Journal of International Business Education 1(1): 111-144.

2004, Senate Hall Academic Publishing.

Bembos Burger Grill

Luz Marina Garcia, Jesus Revilla and Carlos Guillermo
Sequeira 1
INCAE

Abstract. Bembos Burger Grill is a Peruvian fast food chain offering hamburgers prepared and
marketed for the Peruvian palate. The chain owns over 20 establishments in the capital, Lima.
The executive directors would like to enter the Chilean market based on setting up franchises.
This case involves analysis, debate and decision-making to put this plan into action. It presents
information about the fast food markets in Peru, Chile and Argentina. In the latter,
benchmarking is carried out on a Chilean company (Lomiton), third in sales among the fast food
chains in Argentina and market leader in its country of origin. In addition, information is
presented for carrying out microeconomic marginal analysis of the company under three
different parameters.
Keywords: fast food, benchmarking, Peru, Chile, Argentina, marketing, franchises,
hamburgers, costs.

We want to reach beyond our borders. We are studying proposals from

businessmen interested in operating our restaurants outside of our country.
We are convinced we would be successful in other markets.
- Carlos Camino, general manager and founder

1. Introduction
In February of 2002, the young businessmen Carlos Camino and his partner
Miroslav Cermak considered that Bembos Burger Grill was prepared to
expand outside Lima2. They contemplated opening a restaurant in Santiago de
Chile, and then subsequently opening several others in the principal provinces
of Peru. This was a Peruvian fast food chain dedicated to marketing charcoalbroiled beef hamburgers.

1.

2.

This case was written by Luz Marina Garcia based on interviews carried out by Jesus
Revilla, both of whom are investigators under the supervision of Prof. Carlos Guillermo
Sequeira, and all are of the INCAE. The same should serve as a basis for classroom
discussion and not as an illustration of the correct or incorrect administration of a
managerial situation.
Lima is the capital of Per in South America.

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Bembos Burger Grill

Bembos maintained its leadership in hamburger sales in front of strong

competitors in the international market like McDonalds and Burger King (see
appendix A for short summary of both). At the end of 2001 Bembos had 19
eating-places in metropolitan Lima that included everything from restaurants
to formats for food courts called Bembos Express. The company had a total
of 500 employees and Bembos planned to inaugurate five more eating-places
during the first semester of 2002.
The companys managers agreed that the key to their success in Peru was
the combination of product, quality and service. They knew that before
internationalization they would have to define the terms of the model under
which they were going to operate.

2. The Country

2.1. Geography and Political Divisions

Peru was divided into 24 departments in addition to the constitutional province
of Callao. The departments were subdivided into provinces and these last into
districts. Its territory included the Andes mountain range from north to south,
from which arose three natural regions: the Coast, which was a narrow desertlike strip; the Sierra, a zone of large mountains and narrow valleys; and the
jungle, which formed part of the large Amazon territory.
52% of Perus population lived on the coast, 34% in the Sierra and 14% in
the jungle. The most populated cities were metropolitan Lima (27.4% of the
total population), Arequipa (3.0%), Trujillo (2.4%), Chiclayo (2.0%),
Huancayo (1.4%), Iquitos (1.3%), Piura (1.3%), Chimbote (1.2%) and Cusco
(1.1%)3. The cities with the largest spending propensity were Arequipa,
Trujillo and Chiclayo.

2.2. Political Situation and Recent Micro-Economy

During the decade of the eighties Peru suffered severe attacks from organized
terrorism. Another problem during this time was the illicit crops of cocaine
leaves, especially in the large expanses that made up the eastern slopes. Rural
terrorism symbolized by the groups Shining Path and the Tupac Amaru
Revolutionary Movement grew in force, financially supported by the drug
traffickers who were their allies.
3.

Population Statistics, Marketing Management, Opinion and Marketing Support, January

2001. www.apoyo.com/infor_util/inv_mercados/igm/igm_2001_1-html.

Journal of International Business Education 1(1)

113

In 1990, Alberto Fujimori was elected president, succeeding Alan Garcia.

Fujimori inherited from Garcias government a country with a serious
economic and social crisis. The fight against terrorism, the reinstatement of
Peru into the International Monetary Fund, and an increase in production and
exports characterized the aims of this new government.
In 1995, President Fujimori was reelected for the term of 1995-2000.
During this second term he continued with his program of stabilizing the
economy and his government carried out large privatizations and concessions.
Nevertheless, several sectors provided evidence of abuse of power and
violations of human rights.
Due to the effects of the phenomena El Nio, the decline in the
international price of exports, and the Asian financial crisis, 1997 and 1998
were difficult years for the Peruvian economy. In 1998 there was a real
reduction in private spending of 0.4% (Table 1 from Exhibit 1 shows the
variation in percentage between supply and demand).
In April of 2000 presidential elections were held and Fujimori was elected
for the third time, but the OAS, which participated as election observer, did not
endorse these elections. At the end of 2000 numerous scandals of
governmental corruption came to light, forcing the president to resign and to
subsequently seek asylum in Japan. According to information from the Central
Reserve Bank of Peru, the situation had created political instability while
slowing down the countrys productive activity4 (Table 2 in Exhibit 1 shows
the principal economic indicators).
After Fujimoris resignation a transitional government headed by the
lawyer Valentin Paniagua was set up and Peruvians later returned to the ballet
boxes and elected Mr. Alejandro Toledo as president. Toledo assumed power
at the end of July 2001 and some of his main challenges were in solving the
economic crisis, generating employment, and reducing the fiscal deficit.

3. Fast Food in Peru

The principal fast food chains were divided into three groups: chicken, pizza
and hamburgers, whose sales represented 42%, 28% and 30% respectively.
The leaders were Kentucky Fried Chicken, Pizza Hut and Bembos. In 1998,
taking into consideration only those companies with important sales figures
from the aforementioned three groups, the market value of fast food was 70
million dollars. The market growth was estimated at 10%.
Peru had 29 fast food chains in Lima, 9 of which were managed by their
owners (including Bembos) and 20 that operated under the model of
4.

