The Cheesecake factory (2) Essay Example

the restaurant industry, mainly due to expansion opportunities.

These chain restaurants choose to construct their facilities to conform to a specific concept and design, but they acquire the land either through purchase or lease. While purchasing the property of the same type incurs a higher upfront cost, it eliminates the need for monthly rent payments. The large size of these corporations within the industry provides them with economies of scale, allowing the possibility for them to gain control and influence over their suppliers. Considering these factors, the overall power of the suppliers is ranked as a 10 out of 1 (David, Kim & MacKenzie, 2009).

Another factor to consider is the power of the buyers. In the case of the Cheesecake Factory, the buyers consist of ordinary citizens who do not collectively possess enough power to significantly impact prices. There is no individual buyer or group of buyers that purchases a substantial amount of cheesecake to dictate terms or prices. Additionally, buyers have more power compared to suppliers due to high fixed costs, which can affect profitability and sales when there are a significant number of buyers (Karen & John, 2008).

The Cheesecake Factory depends on macroeconomic factors, which give buyers more power. The restaurant industry is highly competitive, resulting in a high level of rivalry among competitors. The Cheesecake Factory has locations in both metropolitan and urban areas, but it needs a significant customer base. However, these customers can also be found in less populated areas. The restaurants have a high density and offer similar services and products, making them subject to customer scrutiny. Customers tend to frequent the restaurants that provide the best value. Larger

restaurants have a slight advantage because of economies of scale, enabling them to advertise more frequently, develop unique products, and access competitive technology. This advantage is rated 0.25 out of 1.

The threat of substitutes is the highest among the five forces, primarily due to the frequent availability of substitutes. These substitutes are not limited to the restaurant industry, but also include any form of home-prepared meals. To counteract this, the Cheesecake Factory often utilizes a differentiation strategy and relies on its unique atmosphere to offer products that cannot be easily duplicated. According to Hume (2007), this threat is rated at 0.30 out of 1. Additionally, there is also the threat of new entry into the restaurant industry. The entry barriers are low, with small operators accounting for 91% of all restaurants, as reported by the National Restaurant Association.

Despite the impediments of intense competition and substantial fixed costs, a significant number of entrepreneurs still venture into the industry due to the promise of substantial profits from incremental sales beyond the breakeven point. Additionally, the prevalence of franchised businesses in this sector is a common occurrence. Furthermore, major chain restaurants benefit from advantages such as advertising, economies of scale, advanced technology, and superior purchasing power in real estate. According to Hume (2007), this force is ranked at 0.22 out of 1.