Case Study: Hard Rock Cafe

Question 1: From Munday’s standard market report checklist, select any other four
categories, such as population (A1), hotels (B2), or restaurants/nightclubs (D), and provide
three subcategories that should be evaluated. (See item C1 (airport) for a guide.)

Answer: Demographics (local, city, region, SMSA), with trend analysis

1. Population of area:

a) Gender & Age distribution: Hard Rock café usually attracts certain ages (young and
middle ages) more than other ages, and attract men more than women.
b) Population density: when it is high in the location being studied, that means the
probability of getting more and more customers is better and vice versa.
c) Population growth rate: when it is high, that means the probability of getting more
and more customers is better and vice versa.

2. Economic indicators:

a) Gross Domestic Product (GDP): it is better to make an investment in a country that

has high GDP.
b) Unemployment rate: when there is a high Unemployment rate, that means Hard
Rock café can get more workers for less wages and salaries and vice versa.
c) Inflation rate: when it is high or getting higher, that means costs will increase.

E. Political risk

1. New legislations.

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2. Expropriation of assets by the government.
3. Acts of war, and military coups.

F. Real estate market

1. Real estate’s values.

2. Listing prices.
3. Number of real estates’ available for rent& sales.

Question 2: Which is the highest rated of the four European cities under consideration,
using the table above?

Factors weighted by its

European cities under Importance importance for each
consideration of this European city under
Factors factor at consideration
this time
A B C D A B C D
A. Demographics 70 70 60 90 20 14 14 12 18

B. Visitor market 80 60 90 75 20 16 12 18 15

C. Transportation 100 50 75 90 20 20 10 15 18

D. Restaurants/ nightclubs 80 90 65 65 10 8 9 6.5 6.5

E. low political risk 90 60 50 70 10 9 6 5 7

F. Real estate market 65 75 85 70 10 6.5 7.5 8.5 7

G. Comparable market
70 60 65 80 10 7 6 6.5 8
analysis
100 80.5 64.5 71.5 79.5

Sum
Answer:  The steps of factors rating method:

1- We weight each factor by its importance at this time for each city under consideration.
For instance: the Demographics factor in city A is 70, the importance of this factor at
this time is 20%, therefore the weighted factor is 70*20%= 14.

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 2- We sum all the weighted factors for each city, and the city with the highest score is the
one we choose for our next location.

 Applying these steps in this example had resulted in choosing city A to be the place of
our next café, after being the highest rated city (80.5) among the four European cities
under consideration.

Question 3: Why does Hard Rock put such serious effort into its location analysis?

Answer:

 Choosing the location of where to place the next Hard Rock café is a very
important decision that requires (before selecting) a lot of locations analysis for several
critical reasons. First of all it is a long term decision that is made relatively infrequently, and
once committed to a certain location, many resources and cost issues are difficult to change.
It also has a significant impact on fixed and variable costs which are key factors in increasing
or decreasing the profit of any company or firm.

 It is also important because it determines many specifications that shape the way the
company operates and affects many upcoming decisions such as:

 The relationship with suppliers.

 Types of employees that location is going to provide for the company (skilled-
not skilled, educated-not educated…etc).
 Types of customers that the company is going to try to attract which is also
related to the types of market researches, marketing strategies, and marketing
plans.
 The conditions of legal, political, and economical environment that the company
is going to work under.

Question 4: Under what conditions do you think Hard Rock prefers to franchise a cafe?

Answer:

 When there are various risk factors and differences in social norms, preferences,
business practices and employment law. (As a Hard Rock Cafe franchisee you have

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 the flexibility to shape and mould your own Cafe to suit local market conditions. Go
after the business you want.)
 For rapid expansion without an enormous outlay of capital.
 For achieving fast market penetration.