Banco Central de Rerserva de Per, Memoria Anual del ao 2000, located at http://
www.bcrp.gob.pe/Espanol/WInformes/Memoria/Memo2000/ESP%2001%20inflation.pdf

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Bembos Burger Grill

franchises5. The latter were divided into 10 national and 10 foreign chains and
amongst the first that stood out were: Pardos Chicken, Mediterrneo Fried
Chicken, La Romana, Alfresco, Caf Expresso and Caf Bohemia.
Kentucky Fried Chicken (KFC) was the first foreign fast food chain to
arrive in Peru (1981) followed by Pizza Hut (1983). By the middle of the 1990
Burger King, Chilis, Tony Roma's, Swenson's, Dunkin Donuts and
McDonald's, among others, were in operation. However the chains Taco Bell,
Sir Pizza, Big Apple Bagels, Miami Subs and Hard Rock Cafe had withdrawn
from the Peruvian market in recent years, according to some experts due to the
fact that they had not adapted to the local consumer.
In a poll carried out in Lima the chains most often cited were: KFC,
McDonalds, Bembos, Pizza Hut, Burger King and Dominos6. KFC was the
fast food market leader with 23 restaurants in Lima and invoicing more than
13 million dollars in 1998. This chain belonged to the Delosi Group, which
included Raul Diez Canseco, the current Vice-President of Peru, among its
shareholders. In Peru this group operated franchises of Pizza Hut (21), Chilis
(2) y Burger King (12).
The market for fast food in the provinces7 was smaller than in Lima and
was dominated by charcoal-roasted chicken restaurants, followed by those
restaurants that sold pizzas and hamburgers. Food based on chicken was very
highly regarded by the majority of Peruvians.
Until recently the only franchise chains that operated outside Lima were:
Dominos Pizza (in Piura, Chiclayo and Trujillo), Mediterrneo Chicken8 (in
Trujillo) y Pastipizza (in Trujillo, Piura, Chiclayo and three more cities), but in
Arequipa establishments of KFC, Pizza Hut and Burger King had recently
been opened, which were located in the food court of a Chilean Department
Store, SagaFalabella. The Delosi Group had announced the opening of KFC in
Cusco in 2002 and, according to information from the newspaper Gestin,
Trujillo was to follow9.
Some Peruvian restaurants had already crossed the borders into
neighbouring countries. Some examples of these were: Mediterrneo Chicken
(Colombia), Pasti Pizza (Venezuela), Caf Bohemia (Chile) and Cevichera
5.
6.
7.
8.

9.

Businesses based on names, trademarks, products and marketing methods of another

existing organization.
Fast Food: Mercado en Crecimiento, Diario Gestin On Line, January 14, 2001.
In Peru the term province referred to all regions that were not Lima, including the rest of
the areas belonging to the department of Lima and the rest of departments. A province can
contain one or more cities.
Mediterrneo Chicken was a Peruvian franchise that had started franchising in 1995. They
charged the local operator for the legal right to the trademark for ten years US $35,000, 5%
of the net monthly sales and an additional 2% of net sales for a corporate investment in
marketing and publicity. The initial investment for a franchise varied between US
$200,000 and US $600,000.
Article published February 8, 2002 en Gestin, titled Cadena KFC abrir s en provincias.

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Journal of International Business Education 1(1)

Alfresco (Chile). In addition, the Peruvian chain Pardos Chicken with 9

franchises in Peru announced the opening of its first restaurant in Santiago in
2002.

4. Hamburger Market
In recent years hamburgers had been the fastest growing segment of the fast
food market. The economic expansion that took place in Peru between 1993
and 1997 gave rise to the opening of a large number of hamburger restaurants,
which caused a substantial rise in sales in this area. The growth of hamburger
chains was concentrated in Lima.
In 1999, hamburger chains sales dropped due to the reduction in the
internal demand (-0.1%) and devaluation (-11.2%). Hamburger sales shrank in
relation to the year before by almost 8%. A similar situation occurred in the
year 2000. Table 1 shows some of the indicators of these trends in recent years.
In a poll carried out by the consulting firm Maximixe in December of
2001, 59% of those who responded rated Bembos as the best fast food
hamburger outlet, 23.5% preferred McDonalds and 15.7% Burger King10.
Among those polled 61% indicated that they visited hamburger restaurants
from 1 to 3 times a month, 20% affirmed they visited between 4 and 7 times
and 2% responded that they visited more than 8 times a month.

Table 1: Hamburger Market Indicators (Bembos, McDonalds and Burger King)

Indicators

1995

1996

1997

1998

1999

2000

2001

2002*

Sales in this industry,

US Millions of dollars

11.5

15.7

20.8

21.7

20.0

19.2

22.0

24.0

Bembos locations

14

18

20

20

19

24*

Burger King locations

11

11

11

11

11

12

15

17

19

18

33

37

40

46

47

55

McDonalds locations
Total No. locations

10

* Estimated figures.
Sources: Maximixe; Declarations of Carlos Camino, Bembos General Manager to the newspaper
Gestin February 3, 2001. Newspaper El Comercio, Negocio que provoca, 01/27/02.

10. Hamburguesas: Pobre Crecimiento en el 2001, Mejores Expectativas en el 2002, diciembre

2001.

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Bembos Burger Grill

In the previously mentioned study people were asked, Which is the most
important factor when choosing a hamburger restaurant. The answers were
rated on a scale of 1 to 5 with 1 being most important and 5 least important.
The factor that was selected as being the most important was flavor (classified
as 2), followed by moderate prices (3), variety of products (3), good
atmosphere (3) and treatment of clients (4).
The consumers of hamburgers were of all ages, with 54% of them between
the ages of 18 and 39. In Peru 60% of hamburger purchases were planned,
while according to the executives of McDonalds11, in other countries the
majority of sales were impulse purchases.
In 2000, Bembos market share was 46% (US $8.5 millions), Burger Kings
was 30% (US $5.5 millions) and McDonalds 24% (US $4.5 millions). In
2001 Bembos sales were US $9.6 million and those reported by McDonalds
were US $9.5 millions. It is necessary to point out that the general manager and
marketing manager of McDonalds had, in different statements to the media,
declared that they had grown by 20% and 50% respectively in 2000. This
would place McDonalds sales between US $6.6 and US $8.3 millions. Burger
King had not announced their sales, but according to analysts they occupied
third place in sales.

