Corral Burgers Delivery Service

Case: AN0041
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Version: 16/01/2017
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Case
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Hamburguesas
El Corral
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ISSN: 2322 - 9330
Does Delivery Service

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Matter?
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In preparation for the El Corral management board’s final meeting of 2013 on December 16, Nata-
lia Gutiérrez, who had been appointed assistant to the corporate sales manager two months earlier,
stayed late at the office that night. With some of her colleagues, she reviewed expansion strategies
and market data. While El Corral’s sales developed according to plan, the recent Euromonitor report
from November 23, 2013, caught their attention, as it stated that El Corral had lost its long-lasting
leadership at Colombia’s fast-food market. The new ‘Number 1’ was McDonald’s.
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The meeting took longer than expected; it was time to eat something. Somebody came up with the
idea to call a delivery service.
“Let’s call McDonald’s,” said Juan, an experienced sales assistant.
The group was silent. Juan apologized, saying, “I’m sorry… I was joking, but we cannot call El Co-
rral because we don’t have a delivery service.”
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AUTHORSHIP This case was prepared by Professors Marcus Thiell and Luz Elena Orozco, from the Universidad de los Andes School of Manage-
CREDITS ment and Daniela Sinisterra an alumnus from the same university, with collaboration in structuring of exhibits of Eduardo Olaya Par-
do, alumnus from the same university. Teaching cases are developed solely as the basis for class discussion and are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to repro-
duce materials, contact coleccion.cladea@gmail.com.
Copyright © 2017 Universidad de los Andes – School of Management. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any form or by any means --electronic, mechanical, photocopying, recording, or
otherwise-- without the permission of the copyright holder.
This document is authorized for educator review use only by Mary Mendoza, Other (University not listed) until Sep 2018. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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“This is part of our corporate policy, Natalia.” Juan added.
“But why don’t we make deliveries? We should!” Natalia sentenced.
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All heads turned to her, and Juan replied: “Well, there are diverse opinions on this issue, Natalia,
but, given the extreme freshness of our products, the company stays firm to its ‘no-delivery-servi-
ce’ policy.”
The group finally ordered sushi and continued assessing national expansion options. On her way
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home, the lack of a delivery service offering at El Corral occupied Natalia’s thoughts.
Hamburguesas el Corral
Hamburguesas El Corral was a Colombian hamburger restaurant chain that first opened in 1983
with a casual self-service location in downtown Bogotá (Portafolio.co, 2011). They started opera-
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tions with what they called “the original style” (“el estilo original”), with a unique pop and retro
decoration present in its self-service restaurants (see Exhibit 1). From the beginning, El Corral
was recognized as a traditional Colombian brand positioned with the motto “the original recipe”
(“la receta original”).
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We have always stayed loyal to our logo, newspaper-decorated tables, and to the cartoon
and neon lights adornments, because this fosters familiarity. People still feel affection
and appreciate it, so we haven’t felt pressure to change it. We haven’t modified anything
in the restaurants’ layout, except including more seating arrangements to accommodate
different group sizes (Juan Maldonado, personal interview, 10/2013).1
Hamburguesas El Corral’s main customer segment consisted of high-income people between the
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ages of 18 and 40 who ate out often and enjoyed good meals. They were “also characterized by their
extreme loyalty” (Juan Maldonado, personal interview, 10/2013). In Bogotá, El Corral deployed
its restaurants in the area stretching from Chapinero to Usaquén, where high-income consumers
prevailed. Another important segment consisted of middle-income customers who visited restau-
rants less frequently.
El Corral’s mission was “producing first quality food, offering outstanding service, striking the right
balance between quality and price, creating a welcoming and entertaining atmosphere, and making
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every customer feel special and important.”2
To fulfill its mission, El Corral relied on top-quality ingredients in every product and process, cons-
tantly exploring ways to improve its procedures and techniques in order to satisfy customer expec-
1
Juan Maldonado joined Hamburguesas El Corral in 2003; for the past seven year he has been part of the managerial board.
p. 2 2
Hamburguesas El Corral. Misión, accessed in September 2013, at https://www.facebook.com/hamburguesaselcorral/info
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tations (Diaz, 2012). The company developed new products to keep up with current trends, using
an abundance of international ingredients and different combinations to create exciting hambur-
ger dishes, like “la italiana”, “la casera”, “la todoterreno”, “la criolla”, “la texana”, or “la costeña”.
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Employees played an important role, contributing to mission accomplishment by creating a unique
experience at chain stores as well. “When you eat a delicious hamburger and you are comfortable,
but the cleaning lady is rude or annoys you, the whole dining experience is tarnished, and custo-
mers leave with a poor perception...” (Juan Maldonado, personal interview, 10/2013). In addition
to training on customer interaction processes, El Corral also provided extensive training on produc-
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tion processes, considering sensory characteristics of product preparation stronger than technolo-
gy. El Corral offered employees a large variety of training programs. As a result of high personnel
turnover and the geographic dispersion of stores in Colombia, these programs were delivered both
face-to-face and online. “The company does not pay the highest salaries in the market, but its sa-
laries are not the lowest either. Entry salaries start at minimum wage and are adjusted based on
seniority after only six months and up to two years on the job. Employees primarily resign when
lured by promises of higher wages in other organizations, but they largely apply for re-entry after
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a short while. They discover that not only the salary is important but also other components of our
company’s ‘total compensation package’ like training, compliance agreements, etc.” (Juan Maldo-
nado, personal interview, 10/2013).
El Corral also forged strategic alliances with suppliers to assure product quality and freshness.3 The
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bread was delivered daily at Bogotá restaurants and approximately every three days in other ci-
ties. The company only used cholesterol-free oil and freshly picked vegetables. Having established
suppliers enabled El Corral to offer the exact same product every time customers made an order,
no matter which restaurant they visited. The company assessed its providers constantly and only
purchased ingredients and raw materials from registered suppliers with a manufacturing license
issued by Colombia’s Ministry of Health. El Corral itself manufactured some sauces and produced
its own no-additive, 100% beef meat –certified by Universidad Nacional de Colombia’s Institute of
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Food Science and Technology. In Colombia, its main supplier for bread was Bimbo and for French
fries McCain, whose sales to El Corral accounted for 10% to 15% of revenues.
El Corral’s quality strategy featured an Integrated System for Quality Management and the certi-
fications for all its locations and formats. At the end of 2005, El Corral obtained for the first time
GMP4 and HACCP5 accreditations (Dinero.com, 2006). Quality was highlighted in its web page
advertising, with illustrations showing that El Corral’s hamburgers looked healthy and nutritious,
also revealing the “homemade” component of its product offering. El Corral had never placed TV
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or radio ads in its 30 years of operations (Revista Merca2.0, 2011). They relied on what works best
3
Hamburguesas El Corral, La Receta Original, accessed in September 2013 at http://www.elcorral.com/?corporativo=historia
4
Good Manufacturing Practices: GMPs are practices used to ensure that products are consistently produced and controlled according to quali-
ty standards. See www.fda.gov.
5
Hazard Analysis and Critical Control Points: HACCP is an approach in which food safety is addressed through the analysis and control of
biological, chemical, and physical hazards from raw material production, procurement and handling, to manufacturing, distribution, and con-
p. 3 sumption of the finished product. See www.fda.gov.
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in Colombia: word of mouth. In 2012, for the first time, El Corral successfully used Groupon’s pro-
motional service, a marketing tool that offered daily local business discount coupons by email to
its subscribers. El Corral also boosted its presence in social media, such as Facebook, where they
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had more than 100,000 followers.
By 2013, 30 years after its foundation, El Corral had more than 200 restaurants across 30 Colom-
bian cities and four countries (Viana, 2013), operating several formats in addition to its traditional
one. They ventured into food courts, hypermarkets, and convenience stores, with a décor and at-
mosphere that resembled its original design (Portafolio.co, 2008).
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El Corral’s Expansion
The company’s development was reflected in its continuous growth. In 2012, El Corral had sales
of USD 145.5 million, with a growth rate of 11.2% and 19.8% in comparison to 2011 and 2010, res-
pectively (see Exhibit 2). Though expansion began in 1983, its rate got higher after 2000, when El
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Corral’s total number of restaurants reached 25 (Dinero.com, 2006). Until then, the company grew
by replicating its initial format in every restaurant, but, over time, this scheme ceased to create the
desired customer experience. However, El Corral learned to adapt its restaurants to meet customer
requirements, such as Internet access and table size flexibility, as well as including bar seating for
single guests. The company’s current mindset considered that “it doesn’t matter if customers stay
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all afternoon working at our restaurant and don’t buy as much; we just want them to come” (Juan
Maldonado, personal interview, 10/2013).
What defines our strategy most is the expansion plan. We have focused deeply on ente-
ring medium-sized cities, such as Florencia, Yopal, and Barrancabermeja, which have
populations with good purchasing power but do not have many well-known restaurants
yet. Without taking into account the development that McDonald’s or other restaurants
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have had, we have concentrated on increasing our market penetration in the country,
and we want to cover untapped areas, with as little cannibalization as possible. This has
implied closing restaurants as soon as we found that cannibalization was significantly
affecting sales. Another essential part of our strategy is to look for convenience, even
if we do not provide home-delivery services. We are opening small restaurants becau-
se we want our customers to find us everywhere. That way we are building high market
penetration as a basis for future growth. Accordingly, we are also working on impro-
ving takeout packaging, so customers who wish to take our hamburgers home can do so
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comfortably. We do not compromise quality in this case, also making our burgers look
more appetizing, rather than just wrapping them up with paper (Juan Maldonado, per-
sonal interview, 10/2013).
The international expansion started with a restaurant in Santiago de Chile in May 1996. From the-
re, El Corral continued its international expansion through franchising. By early 2013, there were
p. 4 four restaurants in Panamá (starting in 2004), six in Ecuador (starting in 2007), four in Chile (star-
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ting in 1996), and one in the United States (starting in 2013) (Viana, 2013). In every country, the
company adapted to local markets, depending on available suppliers, but it continued to focus on
high service and food quality. In the United States, for example, the Board of Directors decided to
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substitute juice suppliers because the Colombian suppliers, Tutti Frutti and Alpina, had no market
presence there and did not offer any added value for local customers. Nevertheless, some provi-
ders were also available in or even from the United States, like Coca-Cola Company for sodas and
McCain Foods Limited for French fries.
In 2001, using the same base of suppliers, the first El Corral Gourmet started operating. El Corral
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Gourmet featured a modified restaurant concept, with table service and an extended menu of gour-
met hamburgers with special ingredients (Pérez, 2013). Supported by El Corral’s well-established
recognition of the brand Hamburguesas El Corral, El Corral Gourmet grew and developed its own
identity as an American-style casual diner (see Exhibit 1), with more alternatives than the chain’s
traditional restaurants. As part of its diversification strategy, its versatile menu allowed customers
to pick among three types of bread and seven types of cheese. It also included a greater variety of
drinks than Hamburguesas El Corral, as well as an assortment of cold and warm appetizers, salads,
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sandwiches, meat, and fish dishes. As compared to Hamburguesas El Corral, customers at El Corral
Gourmet paid between 8% and 54% more for a menu of a similar product category (see Exhibit 3).
A bar with a large range of liquors was also introduced for happy hour fans.
El Corral Gourmet focused on customers with higher purchasing power, ranging from 30 to 70 years
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of age, who wanted to be better served. They looked for a better atmosphere and wanted to spend
more time dining with their families, friends, or colleagues. At El Corral Gourmet, elegant waiters
were trained to provide customized service experiences, and the interior design featured wooden
seats, higher ceilings, and decorative mirrors.
Colombia’s Fast Food Industry

