleaning $25 460 $25 170 $24 860 $24 190 but his fears were unfounded. While many more expensive restaurants saw a decline in Insurance $15 276 $15 328 $15 331 $15 367 sales, Fork and Dagger seemed to be more or less immune to the changing economic cli- Bank charges $25 460 $25 408 $25 479 $24 511 mate. Sales in 2008 were higher than in 2007, and there was no indication that Fork and Sponsorships $12 730 $13 000 $11 200 $11 600 Dagger's revenues would suffer. However, in 2009 Richard saw sales decline for the first. $1 527 $1 611 year since he'd started the business 17 years earlier. It was only a small decrease, but-sig- Office supplies $1 55 $1 570 nificant for being the first Fork and Dagger had ever experienced. Revenues continued to Promotions $50 920 $49 010 $47 870 $43 330 decrease in 2010 and again in 2011. Exhibit I shows Fork and Dagger's 2008-201 1 Cable $5 092 $5 109 $5 158 $5 211 income statements. Rent $127 300 $127 300 $127 300 $127 3006 Massine Bouzerar and H. F. (Herb) Mackenzie Case 11: Fork and Dagger 6 EXHIBIT 1 Fork and Dagger's Year-End Income Statements, April 30, Branson, and the two got an apartment in downtown Struan. Bradley continued to work at 2008-2011 (continued) the pub, while Lester, because he and Bradley were uncomfortable with Richard and 2008 2009 2010 2011 Jason's reactions once their relationship was made public, decided to keep away from Repairs & maintenance $38 190 $37 000 $37 300 $38 000 Fork and Dagger. He found a job as a salesperson at a local car dealership. After a while, though, Lester began to come to Fork and Dagger, and he and Bradley soon found accep Telephone $6 365 $6 378 $6 395 $6 409 tance by both Richard and Jason. Bradley eventually became the food and service man- Gas $17 822 $17 853 $17 809 $17 798 ager, responsible for hiring, training, and managing the bar, dining room, and kitchen Hydro $38 190 $38 330 $38 370 $38 280 staff, and for ensuring that customers enjoyed their time at Fork and Dagger. He was very Water $10 184 $10 164 $10 178 $10 157 effective in engaging customers and finding out what they liked and what they wanted to Total $399 982 $397 211 $394 063 $389 053 see improved at Fork and Dagger. He was constantly considering the pub's strengths, TOTAL EXPENSES $2 236 292 $2 145 001 who its customers were, and where there might be additional opportunities to increase $2 359 383 $2 302 133 their satisfaction. NET INCOME $186 617 $156 817 $134 158 $79 649 Over the last couple of months Bradley has been entertaining the idea of changing the pub's positioning strategy. Fork and Dagger was targeting a huge but undifferentiated *Richard, Bradley, and Jason all took a salary from the business, included in the wages. market: people who lived and worked in Struan and the surrounding areas. With such a broad target market Bradley felt that all advertising effort was wasted, and that it might be It was evident to Richard that the market for pubs and bars in Struan was slowly better aimed at one or more concentrated market segments. If Fork and Dagger could becoming more and more saturated. Most customers who visited Fork and Dagger on a attract a large, underserved segment, it could establish greater customer loyalty and hence regular basis continued to do so, but some who'd been regulars in the past simply stopped reverse its revenue. decline. I appearing at the pub. Richard believed they had moved to other venues. For example, the Then, one Friday night, Bradley thought he had an insight. Lester was sitting at a table local golf club had recently renovated its bar area and was making a concerted effort with about a dozen of their friends when it dawned on Bradley that these weren't the only , to attract a loyal group to socialize there. Other bars and pubs in Struan were beginning to gay customers in the bar; in fact, when he looked around the pub area, he realized that offer additional features that hadn't been offered in the past. Big Joe's Sports Bar, several about 15% of the customers were LGBT. Bradley had read somewhere that about 10% of blocks away from Fork and Dagger, had recently renovated its premises, providing its the population were members of the LGBT community, and if that were true, then Fork customers with six pool tables in addition to the flat-screen TVs it already had. The Shark and Dagger was already attracting a good following within this market segment. No other Tank, another nearby pub, had recently begun to offer free karaoke nights every Saturday pub in the Struan area was targeting the segment, and Bradley began to wonder whether night, and was bringing in a live blues band every Sunday afternoon. there was an opportunity here. Furthermore, as a homosexual male, Bradley figured he'd Richard wasn't keen to add these features to Fork and Dagger, since it would mean be in a better position to identify with this market's wants, allowing him to better attract having to focus more on the bar area of his business, compromising his dining room cus- the LGBT community. "tomers' experience. And with limited room in the pub, he'd have to eliminate several When developing his proposal, Bradley did some informal marketing research. He tables to accommodate pool tables and a karaoke stage, which he really didn't want to do. began by identifying friends he knew were homosexual and collecting information on their He was also concerned that live music in the bar area in the afternoons would drive away "per-person average expenditure" during their visits to Fork and Dagger. Over a two-week his dining room crowd on Sundays. Richard believed that the atmosphere he'd established period he identified 50 tables where he knew the customers were all homosexual. Many of at the pub, as well as the outstanding service his staff provided, would continue to set Fork these customers were included several times, as they were regulars and often came to the and Dagger apart from its competitors. Still, knowing he'd have to make changes or sales pub with different friends each time. Among the 50 tables he included in his sample were would continue