5. The Company

5.1. History
The first Bembos Burger Grill restaurant opened in Lima in 1988. Its founders
had personally taken charge of every detail: layout, design, color scheme,
location and others. The faade of the restaurant and its decoration was based
on primary colors such as blue, red, yellow and white. Its design was modern
and could be placed within the style of Art Deco (see photos in Exhibit 2).
At that time the country suffered frequent attacks from terrorist groups and
nightlife in the capital had greatly diminished as a result of this, and to
compensate in part for this, Bembos offered a home delivery service.
The owners of Bembos said that at that time they had to wear several
hats to be assured the company would work well. Reflecting on that Mr.
Camino said:
We began with a small budget and for this reason at the beginning we took
charge of everything; we were the cashiers, managers, cooks. It was the only
way to control our costs and to learn how to manage the business.
11. Taken from Business Peru, Edition June 1998.

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Bembos hamburgers were the result of a combination of flavors well

regarded by the Peruvian palate12. This is how Mr. Camino expressed it, we
wanted to design a hamburger that would be a tribute to our tastes. The
objective was to become the leader in the hamburger sector.
The partners assigned great importance to the quality of the ingredients
used in their products. Based on the following analysis they decided to import
beef from Argentina: (1) the Peruvian market did not offer beef of the required
quality and quantity; (2) the cut of meat belonged to what was classified as
premium and was characteristically Argentinean and (3) cattle were fed
differently in both countries, which was reflected in the variation in the
percentages of fat.
In spite of the fact that potatoes had originated in Peru, frozen potatoes
were imported from the United States to assure uniformity of final product.
They had previously offered homegrown French fries but they were not well
received by the consumers because they were not consistent enough. The
national potato had a much greater variation in the percentage content of water
and starch. It also had genetic problems and was affected by the lack of
standardization in Peruvian agriculture. The latter was partially due to the fact
that as a result of the agricultural reform that occurred at the end of the decade
of the 60s, the lots of land being planted were small.
In 1990 the company already had two restaurants and from then on it
registered sustained growth. Around 1993 the company began to operate a
processing plant for its ingredients, the objective being to standardize their
products. At this time Bembos also established some permanent Combos
(combinations of hamburgers, potatoes and drinks) and introduced a medium
size as a third option.
In 1996 McDonalds opened its first restaurant. At the beginning its
ownership capital was divided equally with a Peruvian partner, but starting in
1997 McDonalds acquired 100% of the operation after not being satisfied
with the partnership.
In spite of the fact that the entry of McDonalds forced many fast food
businesses to lower their prices, some by as much as 40%, Bembos reacted
differently. It introduced low cost products with a high-perceived value, for
example, the Hamburger a la pobre (the Poor Mans Hamburger), which was
made of bread, ripe plantain, egg, tomato and onions (all regional ingredients).
Bembos directors estimated that McDonalds would need at least two
years to learn about the market, and they planned to take advantage of this time
and grow quickly. They were prepared to open four new locations per year. An
executive of the firm enlarged upon this in the following way:

12. Peruvians are known for having a demanding and varied gastronomical culture.

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Bembos Burger Grill

We capitalized on our knowledge of the market to grow and this will open an
interesting gap between Bembos and McDonalds. Our goal was to be well
established by the time they would begin to grow.

In answer to the competition, Bembos carried out operational

improvements and redesigned their kitchens, thus reducing the average
delivery time of their products by 8 minutes 30 seconds. The company built
play areas for children in some restaurants and began offering to stage
childrens parties. They also accompanied their childrens menus with
collectable toys.
Bembos underwent economic problems during 1998 and 1999 due to the
recession, the currency devaluation, and the reduction in demand. Their
owners fired all the assistant managers and reduced the number of security
personnel (a legacy from the era of terrorist attacks). Among other successes
were that they were able to obtain meat at a lower price and a reduce the use of
sauces. This is how Mr. Camino expanded upon this idea:
The area where we saved more was in the sauces: US $25,000 monthly. We
carried out a study that made us realize that many clients were taking the
tartar and the pickle sauces home with them in disposable cups. Currently we
offer mayonnaise, ketchup, mustard, hot pepper and white onions.

5.2. Current Situation

The company had traditionally directed itself towards the high income and
lower high-income segments of the population (referred to as A and B). These
added up to 1.2 million people in metropolitan Lima (Exhibit 3 shows the
number of homes and income by socio-economic level). The people with the
greatest purchasing power from these segments lived in the southwest and
southeast of Lima and represented 8.8% of the population of Lima. Close to
50% of the hamburger restaurants were in these zones.
The middle-income segment (referred to as C) represented 2.4 million
persons. Due to the saturation of supply in the high income and lower highincome zones, especially in the southeast zone, Bembos planned to expand into
the northern zone, whose residents were middle class in a booming economy.
Since 1999, Bembos had postponed the creation of a second trademark
directed specifically to the middle-income market.
Bembos eating-places had capacities that varied according to the
following criteria: location, vehicle traffic and clients. The average cost of
their construction was US $300,000. Four of these had been relocated from
1998 to date.
According to the companys directors starting in the year 2000, an
aggressive recovery had been initiated as a result of financial and operational

Journal of International Business Education 1(1)

119

reengineering (Exhibit 4 shows the results and general balance statement from
the last few years).

5.3. Products Offered

Bembos offered more than 15 types of hamburgers in three sizes, some of
which were offered as combos, and some beef and grilled chicken platters. The
best sellers were the medium size hamburgers (Exhibit 5 shows a synthesis of
products offered).
Bembos directors agreed that the key to the chains success was
permanent and intense training and motivation of the companys collaborators
(workers) in order to offer a service of hospitality and excellence, as well as
the continuing creation of innovative products with high perceived value,
examples of which are the Peruvian, Hawaiian, German, French and Mexican
hamburgers, and the mixed grill with sausage.
The beverages offered by Bembos were produced by Coca Cola. This was
the first hamburger chain that included the beverage Inca Kola (now property
of Coca Cola) on its menu, which was the leading beverage in the Peruvian
market. This drink was later copied by the competition.

5.4. Promotions and Publicity

According to the companys marketing manager their promotions were very
effective. Among these were the checkbook, Bembona cards, Bembones cash
and the discount coupons (Exhibit 6 shows a printout of some of these). This
was enlarged upon:
We were innovators because we adapted the concept of discount coupons
used in other world markets and the one who strikes first strikes twice. We
made an excellent selection of how to distribute the coupons by using the
newspaper El Comercio, Limas best with a very strong circulation. Via
this means we were able to select the segment of the population we wanted to
reach. This has had to do with the effectiveness of this type of promotion.