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Colombia, a developing country in South America with a population of 48 million and an economic
growth of nearly 4.0% in 2012 and 10.9% since 2010, was expected to grow 4.3% in 2013 (DANE,
2013). Its GDP rose from USD 287.02 billion in 2010 to USD 378.42 billion in 2012 (World Bank,
n.d.). Although 32.7% of Colombia’s inhabitants lived in poverty in 2012, the country ranked second
in poverty reduction worldwide, 1.4% less than in 2011 and 4.5% less than in 2010. Its Gini Index
stood at 0.535 in 2012 and 0.555 in 2010 (World Bank, n.d.).
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In 2012, Colombian households spent USD 12.1 billion eating out, 17% more than in 2011 (Semana.
com, 2012). From that total, USD 2 billion corresponded to meals at fast food restaurants according
to Raddar, a market consulting firm.
Before 1995, the year when McDonald’s arrived in Colombia, only ten fast food chains operated in
the country (e.g., Kokoriko, Presto, Surtidora, and PPC). However, in less than two decades, other
p. 5 important global players, such as Pizza Hut, Dominoes, Taco Bell, Papa John’s, Burger King, Ken-
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tucky Fried Chicken, and Subway, entered the market. By 2011, there were 45 fast food chains with
aggregated sales of USD 0.8 billion that increased their revenues by more than 20% that year (Se-
mana.com, 2012). Despite these changes, local chains such as Kokoriko, Frisby, and Presto were
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still important players (see Exhibit 4). McDonald’s arrival, Colombia’s thriving economy over re-
cent years, and some Free Trade Agreements contributed to the expansion of the fast food industry
in Colombia by increasing foreign investments, which in turn fueled new business developments
(Portafolio.co, 2009).
The Colombian fast food industry witnessed a constant struggle between El Corral and McDonald’s
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for market share in recent years (see Exhibit 4). While McDonald’s increased its share by more
than 2.5 points, reaching 20.6% and a leadership position in 2012, El Corral reduced its share by
approximately 2 points to 16.6%, holding the second place (Euromonitor International, 2014a).
However, in spite of its 8.4% sales increase from 2011 to 2012, McDonald’s posted a negative ope-
rational margin of -3.5% in 2012 (see Exhibit 2).
The main process difference between McDonald’s (see Exhibit 5) and Hamburguesas El Corral
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lay in process flexibility and the corresponding product customization. McDonald’s menu offered
product variety, but the company did not allow customers, for example, to specify how they wan-
ted their burgers done:
Orders like “I want it well done, but I want it still a little red in the middle, and I would
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only like one slice of tomato” are not possible at McDonald’s given its strict processes.
From our standpoint, this drives employees to lose sense of what they do and does not
enable them to do their work with affection and to convey the magic that we have at El
Corral. … While maintaining a customized front-office service, we seek back-office sy-
nergies throughout the entire operating model (Juan Maldonado, personal interview,
10/2013).
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McDonald’s had a significant economic capacity to invest in development and technology to