to decline, he decided it was time to get Bradley and Jason more involved 163 people; Bradley estimated this total as comprising about 82 unique individuals. For his in the decision making. After all, the future of Fork and Dagger would be their concern. comparison sample he randomly chose 50 tables of people he knew weren't homosexual. He'd now asked each of them for their thoughts, knowing very well that they'd have very Among these 50 tables were a total of 145 people, translating to about 128 unique individu- different views of what should be done to increase sales. als. When he compared the cash register receipts, he found that those whom he'd identified as homosexual spent, on average, about 10% more than the other customers. Furthermore, BRADLEY'S PROPOSAL: TARGETING A NEW MARKET they came in larger than average groups-3.3 people per table versus 2.9-and they seemed to be more loyal, since there were fewer unique individuals among this group com- Bradley Lynch obtained his Bachelor of Arts degree in 2005 from a prestigious Ontario pared with the comparison group. Bradley was unsure whether this last assumption was a university. He continued to work at Fork and Dagger during summer vacations and breaks valid one, but it did agree with what he believed to be likely. from his studies, After graduation he returned from university_with his friend, Lester These results were far better than Bradley had expected, and the more he thought about it, the more convinced he became that targeting the LGBT community would be a great68 Massine Bouzerar and H. F. (Herb) Mackenzie Case 11: Fork and Dagger 69 idea. He was certain he'd get resistance from his father and brother, but he felt that now was the time to make his pitch. Fork and Dagger certainly couldn't continue to lose reve- THE FUTURE OF FORK AND DAGGER nue if he and Jason were to have a long-term successful business. After listening to both Bradley and Jason, Richard was concerned that their views for the future of Fork and Dagger were so very different. He was wondering which approach JASON'S PROPOSAL: MARKET PENETRATION the business should take. Should the pub target the LGBT community and shift to a nar- rowly targeted population? Or should it change its decor, modernize its seating, and add After graduating from high school in 2006, Jason Lynch began working at Fork and Dagger new forms of entertainment to compete with some of the newer pubs in the area? Was as a bartender. Over subsequent years he worked in every area of the business, from-waiter, there a way to accommodate the wishes of both Bradley and Jason, given that both would to cook, to buyer. He eventually gravitated to internal operations, becoming responsible need to be happy with the pub's direction if they were to remain committed to its success? for purchasing food, alcohol, and supplies; for scheduling staff to ensure that adequate Richard wasn't pressed for a rush answer, but he knew he couldn't retire until the issue people were on hand to meet the pub's needs throughout the week; for organizing costing was resolved. He wanted to leave a sustainable, if not growing, business. He certainly information about purchases and wages so that it was available for the pub's accountant; didn't want to abandon the place when it was in decline. and for handling the accounts payable, including issuing cheques each week to staff. Over the years he gained considerable technical knowledge of how to manage the pub. He was interested in allaspects of the business, although he lacked Bradley's engaging personality and was less interested in the pub's customers. "When hearing from his father that the pub's sales were declining, Jason wasn't sur- prised: he'd been noticing that his purchases were getting smaller and that he'd often have to send staff home early when he miscalculated demand. In his opinion, the main reason Fork and Dagger's revenues were declining was that the customers were becoming bored with the place and starting to visit other venues. The walls had been the same colour for years, and the decorations were the same as when he first started to work in the business. old The wall-mounted televisions were getting old and there were no exciting attractions to set the pub apart from its competitors. From talking to some of his friends who were regulars, Jason concluded that renova- tions would improve the pub's atmosphere and make it a more enjoyable experience. He hadn't given promotions a lot of thought, but he knew there had to be many possibilities for better promoting the business He was thinking about the traditional ones:ladies night, happy hours, etc. He was also wondering if the pub could leverage social media somehow, since he'd heard of some restaurants that promoted specials through Twitter and others that provided online coupons. What he knew for sure was that people were no longer look- ing for a place to simply eat and drink; they were looking for entertainment and excite- ment. They wanted to be engaged, to feel part of the business where they spent their money. Because the pub was operating well below full capacity, Jason thought it would be a good idea to replace a few tables in the bar area with pool tables-and with some creative organization, he'd need to get rid of only eight bar tables. He estimated the cost of four fully equipped pool tables to be about $5000 each. Jason also wanted to install a karaoke system, which he thought would cost about $1500, and to hire a DJ and some live music for special events throughout the year. DIs usually charged between $75 and $125 per hour. Musicians and live bands could vary from $40 per hour for a single singer or musi- cian to as much as $200 per hour for a three- of four-person band. Of course, he'd vary the music depending on time of day and whatever group of customers might be in attendance at any particular time. Repainting the pub's interior would cost about $6000, and new seat- ing would cost about $900 per bar table (including four chairs), $2000 per dining room table (including four chairs), and $2500 for each new booth