Bembos made agreements of mutual cooperation with leaders from other

sectors. The following are examples of these companies and the agreements:
Marketing Firm Pacocha. Bembos would exclusively use Hellmans
mayonnaise and in exchange Hellmans would economically support Bembos
promotions.
Coca Cola-Inca Kola. Bembos paid for the production of television ads
and in exchange Coca Cola-Inca Kola would pay a percentage of the cost of

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Bembos Burger Grill

putting it on air. The previous was done under the framework of an agreement
for three years where these brands contributed to Bemboss attractive earnings.
Cinemark. Bembos advertised in their movie theaters and paid for these
advertisements with hamburger vouchers that were used in their promotions.
Tienda Ripley. This department store of Chinese origin was a leader in its
category. Bembos had a restaurant inside one of their stores and they would
offer specific promotions to the clients of Ripley and in exchange Ripleys
would send Bembos coupons with their cardholders monthly statements.
Ripley planned to open a store in Trujillo (a city to the north of Lima) in 2003
and Bembos planned to open a restaurant in its food court.
Aval Card. It included among its point reward program, a Bembos voucher
worth 60 soles13.
Recently the Gloria Corporation, a leader in milk products and cheeses,
signed a commercial alliance where Bembos would utilize their products and
exhibit their brands in exchange for an economic contribution. In the same
manner Bembos had reached an agreement with the hypermarkets14 Plaza-Vea
of Dutch capital15 that allowed them to open a Bembos food-place in one of
the capitals hypermarkets with a new format of restaurant named Bembo
Express, which was a smaller restaurant with a reduced menu and whose
average prices were attractive to the type of public that came into these
hypermarkets.
Bembos had developed its website16 and by signing up online, clients
would received discount coupons by e-mail. They could also order take-outs
although the majority of orders were received by telephone. A total of 21,000
people had already signed up online and the company planned to categorize the
database into segments and send out coupons according to their classification.
As with their competitors, Bembos concentrated its publicity efforts on
television advertising. In 2001, one of the companys commercials had been
selected to form part of The Worlds Greatest Commercials, which showed
the most creative publicity from around the world and broadcast on Australian
television. In this commercial a young female office worker was seen kissing
a male co-worker on the mouth after he had just finished eating a Bembos
hamburger in order to sample its flavor. All the companys ads emphasized its
products flavor.
Table 2 gives a comparison of the investment in publicity by some of the
top fast food chains. The information comes from a recognized firm, but was
not endorsed by Bemboss directors. They affirmed that McDonalds
13. The exchange rate at this moment was 3.48 soles per US dollar.
14. A mega supermarket that sells both wholesale and retail and offers its products at a lower
cost than at the supermarket.
15. Belonging to the Corporation Disco Ahold, which occupies third place in the world market
after Wal-Mart and Carreofur.
16. www.bembos.com.pe belonging to the classification Business to Consumer: B2C

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expenditures were more than that of KFC and Pizza Hut and estimated that
McDonalds publicity surpassed one million US dollars.

Table 2: Investment in Publicity in US $ from January to June of 2001

Media/Company

Television

Bembos

McDonald's

200,000

545,821

50,000

12,836

Burger King

1,061,553

Pizza Hut

944,978

Kentucky Fried
Chicken
918,058

Radio
Newspapers

6,517

Magazines
Sensory Panels

30,000

POP Materials

40,000

Total

320,000

558,657

1,061,553

951,495

918,058

Sources: MEDIA CHECK y Bembos

5.5. Prices
Some of the Bembos products were priced higher than that of their competitors
(Exhibit 7 shows a comparison). These prices were based on the following
criteria: (1) the use of high quality prime material, (2) the classification of their
products as being premium and (3) the weight in grams of meat in Bembos
hamburgers.
Referring to this Mr. Camino stated:
If we calculate the price of each product per gram, ours are probably equal or
lower than that of our competition. Obviously, clients do not carry a scale to
weigh the products when they go to Bembos or the competition!

Bembos small hamburger weighed 85 grams, the medium 135 grams and
the large 200 grams, while the competitions quarter pounder weighed
approximately 118 grams (equivalent to Bembos medium hamburger).

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6. The Competition

6.1. Burger King

Burger King opened its first restaurant in Peru in 1993. Its initial sales were
lower than expected. Its managers cut the prices and by doing so were able to
win over young customers. In addition, from almost the start, they made
agreements with suppliers of national raw materials.
In 1999, Burger King designed two hamburgers adapted to the taste of the
Peruvians: Brava, similar to a Whopper the difference being that it was more
highly seasoned and spicy and the Jarana Criolla. Later it copied some of the
Bembos products like the Mexican and the French hamburgers. The latter had
been targeted in the companys television ads and billboards.
To provide personalized service Burger King servers offered their
customers free coffee.

6.2. McDonalds
McDonalds initiated operations in Peru in 1996. According to some media
sources, its investment budget for its first years was in the order of US $15
millions17. Its strategy was to open 3 to 5 locations per year until reaching a
market share of at least 50%.
One of McDonalds important objectives was to capture the young
population (children) who had good levels of acceptance, which was as much
a product of the popularity of their character Ronald McDonald as it was of the
toys that accompanied their Happy Meals.
The company had an exclusive contract with Walt Disney, by means of
which it acquired the license to distribute toys representing the characters from
their latest movies in their Happy Meal boxes. The movie that the new series
of toys was based on would be announced on television each time McDonalds
changed themes.
In spite of the fact that McDonalds initially offered only their global
products in Peru, they later made some changes directed towards the Peruvian
customer, like offering the beverage Inca Kola and including aj18 among their
optional seasonings. At the same time, McDonalds introduced the Fiesta
hamburger, designed for the Latin-American market in its restaurants in Lima
and the rest of South America.

17. Business Magazine, Year V, Number 45, June 1998.

18. Aj: A hot pepper seasoning.

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Journal of International Business Education 1(1)

According to Fernando de la Flor, General Manager of McDonalds Peru,

the companys expansion would concentrate on the north and south zones of
Lima belonging to the middle-income segment C and afterwards spread to the
provinces19. In the beginning the chain had aimed at the high income and
lower high-income segments of the population, A and B, with little success.