standardize its processes (e.g., digital strategies, interactive kiosks to order, and Apple Pay to
simplify payments). Likewise, its huge volumes proved very tempting for suppliers, serving
as a trump card to lower costs. Most of its providers were leaders in their respective markets
and partnered with McDonald’s since the beginning of its operations through long-term con-
tracts. Some global suppliers included McCain, Nestlé, Danone, and Heinz (the latter until Oc-
tober 2013, as a result of McDonald’s reaction to changes in Heinz’ management (Portafolio.
co, 2013)).
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Both chains, El Corral and McDonald’s, were located in close proximity to one another and offe-
red store locators on their web pages. In Bogotá, McDonald’s owned restaurants largely in areas
populated by social-economic strata 3–6, as well as locations to serve populations like Engativa, a
lower-middle income sector. Likewise, El Corral’s restaurants concentrated geographically in nor-
theast Bogotá, with minimal intensity in lower-income sectors, such as Fontibon or Soacha. These
p. 6 similarities were based on individual planning, as stated by El Corral:
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Our strategy is not to look at the competition. We obviously have annual meetings to
discuss figures, but in general we just focus on ourselves and on pursuing our own goals,
no matter what McDonald’s or Burger King do, even where stores are close, which has
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occurred by coincidence in key areas of the city. It is a risk we take on a daily basis (Juan
Maldonado, personal interview, 10/2013).
Customer satisfaction metrics reflected differences when comparing McDonald’s and El Corral.
McDonald’s customers valued the offerings and activities for children and the chain’s key service
features. Rapid service, ease of and access to parking, home deliveries, drive-thru services, and
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short waiting times at cashiers were valued the most. As compared to El Corral, McDonald’s cus-
tomers highly appreciated having a special place for children, home deliveries, drive-thru servi-
ces, and 24-hour restaurants. In contrast, customers rated El Corral significantly higher in food
quality, freshness, and presentation. El Corral also scored higher than McDonald’s in menu va-
riety, employees’ service attitude, and overall brand satisfaction. When asked about soda quali-
ty, location, and price-quality ratio, customers valued both El Corral and McDonald’s similarly
(see Exhibit 6, Exhibit 7).
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Customers also showed higher satisfaction levels with McDonald’s prices in comparison with
Hamburguesas El Corral’s prices (see Exhibit 6). The higher prices at El Corral (see Exhibit 3)
were attributed to higher quality ingredients and the supply chain costs incurred by the company
to secure fresh products –usually on a daily basis.
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Home Deliveries in Colombia

