Problem statement
Hooter’s of America, a casual restaurant that serves wings and beers among other menu items, has been in operation across the country for over 30 years. It has successfully grown its business over the years, and currently operates and franchises more than 400 Hooter’s restaurants throughout America, Asia and other parts of the world. It thrives on attractive female waitresses with revealing uniforms. During the best years, it consistently saw sales of $1 billion per year. According to the Hooter’s company website, Hooter’s was the fastest-growing restaurant chain in the US in 1991 and 1992. Along with the success, Hooter’s also faced many legal issues with regards to sexual harassment and unfair work practices. Although most cases were settled out of court, it seems as though the brand image withered due to several bad press in relations to employees complaints, one of which a store manager in California videotaped female Hooter’s girls changing in the locker room. As a result, this “Breastaurant” saw its market share decrease due to new and successful competitors such as Kilted Tilts, Twin Peaks among others. In its parent holding company Chanticleer’s March 2014 10K financial statement, it states it is currently operating at a loss, citing “failure by Hooters to protect its intellectual property rights, including its brand image” as one of the reasons. In the following analysis, the Porter’s Five Forces Model will be applied to the restaurant sector Hooter’s currently operates in, attempting to draw some conclusions and identify weaknesses within the company for sustainable growth.
Analysis: Porter’s Five Forces
Supplier Power: The restaurant industry, as well as the fast casual sector is a very competitive industry. Many of the foodservice suppliers are large companies who serve numerous businesses. Amount of suppliers may be abundant, but the cost to switch could be medium to high due to pre-existing supply chains, especially for a well-established company such as Hooter’s. Hooter’s does not require any specialty food suppliers, since it mostly serves traditional American menu items.
Buyer Power: Restaurant industry’s buyers are the consumers. They are vast in numbers, so any one patron has very little effect on the bottom line of the business. "Breastaurant" customers are 80 percent male, range in age from 21 to 35. It’s a multi-billion dollar niche within the restaurant industry, and has the potential of an additional 700 to 800 stores across North America. Consumers always have the substitute option of eating at home and other healthier choices, as we gravitate towards a more health conscious environment. Finally, in this niche within the industry, it has an added buyer incentive to be served by beautiful girls in racy outfits.
Threat of new entrants: Restaurant industry’s threat of new entrants is high. The cost to train the staff is low, and experience isn’t extensive. There is no technological protection in this industry. As a result it has low barriers to entry. In recent years, Hooter’s saw increased competition from various new entrants. Twin Peaks is the most successful example. Last year, Twin Peaks was the fastest-growing chain in the U.S., with $165 million in sales.
Threat of substitution: The restaurant industry is not essential to consumers, as they are able to cook their own food. The main switching cost for consumers is the time and effort spent in the kitchen. Home-cooked food tends to be cheaper than a meal in a restaurant. But there aren’t any Hooter’s girls serving in their homes, therefore making this niche less prone to substitution.
Competitive rivalry: As stated earlier, the “Breastaurant” niche within the restaurant industry is growing at a fast pace. Hooter’s of America, although been tarnished in recent years by bad public press partially due to the racy nature of the business, still has a brand that’s very recognizable by the mass. Along with the rest of its rivals, it enjoys a competitive advantage over the rest of the restaurant segment; As is clearly stated in the company’s mission statement: “We are committed to providing an environment of employee growth and development so that we can provide every guest a unique, entertaining dining experience in a fun and casual atmosphere delivered by attractive, vivacious Hooters girls while making positive contributions to the communities in which we live”.
Conclusion
After applying the Porter’s Five Forces Model, Hooter’s industrial weaknesses can be recognized in multiple areas such as high suppliers switching cost, threat of substitutes and strong competitive rivalry. In a very recent article, sales at the Tilted Kilt, Twin Peaks and Brick House, casual eateries featuring scantily clad waitresses, have all grown at a double-digit pace over the last year. On the other hand, Hooter’s has only had a 3.1% growth in the past year. Hooter’s management should take advantage of the positive growth potential within the “Breastaurant” niche, recognizing itself as being in this “focus differentiation” spectrum of the Porter’s generic business strategies. Furthermore, Hooter’s should revamp its stale brand image by “stealing” a page out of its competitors’ book, hire more beautiful Hooter’s girls in new uniforms and take back the market shares before saturation occurs.

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