7. The Expansion of Bembos

For some time now the companys directors had been receiving visits from
foreign investors interested in acquiring franchises of Bembos for markets in
the United States, Chile, Bolivia, Ecuador, Venezuela and Mexico. The
company had chosen the State of California as its first market in the United
States. The trademark Bembos had already been registered in the previously
mentioned countries and there also existed the possibility of opening
restaurants in Central America.
The countries on the American continent with the largest number of
franchises were: United States, Canada, Brazil and Mexico. Table 3 shows the
number of franchisors and the number of franchises per country.
Table 3: Franchisors, Franchises, And Sales In Some Countries In The Americas

Franchisors

Franchises

Annual Sales of Franchises

in Millions of US $

United States

1,500

350,000

1,000,000

Canada

1,327

63,642

N/d

Brazil

894

46,534

12,000

Mexico

500

25,000

8,000

Argentina

150

1,500

1,100

50

300

250

Venezuela

185

n/d

1,100

Uruguay

148

340

360

Colombia

80

600

350

Ecuador

70

n/d

N/d

Peru

59

440

375

Country

Chile

Sources: International Franchise Association and Pye & Asociados.

19. Newspaper Gestin.

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Bembos Burger Grill

In spite of the fact that in some countries, like in Argentina, the

predominant franchises were in fast food, in other countries the opposite was
true. Table 4 shows the market value of fast food in some Latin American
countries, Canada and the United States over the last five years.
Table 4: Market Size for Fast Food in Some Countries of the Americas in Millions of US$

Country/Region

1997

1998

1999

2000

2001

109,327

115,559

121,106

125,950

131,301

Canada

10,585

10177

10,483

10,838

10,762

Brazil

9,043

8,928

6,132

6,580

5,620

Mexico

796

918

1,156

1,294

1,397

Argentina

574

680

758

796

778

Chile

484

516

489

482

410

Venezuela

142

182

303

309

298

2,436

2,414

2,379

2,351

2,407

United States

Rest of Latin America

Source: Euromonitor 2002. in round figures.

The directors of Bembos studied the hamburger market in Argentina in

spite of the fact that they were not considering entering it. They wanted to
study and to learn from the experiences of the Chilean chain Lomiton.

7.1. Hamburger Market in Argentina: The Case of Lomiton

It was estimated that in 1999 the value of the hamburger market in Argentina
was US $305 million and had more competitors than those in other areas of the
fast food market. McDonalds was the leading chain of the hamburger sector
in Argentina with 216 outlets and sales of US $240 million dollars in 2000,
which represented approximately 78% of the hamburger market with zero
growth compared to the previous year. The chain owned 183 outlets, 20 of
which were of the stand-type, whose construction cost was around US $40
thousand with a surface area of 10 m2. Among its restaurants 10 were located
outside Buenos Aires.

Journal of International Business Education 1(1)

125

The second in the market was Burger King with 25 outlets and sales in
1999 of US $34 million, which represented a market share of 11% and only 1
restaurant outside Buenos Aires.
Another two important hamburger chains were Mostaza and Lomiton, the
first of Argentinean origin and the second Chilean. Mostaza offered beef
hamburgers and chicken and pork sandwiches seasoned in accordance with the
Argentinean palate. At the end of 2001 it had 9 of its own outlets and 6 under
franchise with an average monthly sales per site of US$45 thousand, which
translated into US$8 million a year. The initial investment for a franchise of
Mostaza varied between US$60 and US$140 thousand dollars with a bonus
income of US$10 thousand.20
Lomiton opened its first restaurant in Argentina in 1996. It menu
consisted of sandwiches, fruit beverages, soft drinks and wine. The sum of
Lomiton invoices in Argentina is not known. Currently Lomiton had 17
outlets in Argentina, 9 of which were franchises. It is worth pointing out that
there were two franchisees with three franchises each.
Lomiton had also expanded into Paraguay and Bolivia. This chain
revealed that its key to success was innovation through the development of
new products.
In 2001 they added to the menu the following selections: hot tea, coffee,
hot chocolate, pastries and breakfast and snack products. The company had six
business formats that went from traditional restaurants to corner events. In
spite of the background of economic recession in Argentina, Lomitn had
opened 7 of the total of its 17 outlets in 2001 and according to Juan Ramon
Samaniego, the general manager; they did not expect the devaluation to bring
them problems because their income and contracts were in Argentinean pesos.
The franchises that Lomiton offered in Argentina involved an initial
investment that varied between US$40 thousand and US$300 thousand in
addition to a stock investment of approximately US $10 to US $15 thousand
dollars. Its bonus income was US$25 thousand and its royalties were 5% of
gross sales. In addition, they charged a 3% fee of the gross sales for advertising
expenses. They offered financing, operation manuals, and four weeks of
training21.
In a ranking of fast food chains carried out by Gastrofranchising,
McDonalds occupied first place, Lomiton third place and Mostaza fifth
place. Burger King had not participated in the sample.
Some fast food chains did not survive in the Argentinean market due to the
fact they were unable to adapt. Among these were: Wendys, Pizza Hut,
Dominos Pizza, Kentucky Fried Chicken and Dunkin Donuts. The first
20. Cuando el Negocio est en la Mostaza, Franquicia Web.com located at http://
www.franquiciaweb.com/REV29/Mostaza.htm .
21. Sources: Anfitrin Argentina y Portal Alimentario.

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Bembos Burger Grill

closed its 18 restaurants in 2000, after having accumulated operational losses

before taxes of US $3.2 millions dollars.
The following table shows a breakdown of operational costs for franchise
food outlets in Argentina.
Table 5: Operational costs of franchise food outlets in Argentina
Item

Percentage of Operational Costs

Facilities and others

37

Food

24

Royalties

Publicity

Workers

13

Services

Rights

7.2. The Entrance into Chile

The partners planned to enter into the Chilean market before opening locations
in the provinces. The entrance into Chile represented an interesting step for
them since it had one of the most stable economies in the region. Commenting
on this, Mr. Garcia said: We know that there are several Peruvian restaurants
in Chile, especially the ones that serve ethnic food, which have been rather
successful.
The directors of Bembos had defined the type of partners they were
seeking for their expansion plans. This is how Mr. Camino explained it:
We want franchisees or partners who are economically solvent that will assist
the trademark to become strong and who will dedicate themselves primarily
to the business. We want to avoid selling the trademark to somebody who
might neglect it since that would do us huge harm.