Bad weather, lousy traffic, and long distances in cities like Bogotá drove many industries to offer
home delivery services (Euromonitor International, 2014a), including hairdressers, car washes,
animal care services, surprise birthday breakfast providers, medical services, and restaurants.
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From 2007 to 2012, delivery sales in restaurants increased noticeably around the world and par-
ticularly in Latin America. Between 2007 and 2012, the captured value of fast food restaurants
offering home delivery grew by 2.9% worldwide, 18.2% in Latin America, and 28.9% in Colombia
(see Exhibit 8). According to Euromonitor (2014c), in full-service restaurants, delivery sales as a
share of total sales grew from 7% to 10% in Colombia in 2012. Exhibit 9 shows some restaurants
with food delivery service in Colombia, pinpointing key service characteristics.
A major benefit of offering home delivery refers to increased sales. “Delivery sales have been pos-
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ting double-digit growth every year in every country where it’s offered” (Jargon, 2011). Businesses
offering only home deliveries had fared well during the past years with a compound annual growth
rate of 7.7% in Latin America and 99.6% in Colombia (Euromonitor International, 2014c). Such
100% home deliveries did not have facilities for on-site consumption and, therefore, invested a
lot less on rent, locale appearance, interior decoration, and trained waiters. In these ‘restaurants’,
food could be either picked up by consumers or delivered to them, often for an additional charge.
p. 7 Restaurants with stationary operations tended to be more permanent and often featured more
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elaborate on-site cooking facilities. Their menus were generally larger, and the consumption pro-
cess proved more experience-based (Euromonitor International, 2014c). Stationary operations
combined with delivery services required higher investments in infrastructure, personnel, and
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logistics. While the product itself was nearly the sole selling tool at a restaurant that operated as
a 100% delivery service, stationary operating restaurants had to influence many other decision
variables in addition to food itself and could therefore achieve an easier positioning and brand
recognition than those using the 100% delivery formats (Revista La Barra, 2012).
Even though many customers still preferred calling delivery services and almost 50% paid cash
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(Rodriguez, 2012), new opportunities and ways to market a good or service had emerged with
the increasing diffusion of the Internet. Globally, there were 35.7 Internet users for every 100
inhabitants in 2012 (Internet World Stats, n.d.), but, in Latin America, there were 43.4 in the
same year. Half of the Colombian population had Internet access in 2012 (World Bank, n.d.),
and, during 2013, the amount of Internet subscriptions climbed by 17%, with approximately
4.4 million Internet connections in total (Ministerio de Tecnologías de la Información y las
Comunicaciones, n.d.).
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Many businesses –including fast food chains, book stores, and travel agencies–created websites
as point-of-sale options, and online shopping proved feasible. For instance, Herrera et al. (2006)
estimated a return of approximately 22.88% for a web page with an initial investment of USD
15,500. Despite the overall growth of web-supported business models, certain elements, such as
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cultural barriers, had to be considered when implementing delivery services online. Language,
local buying habits, credit card utilization, and customer confidence in e-commerce systems and
services illustrated some of these barriers.
In Latin America, internet-based restaurant food delivery had grown by 12% in recent years (Ro-
driguez, 2012). Over the past 10 years, in Colombia alone, sales in the industry grew from USD
23 million in 2001 to USD 100 million in 2011 (Rodriguez, 2012). In Bogotá, Colombia’s largest
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city, with a population in excess of 7 million, both Internet use in general and online delivery or-
der placing were traditionally popular among higher-income people between 15 and 50 years of
age belonging to the 4–6 social-economic strata (Herrera Galvis et al., 2006) (see Exhibit 10).
Sixty percent of all visits to restaurant websites were made to place delivery orders –90% from
home and 10% from the workplace (Rodriguez, 2012).
Also deluxe restaurants in Bogotá, such as Oliveto, Da Portare, Teriyaki, and Kong, had introdu-
ced internet-based delivery services, successfully managing to deliver fresh fine meals (Euromo-
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nitor International, 2014c). Restaurant strategies targeting affluent consumers began to include
outsourced delivery services or even integrating different restaurants of the same proprietor. Da
Portare by Leo Katz, who owned several restaurants in Bogotá, provided an example. Via the www.
zonak.com.co portal or its call center, customers could order an appetizer from La Mar, a main
course from Koi, dessert from Diner, and a juice from Pravda. Likewise, Internet portals such as
www.domicilios.com and www.pedidosya.com.co enabled users to order on extended schedules,
p. 8 any day, from anywhere.
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Format choice –stationary, delivery service, or both– depended on the customer segment and
the positioning a restaurant tried to reach, as well as on the type of food it served. Chinese and
Italian foods, for example, were sometimes offered as a 100% home delivery service (e.g., Papa
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John’s and Alice’s Chinese Restaurant had already introduced this type of service in Bogotá).
Switching formats required evaluating trade-offs, such as training costs for different types of per-
sonnel, innovative advertising to promote new services, and infrastructure changes (e.g., seating
arrangements, decorations, and parking availability). If an Internet portal was launched, legal
and technical requirements, such as copyrights, brands, web domain, and commercial registra-
tion, had to be met (Herrera Galvis et al., 2006). Likewise, implementing an Internet portal called
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for several investments, among them call-centers and logistics (e.g., effective processes, trained
delivery personnel, and efficient delivery channels). Appropriate packaging proved fundamental
in this business; it had to be appealing and, first and foremost, maintain the product’s optimum
quality (Revista La Barra, 2012).
Delivery services proved successful in crowded cities, where real estate costs were too high to justify
the building of drive-thrus (in the case of restaurants) or the construction of large buildings (e.g.,
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in the case of retailers) (Jargon, 2011). The trend towards convenience was particularly evident in
markets where increasingly hectic lifestyles created the conditions for timesaving sales (Lee & Lin,
2012). Therefore, the demand for convenience and efficiency had a significant impact on the in-
dustry, encouraging the development of formats and concepts that accommodated modern lifes-
tyles (El Tiempo Casa Editorial, 2013). Today’s busy consumers expected ultimate convenience in
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shopping, driving the demand for one-stop shops, convenience stores, direct selling, online stores,
and delivery services (Euromonitor International, 2014a) (see Exhibit 11). In cities like Beijing,
Seoul, and Cairo, motorbike delivery drivers swarmed the roads, taking food/products in specially
designed boxes strapped to their backs to make their way through bustling traffic (Jargon, 2011).
Despite the growth of delivery services, some companies located in Bogotá, such as Hamburgue-
sas El Corral, WOK, Crepes and Waffles, and Andres Carne de Res, had not yet adjusted to this
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global trend. According to them, deliveries compromised quality and, therefore, jeopardized the
restaurant’s or business’ reputation. Hamburguesas El Corral’s website stated, “Our products are
extremely fresh and prepared just when ordered; that is why at Hamburguesas El Corral WE DO
NOT HAVE HOME DELIVERIES” (Hamburguesas El Corral, n.d.).
The Meeting Ahead: No Home Deliveries at

