Hospitality & Restaurants

SBUX’s net income and net profit margins have been on an uptrend since 2010. At the end of fiscal year 2014, SBUX’s adjusted net income was $2.05 billion.

At the end of fiscal year 2014, SBUX’s operating income was $3.1 billion. Its operating profit margins increased to 19% in 2014—compared to 17% in 2013.

SBUX wants to grow sales. It’s also important to manage the operating costs. In this part of the series, we’ll take a look at four key operating costs.

In the last part of this series, we briefly covered Texas Roadhouse’s (TXRH) steak-focused menu. Let’s look at it in more detail in this article.

In this overview of Texas Roadhouse, we’ll look at the company’s financial performance, value drivers, competition, unit growth, and other key information.

Once the card is registered on the Starbucks (SBUX) website, the data is available on other ecosystems—for example, a mobile app. It helps a customer keep track of rewards.

One of the ways a customer can become a My Starbucks Rewards member is by using the My Starbucks Rewards card. The card is available at the checkout counter.

SBUX recognizes its limitation in attracting customers. As a result, SBUX is exploring other growth strategies. It’s looking at other beverage businesses.

Starbucks Corporation (SBUX) is a limited-service café. It operates more than 20,000 restaurants across 65 countries around the world. It employs more than 191,000 people.

The America’s segment includes revenues mainly from the US, Mexico, and Canada. This segment accounted for 73% of SBUX’s revenues in 2014.

Consumer packaged goods, or CPG, include the sale of SBUX’s coffee and tea-related products—like single-serve tea and coffee products. It also includes several beverages at retail stores.

McDonald’s list of initiatives includes simplifying its menu and possibly offering locally relevant menu items. This could be quite a gamble.

According to McDonald’s management, “strong competitive activity” is affecting its sales. Other fast food chains don’t seem to be feeling the competition.

By opening restaurants for different dayparts such as breakfast, afternoon snacks, or late-night snacks, restaurants believe they will sell more products throughout the day and improve same-store sales.

Same-store sales are driven by two factors: the number of customers walking into the stores and the average amount or average check those customers pay for an order.

Starbucks’ (SBUX) management states that product innovation will be its primary focus as it maintains a lesser focus on its coffee business.

The two most important drivers of revenue in a restaurant business are same-store sales and unit growth. Same-store sales growth measures the growth at existing stores or locations over a period of time.

Pilgrim’s customer base is spread across 100 countries, including the US and Mexico, which together contributed ~92% of the company’s revenues as of 2013 year-end.

Full-service restaurants make up 44% of the market share in the United States. Full-service restaurants usually serve breakfast, lunch, and dinner.

In a company-owned restaurant, the company takes ownership of the operation at the restaurant location. The company uses its own financial resources to get the location ready for business.

Limited-service restaurants can be classified into fast food or quick service, fast-casual restaurants, pizza restaurants, and cafés.

The EV to EBITDAR multiple is used in businesses where there’s significant rental and lease expenses—hotels and airlines. We’ve used this to analyze Marriott’s valuation.

Hilton has operating expenses related to its owned and leased hotels and timeshare properties. This is separate from depreciation and amortization expenses.

RevPAR is calculated by dividing hotel room revenue by the total available room nights. It’s used in the hotel industry to measure the company’s ability to generate greater revenue from each room.

Timesharing—also known as vacation ownership—is a method of getting the right to use a vacation property like a hotel or a resort. The buyer owns “timeshare interests” or intervals.

Timeshare revenue accounted for ~18% of total revenue from segments. The company generates revenue by marketing and selling timeshare interests and managing resort operations.

Hilton’s hotels, resorts, and timeshare properties are spread across 91 countries and territories. On December 31, 2013, Hilton’s portfolio consisted of 678,630 rooms.

Hilton’s growth plans are measured by the number of rooms under construction. Its growth plans rank first in the industry in all its markets—domestic and international.

The strengths, weaknesses, opportunities, and threats (or SWOT) analysis is a useful tool for decision-making in businesses and organizations. It helps companies identify the positive and negative factors inside and outside an organization.

The international gaming industry is growing quickly. It’s expanding to new jurisdictions. Many U.S. commercial casino companies, including Las Vegas Sands (LVS) and Wynn Resorts (WYNN), have helped the industry become an important part of the global economy.

Casino gaming is the largest part of the commercial gaming market. It continues to grow in popularity. There has been a surge in demand for casino games. As a result, new casino destinations have been created. Existing casinos have also been expanded.

Same-store sales are one of the important drivers in the restaurant industry. Same-store sales directly drives the revenues. It measures the percentage change in the revenues generated by existing restaurant locations over the same period last year.

The company said on its website that its “business model is focused on franchising and managing hotels, rather than owning them, enabling us to grow at an accelerated pace with limited capital investment—we call this ‘asset light.’

McDonald’s reported flat global comparable sales and negative comparable guest count for 2Q14, which is concerning from a long-term income growth perspective.

Mainstream channels of marketing—like radio, TV, and print ads—are still common. But many restaurant chains have also used social media to increase their brand presence.

In the last part of this series, we looked at the franchise model. Let’s now take a look at the company-operated restaurant model.

The most common business models in the restaurant industry are for franchised and company-operated restaurants. Let’s look at the franchise model in closer detail.

Dunkin’ Brands has a very low capital requirement relative to the rest of the coffee retail industry. This is due to its business model, centered around establishing franchises across the world.

Dunkin’ Brands Group doesn’t typically supply products to its franchises. Revenues derive from royalty fees as opposed to product distribution.

Starbucks indicates that it uses derivative contracts to hedge commodity price risks. These contracts typically don’t have a lifespan longer than five years.