The following section provides information about Chile and its fast food
chains.

7.2.1. Information about Population and Economy

Towards the middle of 2001, Chile had an estimated population of 15,328,467
of which only 19% lived in rural areas. 36% of the countrys population was
concentrated in the metropolitan area of Santiago and they accounted for 40%
of the total national spending.

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Journal of International Business Education 1(1)

Its gross national product per capita was US $9,427.22 The Chilean
economy had a sustained growth rate of 7.6% for the last 10 years, which had
given rise to an increase in the number of people in the middle class. Table 6
shows the socio-economic levels for Santiago.
Table 6: Socio-Economic Levels of the Region of Metropolitan Santiago

SocioEconomic
Levels
Percentage
N of Homes

Monthly
Income/
Household

High
Lower High
Economic
Econ. Level
Level (AB) (C1)

High
Middle
Econ. Level
(C2)

Lower
Low Econ.
Middle Econ.
Level (D)
Level (C3)

Extremely
Poor Econ.
Level (E)

3.0

7.0

20.0

25.0

35.0

10.0

34,740

81,061

231,602

289,502

405,303

115,201

US $20 or
more

From US$5 to
US 20
thousand

From US$2
thousand to
US $6
thousand

From US$1
thousand to
US $2.5
thousand

From
US$0.5
thousand to
US $1.5
thousand

Maximum
US $0.5
thousand

Source: Description of Socio-economic groups of Chile, Empresa Operativa de Apoyo de Marketing

7.2.2. Fast Food Chains

The value of the fast food market in Chile at the end of 2001 surpassed 400
million dollars. A survey carried out in the middle of 2000 indicated that more
than 70% of the residents of Santiago had one or more meals away from home
every day.
The most important foreign chains were: McDonalds, Burger King, and
Kentucky Fried Chicken. The following chains had also established
themselves in Chile (in parenthesis the number of restaurants): Chuck E
Cheese (1); Dunkin Donuts (2); Fridays (1); Fun Time Pizza (1); Ruby
Tuesday (1) and Sbarros (3). The principal local chains were: Lomiton,
Burger Inn, Doggis, Mac Beef and Embers. Table 7 below illustrates the make
up of the fast food market in Chile.
Lomiton was the leading chain in the fast food market with a total of 120
outlets of which they owned 60. They offered different types of meat
sandwiches, but their specialty was pork sandwiches. The company planned to
open 20 new eating-places in the course of 2002 and 15 in 2003. Each one
22. World Bank, International Comparison Programme database.

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Bembos Burger Grill

involving an investment of US $100 thousand. According to the Marketing

Study Firm Collect the companys strategy had been: reduce expensive rents,
do not subsidized one outlet versus another, justify accounts and be well
organized.
Table 7: Fast Food Restaurants in Chile

Name of Company

Type of
Business

Burger King

Fast Food

Burger Inn

# of Sites

Location

Year Started

25

Santiago

1994

Fast Food

45

Nationwide

1976

Doggis (hot dogs)

Fast Food

69

Nationwide

1995

Dominos Pizza

Pizza Delivery

22

Nationwide

N/d

Kentucky Fried Chicken

Fast Food

40

Nationwide

1990

Lomiton

Fast Food

120*

Nationwide

1982

Embers

Fast Todo

+25

Nationwide

N/d

McDonalds

Fast Food

77

Nationwide

1990

Mr. Chips

Fast Food

Santiago

N/d

Pizza Hut

Pizzera

28

Nationwide

N/d

Taco Bell

Fast Food

Santiago

N/d

Tele Pizza

Pizza Delivery

20

Nationwide

N/d

Los Pollitos Dicen

Fast Food

N/d

N/d

Pizza Napoli

Fast Food

N/d

N/d

Shopdog

Fast Food

17

N/d

N/d

Notes: * Includes 15 restaurants with table service, 70 fast food (express) and 15 corners servi-centers.
Sources: Americas Food & Beverage Show 2000, Conference Tracks, Track 1: Selling Food and
Beverage Products Within the Americas. Selling Processed Foods to Argentina and Chile and, Gua para
el Control y Prevencin de la Contaminacin Industrial, Comisin Nacional del Medio Ambiente- Regin
Metropolitana, Dec., 2000.

There had been a rapid increase in the number of franchise chain

restaurants in Chile since their entry at the start of the 90s. For example,
McDonalds grew from 12 restaurants in 1994 to 77 by the middle of 2002.
23% of the total of McDonalds locations operated under the franchise model.

Journal of International Business Education 1(1)

129

In 2001, McDonalds in Chile had faced investigations on the part of the

health authorities after the bacteria E. Coli was found in its chicken
hamburgers. In addition, the chain had been fined US $4 million. McDonalds
reacted with a strong publicity and advertising campaign, and thus prevented
a reduction in customers.
In a survey of 663 people carried out in the first trimester of 2002, 59% of
those interviewed had visited at least one fast food restaurant in the last six
months. Of the total who had visited, 63% had been to McDonalds, 30% to
Lomiton, 29% to Burger King, 28% to Kentucky Fried Chicken, 19% to
Doggis, 9% to Burger Inn and 7% to Pizza Hut.
73% of the ones who had gone to McDonalds belonged to the high
economic level, 67% were women and 71% were between the ages of 12 and
25.
32% of those who had gone to Lomiton were from the low economic
level, 69% were women and 36% were between the ages of 12 and 25.
39% of those visiting Burger King came from the middle level, 65% were
women and 33% were between the ages of 12 and 25.
In answer to the question: which were the aspects of fast food that attracted
them most?.., the people interviewed responded: quick service (43%); taste of
the food (36%); promotions (18%); gifts (11%); a quick solution (6%) and
childrens suggestion (5%).
Among restaurants that were neither franchised nor belonged to chains, the
eating-places that sold roast chicken and French fries stood out. There are
estimated to be 1,100 in the metropolitan region of Santiago. This type of
business was normally encountered scattered among the residential and
commercial sectors of the city and was generally family run.