El Corral?
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The following morning, Natalia went to her boss, María Fernanda Serrano, El Corral’s corporate
sales manager, reporting the progress of the preparation for the board meeting. After her update,
Natalia went on to address her concerns about the company’s no-delivery-service policy.
“Natalia, some people in our company argue that competitors have successfully adap-
p. 9 ted to changes in the market, setting up business models with home deliveries playing
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an important role. We are also aware that, when choosing what to eat at home, consu-
mers do not include El Corral among their options. But a home delivery service would
not guarantee the quality of our products, which is important to our customers. It took a
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lot of time and effort to build our quality-based reputation. Introducing home deliveries
could have a negative effect on both our market positioning and our sales. You should
bear in mind that our products start to impair or depreciate from the moment they are
served; the meat is extremely juicy, the sauces permeate into the bread, and so on. Pas-
ta, sushi, and Chinese food can be easily transported and do not deteriorate as fast as
hamburgers, which often have many layers of ingredients,” elaborated María Fernanda.
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“But what about all the other restaurants that offer delivery services? These are not just
pizza services; also many hamburger chains, like Burger King or McDonald’s, do offer
delivery services. Wouldn’t customers take the responsibility when ordering a delivery
service?” challenged Natalia.
“It is very important that our customers have an ideal perception of their favorite bur-
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ger, and they like it so much because it always tastes the same and looks the same. This
is why our burgers need to be prepared at our restaurants and cannot be ‘assembled’ by
customers at home. Our goal is to always serve it with the same high quality. Delivering
our products would alter the perception and image that our customers already have of
our hamburgers. After a 15- to 20-minute drive, our hamburgers would not reach the des-
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tination tasting as good and looking as good as they do when served at our restaurants.
We are not willing to take the risk of jeopardizing our excellence. Our customers would
resent it, and it would prove more damaging for us than our current lack of delivery ser-
vice. We don’t feel comfortable enough with the technology that is currently available to
deliver our products. We are looking forward to finding an economically viable way to
provide a similar experience that our customers have at our restaurants. If we introdu-
ce deliveries, the service should cover the entire menu, because we want our customers
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to have access to their favorite dishes. Offering a limited menu would affect their loyal-
ty to our brand. We have noticed that our customers have specific preferences and that
the variety of burgers is part of our differentiation. Providing a small range of products
is not our way of doing things,” rebutted María Fernanda.
“And what if we launched a new brand, such as El Corral HOME –a pure delivery service
without waiters and with a modified product offering? The company has already made
such a move with El Corral GOURMET,” Natalia argued.
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Holding the Euromonitor report in her hand, María Fernanda replied, “Yes, we created
El Corral Gourmet, but that was different. True, things might change in the future, Na-
talia, and innovation is another corporate strength. As you are new in the company, you
might have a perspective that could add new arguments to the traditional delivery service
discussion. I will reserve some time at the board meeting for you, and you will organize
p. 10 the relevant information and present a recommendation for a delivery service at Ham-
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burguesas El Corral. Should we stay firm with our traditional no-delivery-service policy,
or should we adapt and launch a new brand, El Corral HOME, as a 100% home-delivery
chain? And, by the way, this will also provide a good opportunity for you to get to know
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all corporate managers personally at this meeting in two weeks.”
Natalia left the office with mixed feelings. On the one hand, she was happy to address board mem-
bers with a topic that held the potential to impact the whole organization. On the other hand, she
knew she would be addressing a topic that required very diligent preparation because her recom-
mendation might –at least at the beginning– lack unanimous support.
yo
op
tC
No
Do
p. 11
Exhibit 1: El Corral’s Restaurant
Formats
t
os
Exhibits’
Section El Corral Gourmet
rP
yo
op
Hamburguesas El Corral
tC
No
Do
Sources: Tripadvisor.com, n.d.; Asociación Amigos del Parque 93, n.d.
p. 12
Exhibit 2: Comparative Income Sta-
tement of Industria de Restaurantes
t
Casuales Ltda. (El Corral) and Arcos
os
Dorados Colombia (McDonald’s) in
Colombia (2010-2012, in million COP)
Exhibits’
Section
Industria de Restaurantes Casuales
rP
Millions of COP Ltda. Arcos Dorados Colombia
(Hamburguesas El Corral, El Corral
Gourmet, Beer Station, and La Yarda)
2012 2011 2010 2012 2011 2010
Operating revenues 261,817 235,465 196,475 214,800 198,240 164,886
Cost of sales and
106,312 100,961 86,049 93,789 88,257 71,109
services
Gross Margin 155,505 134,504 110,427 121,010 109,983 93,778
yo
Management 15,115 10,023 7,753 48,539 49,609 46,049
operating costs
Sales operating
132,216 111,305 95,456 80,098 68,489 59,864
costs
Operating Margin 8,175 13,176 7,218 -7,627 -8,115 -12,135
Other revenues 7,350 5,107 2,766 9,152 10,987 7,929
Other expenses 5,787 4,436 2,683 5,701 5,692 6,264
Margin before taxes
and inflation 9,738 13,847 7,301 -4,176 -2,820 -10,470
adjustments
op
Income taxes 4,578 5,633 1,839 0,00 1,118 1,117
Earning /losses 5,161 8,214 5,462 -4,176 -3,938 -11,586
Depreciation 3,333 2,089 1,872 8,283 5,778 5,090
Amortization 7,394 5,030 3,553 3,699 7,114 5,036
Source: Gestor Comercial y de Crédito, n.d.
Exhibit 3: Prices at El Corral

tC
(‘Hamburguesas’ and ‘Gourmet’)

and McDonald’s in Bogotá (11/2013)
in COPs McDonald's
El Corral Gourmet
No
Quarter pounder with cheese $11,900 $14,200 $8,600

Cheeseburger $9,900 $14,900 $3,450
Big Mac/ Corralisima/ Todo terreno $19,400 $29,900 $4,900
Chicken hamburger $15,200 $16,500 $8,500
Source: Elaborated by case authors.

Do
p. 13
Exhibit 4: Brand Shares of Chai-
ned Fast Food in Colombia, 2009-
t
2012 (in %)
os
Exhibits’
% value Global Brand Owner 2009 2010 2011 2012
Section
McDonald's McDonald's Corp 17.5 17.1 17.4 20.6
rP
El Corral IRCC Industria de Restaurantes Casuales Ltda 18.4 18.6 18.7 16.6
Kokoriko Avesco SA 15.1 13.6 13.0 12.5
Frisby Frisby SA 9.7 10.3 10.5 10.0
Productora y Comercializadora de Alimentos
Helados Mimo's 6.2 6.0 5.8 5.4
Ltda
Dunkin' Donuts Dunkin' Brands Group Inc 3.9 4.3 4.3 3.8
Presto Frayco SA 4.1 3.9 4.0 3.6
Sandwich Qbano Sandwich Qbano SA 3.6 3.4 3.1 3.1
yo
Helados Popsy Inversiones El Cerrito Ltda 3.0 3.4 3.3 3.1
La Brasa Roja CBC Ltda 2.7 2.8 2.8 2.6
Burger King Burger King Holdings Inc 0.9 1.5 1.9 2.2
Subway Doctor's Associates Inc 0.4 0.7 0.9 1.9
Pan Pa' Ya Pan Pa' Ya Ltda 1.6 1.9 2.0 1.9
Yogen Früz Yogen Fruz Canada Inc 2.0 2.0 2.0 1.6
Cali Mio CBC Ltda 2.2 2.0 1.8 1.5
op
Cali Vea CBC Ltda 1.5 1.4 1.2 1.0
Mr Lee SIA Ltda 0.9 0.8 0.9 0.8
KFC Yum! Brands Inc 0.4 0.4 0.3 0.8
Sarku Japan Sarku Japan Restaurant Group - - 0.2 0.7
Jeno's Pizza Telepizza SAU - 0.6 0.7 0.6
Charlie's Roastbeef CRB Capital SAS - - 0.6 0.6
Cinnabon Focus Brands Inc 0.3 0.4 0.4 0.4
tC
Taco Bell Yum! Brands Inc - - 0.3 0.4

On The Run Exxon Mobil Corp 0.3 0.3 0.3 0.2
Chopinar Inversiones Chopinar SA 0.3 0.3 0.3 0.2
Star Mart Chevron Corp 0.2 0.2 0.2 0.1
Petrobras BR Petrobras Distribuidora SA 0.1 0.1 0.1 0.1
El Khalifa Restaurantes El Khalifa SA 0.3 0.2 0.2 -
Charlies Roastbeef Industrias RB 0.8 0.7 - -
No
Jeno's Pizza Grasot Ltda 0.7 - - -

Others Others 2.9 2.9 3.0 3.5
Total Total 100.0 100.0 100.0 100.0
Source: Euromonitor International, 2014a.

Do
p. 14
Anexo 5: McDonald’s Colombia
t
os
Exhibits’
Section McDonald’s arrived in Colombia in 1995 (Luna C., 1995). By 2013, McDonald’s owned more
than 34,492 restaurants (81 in Colombia) and operated in 116 countries worldwide (Chalabi &
rP
Burn-Murdoch, 2013). McDonald’s’ mission states:
To be our customers’ favorite place and way to eat and drink. Our worldwide operations are
aligned around a global strategy called the Plan to Win, which centers on an exceptional cus-
tomer experience – People, Products, Place, Price and Promotion. We are committed to con-
tinuously improving our operations and enhancing our customers’ experience (McDonald’s,
yo
2014).
McDonald’s has successfully segmented its customers, mainly through a demographic age-ba-
sed strategy. It pursues a generic strategy of cost leadership and differentiation in every
country, large capacity, reputation, and multinational character. Its low-price strategy has
allowed the company to reach low-to-high-status consumers because it is affordable enough
for low- and middle-income customers, and, at the same time, its stores are located in trendy
op
areas visited by higher-income segments. For this fast food chain, service is its primary fo-
cus (Kara et al., 1997).
Children are part of McDonald’s target population. McDonald’s knows that kids have a big
influence when choosing the brand the family buys. Therefore, McDonald’s has managed to
tC
understand very well the needs of this customer segment and has created an entire strategy
around it. The company has built play zones and made its restaurants a fun place for kids
to go. At the same time, parents pleasantly agree to eat at McDonald’s because, while their
children entertain themselves playing, they can have some quality time, too. McDonald’s
segmenting strategy has intended to build an image of a place where people can enjoy ea-
ting and playing.
No
Many corporate policies in Colombia are close to those abroad. For instance, at the end of the
year 2000, as a result of a 0.4% decline in sales in the Northeast United States, McDonald’s
implemented a “one-dollar menu” to recover the 2.6% drop in customers that had taken pla-
ce during the first eight months. The menu proved an instant hit, and the amount of total
sales and customer transactions effectively rose. Even though this exact menu has not been
applied in Colombia yet, it does demonstrate the company’s low-price strategy and the eleva-
ted margin it still receives with such a low-priced menu. In Colombia, this strategy has been
adapted with the name “pequeños precios” (“small prices”) and a menu that features ham-
Do
burgers from USD 0.6 to USD 1.6, as well as French fries, ice cream, or sodas from USD 0.8
to USD 2.4 (Parry, 2004).
p. 15
t
os
Exhibits’
Section McDonald’s one-dollar menu costs and prices (2002)
rP
Item Food & Paper Margin
Cost
McValue Fries 0.12 88%
Soft Drink 0.17 84
Big N’ Tasty 0.64 36
Double Cheeseburger 0.52 48
McChicken 0.46 54
Pies (two) 0.34 67
Sundae 0.10 90
yo
Fruit N’ Yogurt Parfait 0.35 65%
Source: Parry, 2004
In Colombia, McDonald’s has offered delivery service since its beginning; even though it was
not common worldwide (it started in Egypt in 1994). By 2011, approximately 1,500 of its res-
taurants in 15 countries offered delivery service, and more than 30% of their total sales came
for this service (Jargon, 2011). By 2012, McDonald’s offered delivery services, for example,
op
in Australia, India, Malaysia, Philippines, Singapore, and China as well (abc.es, 2012). It was
necessary for McDonald’s to invest in technology to take its food to its destination with the
best possible quality; orders are carried in battery-powered induction heating boxes with
vents to keep humidity out, so the fries do not get soggy and cold. Items are also placed in
insulated containers with ice packs that fit the motorbikes or electric scooters driven by de-
tC
livery personnel (Franchise Direct, 2008).

No
Do
p. 16
Exhibit 6: Results from a Customer
Satisfaction Survey –McDonald’s ver-
t
sus El Corral (2013)
os
Exhibits’
Section
rP
Your fondness for the brand 4.07 2.79
General satisfaction with the brand 3.93 2.86
Food quality 4.50 2.57
Food presentation 4.29 3.14
Food freshness 4.29 2.43
Employees’ service attitude 4.00 3.79
Store location 3.93 3.93
yo
Quality of desserts 3.86 3.64
Menu variety (salads, vegan, low fat, etc.) 3.86 2.79
Food preparation standards 3.79 3.29
Soda quality (Postobón and Pepsi; Coca Cola) 3.71 3.64
Atmosphere and decoration 3.71 3.50
Menu and ongoing innovation 3.57 3.07
Price vs. perceived quality 3.57 3.29
Restaurant cleanliness 3.50 3.93
Service and food delivery speed 3.36 4.21
op
Appropriate place to share with family (adults, 3.29 3.43
grandparents, children, etc.)
Waiting time at cashiers 3.00 4.00
Access and parking ease 3.00 4.14
Children’s menu 2.93 3.71
Healthy and balanced products 2.86 1.79
Price level 2.64 3.71
tC
Social and environmental responsibility 2.14 2.00

Special place for children 1.50 3.64
Home deliveries and drive-thru 1.43 4.00
24-hour restaurants 1.21 3.93
Scale: from 1 through 5, with 5 as highest score.