7.2.3. Eating Habits of the Chileans

Traditionally Chilean cuisine was country-style food and seafood. Examples
of some typical dishes were: empanadas (a combination of meat, chicken or
fish with onion, eggs, raisins and olives wrapped in bread); chicken casseroles;
beefsteak la pobre; and grilled meat platters. Among seafood dishes were:
giant lobster, fish, shrimp and oysters and among the most common
ingredients were: onion, garlic, hot pepper, oregano, coriander, parsley and
basil.

7.3. The Expansion outside Lima

As a prior requirement to opening restaurants in the provinces, the directors of
Bembos intended first, to satisfy the demand in Lima. Currently they owned

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Bembos Burger Grill

all of their restaurants and the company was about to open three Bembos
Express outlets in Lima and a fourth restaurant in the traditional format. The
former would be located in a shopping mall that would be in operation before
the end of 2002 in the northern part of Lima, which belonged to the middle and
low-income segments of the population (C and D). According to analysts, this
shopping mall was going to be very successful.
To finance the expansion to the provinces the owners considered either
working under a system of franchises or investing with a local partner.
Expansion would be feasible thanks to the fact that its food processing plant
was working at 35% capacity.
In face of an eventual opening of a restaurant outside Lima Mr. Andres
Garcia, the Financial Manager, wanted to carry out an economic analysis
(marginal) that would allow him to compare the performance of the present
restaurants to that of one located in another city or country. To do this he
checked the current process, where he contemplated each restaurant as a center
of earnings. He then distributed between the 19 eating-places, the fixed costs
associated with the production center and the fixed costs of the related
administration of the central offices. Since they had a diversity of products that
represented different proportions of the sales, he used a weighted marginal
revenue for each product (see the corresponding information in Exhibit 8).
He then proposed carrying out the comparative analysis in two additional
ways. In the first, he would include the fixed costs per restaurant and the fixed
administrative costs and exclude those of the production center. In the second,
he would include the fixed costs of the restaurants and exclude both the fixed
production costs as well as the corresponding administration costs.

8. Epilogue
In spite of the fact that the directors of Bembos had elected what was to be their
first international market they knew that there were still pending aspects that
had to be considered. In this way, Mr. Camino concluded:
For now we dont have anything concrete. We must decide if we are going to
invest and to what measure, how much we will charge for the initial right to
use the trademark, what is going to be the duration of the contract and the
royalty23 from the monthly earnings.

23. It is a continuing payment that the franchisee makes to the franchisor which is payable
on a defined base that is laid out in the terms of the agreement. In theory, this payment is
due to the following: (1) Compensation for the franchisors (entertainment, counseling,
services and others. (2) A percentage of the gross sales and (3) a payment corresponding to
the true market value of the franchise. The payment of royalty can be set amounts or based
on percentages.

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Journal of International Business Education 1(1)

My partner and I want to study the Chilean market carefully. It is several

times larger than ours. We know that Chile or another country will suggest
the possibility for a certain type of tropicalization. In addition, we have the
challenge of maintaining ourselves as leaders in Peru, and in this respect, we
believe we are well on our way

______________________________________________

EXHIBIT 1
ECONOMIC INDICATORS

Table 1: Global Supply and Demand (Current Variations by Percentage)

1996

1997

1998

1999

2000

2001

Global Supply

2.0

7.9

-0.1

-1.7

3.2

0.6

Production

2.4

6.9

-0.5

0.9

3.1

0.3

Imports

0.6

11.4

2.3

-15.2

3.6

2.3

Global Demand

2.0

7.9

-0.1

-1.7

3.2

0.6

Internal Demand

0.0

6.6

-0.8

-3.1

2.4

-0.1

Private Consumption

1.5

4.0

-0.8

-0.4

3.9

0.9

Public Consumption

1.6

5.1

2.5

3.5

5.1

-1.7

-3.3

12.4

-2.0

-13.5

-3.7

-2.9

-2.5

13.0

-2.4

-15.3

2.0

-2.7

Gross Internal Investment

Private
Public
Exports B & S

-8.1

9.0

3.0

7.2

15.4

-4.6

10.2

12.7

5.6

7.6

7.9

4.5

SOURCES : Banco Crdito del Per, annual reports 1998 and 2000. Data for 2001 taken
from Riesgos Macro, Nov. 2001, Club de Anlisis de Riesgos, Maximixe.

132

Bembos Burger Grill

Table 2: Principal Economic Indicators from Peru

1995

1996

1997

1998

1999

2000

2001

GDP currant growth (%)

8.6

2.3

8.6

0.1a

3.8

4.7

2.0

GDP nominal (Mill. US$)

59,100

60,900

65,200

62,700

57,100

58,200

2,504

2,517

2,686

2,642

2,696

2,775

10.2

11.8

6.5

6.0

3.7

4.5

Devaluation (%)

5.9

12.5

4.6

15.8

11.4

0.4

Fiscal Deficient (% GDP)

3.1

1.0

-0.2

0.8

3.0

3.0

2.25

2.45

2.66

2.93

3.38

3.49

30,900

29,300

30,500

30,600

30,700

52.2

48.1

46.7

48.8

53.7

5,456

5,850

6,756

5,680

6,003

6,673

Precious Metals (Mill. US$)

1,846

2,066

2,375

2,365

Fish Flour (Mill. US$)

1,031

393

533

860

Minerals (Mill. US$)

942

673

773

628

Textile Products (Mill. US$)

101

81

166

158

GDP per capita nominal (US$)

Inflation

Exchange Rate (Nuevo Sol x US $1)

Total External Debt (Mill. US$)
External Debt (% GDP)
Exports (Mill. US$)

Imports (Mill. US$)

7,717

7,392

6,198

6,808

Petroleum and Diesel (Mill. US$)

6,896

7,147

678

486

536

931

Flour, Corn, Rice (Mill. US$)

355

358

279

215

Vehicles (Mill. US$)

296

361

225

161

Telephone Equipment (Mill. US$)

325

236

194

155

3.5

7,400

7,300

SOURCES : Strategy Research, 2000 Latin America Market Planning Report. Latin American at a glance.
The Economist intelligence Unit Limited 2000. Aduanas del Per. Divisin de Mercado de Capitales.
Banco Crdito del Per. January 2001. World Bank. CD-ROM 2000

a.