No
Do
p. 17
Exhibit 7: Tangible Service Ele-
ments at El Corral and McDonald’s
t
in Colombia (11/2013)
os
Exhibits’
Section Service Element Hamburguesas El Corral McDonald’s
1 Number of cashiers 1 or 2 cashiers per store 2 or more cashiers per store
rP
Delivery service in Bogotá, Chía,
2 Home delivery No delivery service Medellín, Cali and Bucaramanga via
call center and McEntrega (website)
3 Drive-thru No drive-thru service Large stores have drive-thru service
Restaurants rarely feature their
Large restaurants have their own
own parking lots, but they have
4 Parking lot parking lots; the others have alliances
alliances with private parking
with private parking companies
companies
yo
Main stores have a kids’ area/playing
Kids’ area/playing
5 No kids’ area/playing ground ground, including toys and tables for
ground
kids and their relatives
No dedicated dessert and beverage
Dedicated dessert and counter; customers must wait in a All stores have a dedicated dessert and
6
beverage counter regular line to buy only a dessert or beverage counter
beverage
7 Coffee shop area No coffee shop area Some restaurants feature a McCafe
All stores have a self-service topping
Self-service topping
8 No topping area area (pickles, jalapeños, sauces,
op
area
napkins, straws)
1. Cheeseburger + French fries +
1. Hamburger + French fries + Orange juice + apple + toy
juice or soda + dessert 2. Hamburger + French fries +Orange
9 Kids menu alternative
2. Chicken nuggets + French fries juice + apple + toy
+ juice or soda + dessert 3. McNuggets (4 pieces) + French fries
+ Orange juice + apple + toy
Alliance with Walt Disney, offering 3
tC
10 Kids toys No toys or 4 seasonal options (movie or

specific topic)
11 Soft drinks Postobón and Pepsi products Coca-Cola products
1. Nestea (Nestle)
2. Milkshakes (Popsy) 1. Orange juice (Minute Maid)
12 Non-soda drinks
3. Beer (Club Colombia) 2. Fuze tea (Coca-Cola)
4. Flavored water (Brisa-Postobón)
1. Ice cream 1. McFlurry (Oreo or M&Ms)
No
2. Ice cream and brownie 2. Sundaes (chocolate, strawberry, and

13 Dessert menu 3. Lemon or apple pie arequipe)
4. Ice cream and lemon or apple 3. Soft cone (chocolate, vanilla or mix)
pie 4. Pieces of fruit
9 different options for breakfast +
14 Breakfast menu No breakfast menu
orange juice or coffee products
6 different options for salads 2 different options for salads (chicken
Low-fat or veggie and tuna)
15 3 different options for wraps
menus
1 option wrapped with lettuce 3 different options for wraps
Chicken sandwich
(Roast) Beef sandwich
Do
Chicken menu or Ham & cheese sandwich Chicken sandwich

16 sandwiches and other
alternatives 2 options for hot dogs Chicken nuggets (10 pieces)
Chicken nuggets (5 and 8 pieces)
2 options with chili
p. 18
t
os
Exhibits’
Section Service Element
Descripción Hamburguesas El Corral
Hamburguesas El Corral McDonald’sMcDonald’s
rP
Menu for COP 9.800
There is no specific low-price
17 Low-price menu ‘Pequeños precios’ (“Small Prices”) for
option
COP 3.450 (5 options)
Some small stores located at ESSO
18 24-hour stores gas stations; 1 24-hour store in 11 24-hour stores across Colombia
Bogotá (Zona Rosa)
15 kids 12 kids
Kids’ meals Kids’ meals
Invitation cards Invitation cards
yo
Decoration Decoration
H-Birthday present H-Birthday present
Chocolate fondue and Cake
marshmallows
Candies Candies
19 Kids Party service
Globoflexia activity Globoflexia activity
Free bonus monthly kids’ meal during
a year for birthday child
Gift for guests
op
2 hostesses
Kids’ area/playing ground
Total price COP 336.000 Total price COP 392.800
Price per kid COP 22.400 Price per kid COP 32.733
tC
No
Do
p. 19
Exhibit 8: Market Sizes for Food-
service (2007-2012)
t
os
Exhibits’
USD MILLION 2007 2008 2009 2010 2011 2012
Section World
rP
Consumer Foodservice by
2,128,934 2,291,531 2,213,921 2,357,508 2,552,161 2,589,061
Type*
Chained (%) 24.90 24.60 25.30 25.20 25.30 25.80
Independent (%) 75.10 75.40 74.70 74.80 74.70 74.20
100% Home
81,193 85,731 82,481 86,076 91,428 91,700
Delivery/Takeaway*
Chained (%) 38.10 38.00 39.10 39.80 40.00 41.40
Independent (%) 61.90 62.00 60.90 60.20 60.00 58.60
Latin America
yo
194,475 223,914 212,506 251,602 278,427 194,475
Type*
Chained (%) 10.00 10.00 10.40 10.50 10.60 11.50
Independent (%) 90.00 90.00 89.60 89.50 89.40 88.50
100% Home
3,010 3,540 3,581 4,250 4,515 4,852
Delivery/Takeaway*
Chained (%) 28.80 27.30 26.60 26.20 26.50 27.30
Independent (%) 71.20 72.70 73.40 73.80 73.50 72.70
Colombia
op
17,315 20,016 20,342 22,138 24,677 27,158
Type*
Chained (%) 7.40 7.40 7.80 8.00 7.80 8.10
Independent (%) 92.60 92.60 92.20 92.00 92.20 91.90
100% Home
121 141 152 179 207 233
Delivery/Takeaway*
Chained (%) 30.60 33.40 32.10 36.20 38.70 40.30
Independent (%) 69.40 66.60 67.90 63.80 61.30 59.70
tC
Source: Euromonitor International, 2014c.

No
Do
p. 20
Exhibit 9: Restaurants Offering
Home Delivery Services in Bogotá
t
(Examples; 11/2013)
os
Exhibits’
Section Food Restaurant Home Call Time Delivery Minimum
Type delivery center frame Charge Delivery
rP
Pizza Hut 30 min. $3.300 $10.900
Pizza Pizza 35 min. free $9.900
Jeno's Pizza 70 min. $2.800 $13.200
Archie's 40 min. $3.500 $10.900
Pizza
Oliveto 45 min. $3.000 no minimum
Dominoes 30 min. free $11.000
Papa Johns 40 min. free no minimum
yo
Red Box 45 min. $2.900 no minimum
Conosur 60 min. $3.000 $19.900
Wok to Walk 50 min. $3.300 $15.500
Asian Toy Express 90 min. $3.300 no minimum
Mister Lee 45 min. $1.300 $12.000
Sr. Wok 45 min. $2.000 $10.000
Nick's 40 min. $1.500 $15.000
Sandwiches
Sangucheria 40 min. $3.000 $10.000
and Wraps
Subway 30 min. $1.500 $12.000
op
La Cigale 45 min. $3.000 $20.000
Di Lucca 45 min. $3.500 $23.500
Hooters 45 min. $3.000 $18.500
Internationa
Hard Rock 45 min. $3.000 $20.000
l Food
TGI Fridays 60 min. $3.000 $18.000
Diner 45 min. $2.300 $20.000
La Mar 60 min. $2.300 $20.00
Presto 70 min. $2.800 $7.900
tC
Toro Burger 50 min. $2.000 no minimum

McDonald's 45 min. $3.300 no minimum
Hamburguesas del
40 min. $3.100 $15.000
Rodeo
Hamburgers La Hamburgueseria 45 min. free no minimum
Randys 40 min. free $14.600
Burger King 40 min. free $10.000
El Corral Gourmet
No

Do
p. 21
Exhibit 10: Home Delivery Service’s
Target Market in Colombia (2006)
t
os
Exhibits’
Section Socio-Economic Stratum
Age Total
Low Medium Med/High High
rP
All 7,185,889 2,299,484 2,802,497 1,580,896 503,012
0-4 747,276 239,128 291,438 164,401 52,309
5-9 742,345 237,550 289,514 163,316 51,964
10 - 14 735,035 235,211 286,664 161,708 51,452
15 - 19 675,915 216,293 263,607 148,701 47,314
20 - 24 640,686 205,019 249,867 140,951 44,848
25 - 29 606,222 193,991 236,427 133,369 42,436
30 - 34 543,629 173,961 212,015 119,598 38,054
35 - 39 535,903 171,489 209,002 117,899 37,513
40 - 44 474,421 151,815 185,024 104,373 33,209
yo
45 - 49 390,882 125,082 152,444 85,994 27,362
50 - 54 320,560 102,579 125,018 70,523 22,439
55 - 59 241,173 77,175 94,058 53,058 16,882
60 - 64 172,595 55,230 67,312 37,971 12,082
65 - 69 128,623 41,159 50,163 28,297 9,004
70 - 74 95,758 30,643 37,346 21,067 6,703
75 - 79 66,431 21,258 25,908 14,615 4,650
Older than 80 68,435 21,899 26,690 15,056 4,790
Source: Herrera Galvis et al., 2006.
op
Exhibit 11: World Market by Conve-
nience Shopping Channels
tC
USD 2007 2008 2009 2010 2011 2012

% growth
millones 2007/2012
Store
formats 10,414,855 11,204,400 10,846,760 11,495,864 12,456,025 12,631,131 21.28
Non-store
formats
Internet 250,388 289,810 311,528 378,384 481,226 574,250 29.34
retailing
No
Vending 54,261 54,318 59,967 64,494 65,751 64,421 18.72
Source: Euromonitor International, 2014b.

Do
p. 22
Case: AN0041
t
os
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sed at http://www.merca20.com/hamburguesas-el-corral-una-caso-particular-de-mercadeo/
No
≈≈ Rodriguez, A. (2012). Mercado de food delivery en Internet crece al 12% anual en La-
tAm. Accessed at http://pulsosocial.com/2012/07/30/mercado-de-food-delivery-en-
internet-crece-al-12-anual-latam/
≈≈ Semana.com. (2012). El mercado de comidas rápidas: un negocio sabroso. Accessed at http://
www.semana.com/economia/articulo/el-mercado-comidas-rapidas-negocio-sabroso/265173-3
≈≈ Tripadvisor.com. (n.d.). El Corral Interior. Accessed May, 2015 at http://media-cdn.tri-
padvisor.com/media/photo-s/01/b6/0c/5a/el-corral-interior-shot.jpg
≈≈ Viana, J. (2013). A los 30 años, El Corral llega a 200 locales. Accessed at http://www.
Do
portafolio.co/negocios/expansion-cadena-restaurantes-el-corral
≈≈ World Bank. (n.d.). Indicators.
Interviews
p. 24 ≈≈ Maldonado, J. (2013, October). Personal interview.

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Corral Burgers Delivery Service

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Case: AN0041

Does Delivery Service

“Let’s call McDonald’s,” said Juan, an experienced sales assistant.

“But why don’t we make deliveries? We should!” Natalia sentenced.

every customer feel special and important.”2

Colombia’s Fast Food Industry

McDonald’s had a significant economic capacity to invest in development and technology to

Home Deliveries in Colombia

The Meeting Ahead: No Home Deliveries at

Sources: Tripadvisor.com, n.d.; Asociación Amigos del Parque 93, n.d.

Exhibit 3: Prices at El Corral

(‘Hamburguesas’ and ‘Gourmet’)

Quarter pounder with cheese $11,900 $14,200 $8,600

Source: Elaborated by case authors.

Taco Bell Yum! Brands Inc - - 0.3 0.4

Jeno's Pizza Grasot Ltda 0.7 - - -

Source: Euromonitor International, 2014a.

livery personnel (Franchise Direct, 2008).

Social and environmental responsibility 2.14 2.00

Scale: from 1 through 5, with 5 as highest score.

10 Kids toys No toys or 4 seasonal options (movie or

2. Ice cream and brownie 2. Sundaes (chocolate, strawberry, and

Chicken menu or Ham & cheese sandwich Chicken sandwich

Source: Euromonitor International, 2014c.

Toro Burger 50 min. $2.000 no minimum

Source: Elaborated by case authors.

USD 2007 2008 2009 2010 2011 2012

Vending 54,261 54,318 59,967 64,494 65,751 64,421 18.72

Source: Euromonitor International, 2014b.

bre la viabilidad de un portal de Internet para pedidos a domicilios de restaurantes

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