Some sources indicated a decrease of 0,3% for this year..

Journal of International Business Education 1(1)

EXHIBIT 2
INTERIOR AND EXTERIOR OF A BEMBOS RESTAURANT

Photos courtesy of the company

133

134

Bembos Burger Grill

EXHIBIT 3
SOCIO-ECONOMIC LEVELS FROM PERU

Table 1: Levels, Metropolitan Lima, July 2002

High
Level (A)

Lower
High
Level (B)

Percentage per Number of People

2.9

15.6

27.1

32.1

22.2

Per thousand people*

232

1,217

2,118

2,512

1,736

Socio-Economic
Levels

Middle
Level
(C)

Low
Level (D)

Extremel
y Poor
Level (E)

* Based on an estimated population of 7,815 thousand inhabitants. Source: Apoyo Opinin y Mercado
S.A. website: www.apoyo.com. Note: 51% of all Peruvian belonging to segments A and B reside in
Metropolitan Lima.

Table 2: Gross Monthly Average Family Income by Socio-Economic Level in Metropolitan

Lima, July 2002. (US dollars) (Exchange Rate: US $1.00 = 3.5 Soles)

Socio-Economic
Levels

High
Level (A)

Lower
High
Level (B)

Middle
Level (C)

Low
Level
(D)

Extremely
Poor
Level (E)

Percentage by # of Households

3.7

17.1

27.4

30.6

21.2

Thousands of Households

64

297

476

532

368

3,254

816

322

192

143

Average Monthly Income in US$

Information presented in round figures.
Source: Apoyo Opinin y Mercado

135

Journal of International Business Education 1(1)

Table 3: Age of Household Members In Percentages, Metropolitan Lima and Surroundings, July
2002
Socio-Economic
Levels
By Age in years

Lower
High
Level
(B) %

High
Level
(A) %

Middle
Level (C)
%

Extremel
y Poor
Level (E)
%

Low
Level
(D) %

From 0 to 3

From 4 to 6

From 7 to 12

11

14

17

From 13 to 19

12

10

14

15

16

From 20 to 24

10

From 25 to 29

10

From 30 to 35

12

12

11

10

From 36 to 40

From 41 to 44

From 45 to 49

From 50 to 54

From 55 to 59

From 60 to 64

From 65 to 70

Source: Apoyo Opinin y Mercado

Table 4: Average Common Expenses Per Household in US dollars, Metropolitan Lima, July
2002. (Exchange Rate: US $1.00 = 3.5 Soles)

Socio-Economic
Levels

High
Level
(A) %

Lower
High
Level (B)

Middle
Level (C)

Extremely
Poor
Level (E)

Low
Level (D)

Food

433

206

140

118

94

Transportation

185

96

50

37

25

Education

304

124

37

16

10

House Cleaning

68

39

21

18

11

Electricity

60

31

18

12

112

43

11

Telephone

95

36

16

Clothing or Shoes

67

32

11

Water

29

16

Recreation/ Entertainment

Source: Apoyo Opinin y Mercado

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Bembos Burger Grill

Table 5: Activities Carried Out over the Last 30 Days, Metropolitan Lima, July 2002

Socio-Economic
Levels

High
Level
(A) %

Lower
High Level
(B)
%

Middle
Level (C)
%

Low
Level
(D) %

Extremely
Poor Level
(E) %

Eat out with the family

84

65

41

23

21

Eat out with friends

63

36

19

10

Make Purchase in Supermarket

95

78

44

20

10

Attend Religious Ceremony

66

54

35

30

23

Drink Liquor with Friends

45

29

21

14

14

Go to Shopping Mall

76

52

15

Make Purchase in Department

Store

78

42

13

Go to the Movies

59

27

12

Go to Recreation Center or
Amusement Park

39

20

Source: Apoyo Opinin y Mercado

137

Journal of International Business Education 1(1)

EXHIBIT 4
BEMBOS RESULTS AND GENERAL BALANCE STATEMENT

Table 1: Results Statement for the Period of 1997-2001, US $

Net sales
Cost of Sold Goods
Gross sales
Operational Costs
Sales Costs
Administrative Costs
Total Costs
Documents, Sales & Discounts
Operational Profits
Other revenue (expenses)
Financial revenue
Financial expenses
Net Various
Result of Contact to Inflation
Special Revenue
Special Fees
Total Other Revenue (Expenses)
Profit before tax
Income Tax
Net Profit

1997

1998

1999

2000

2001

10,447,799
4,800,686
5,647,113

11,460,310
5,521,916
5,938,394

8,466,830
3,948,590
4,518,240

8,189,295
3,475,188
4,714,107

9,551,763
4,062,288
5,489,475

4,450,039
840,337
5,290,376

5,098,656
734,182
5,832,838

3,981,734
483,687
4,465,421

3,771,094
781,738
4,552,832

356,737

105,556

52,819

161,275

4,019,565
1,109,380
5,128,945
147,631
508,161

41,279
(593,645)
995.682
70,501

112,270
(593,396)
942.749
(551,142)

112,105
(784,020)
251,197
(422,381)

108,110
(606,731)
546,503
109,929

69,015
(449,078)
512,502
26,546
22,228

513,817
870,554
(254,239)
616,315

(92,518)
13,038
(76,154)
(63,117)

(843,098)
(790,279)
(32,848)
(823,127)

157,811
319,086
(113,824)
205,262

134,207
642,368
(83,789)
558,579

Source: The Company

Table 2: General Balance for the Period of 1997-2001, US $

1997

1998

1999

2000

2001

Assets
Current Assets
Not Current Assets
Total Assets

4,159,846
5,344,729
5,344,729

4,171,527
6,537,774
10,709,300

2,301,662
4,753,518
7,055,180

3,015,060
3,394,079
6,409,138

2,587,356
3,108,333
5,695,689

Liabilities
Current Liabilities
Not Current Liabilities
Total Liabilities

6,654,578
15,089
6,669,668

5,815,268
3,486,790
9,302,058

5,815,268
3,486,790
9,302,058

3,315,163
1,187,742
4,502,906

2,179,598
1,510,344
3,689,942

Patrimony
Profit/Loss
Average Dollar

2,834,907
616,315
2,6730

1,407,243
(63,117)
2,948

1,375,513
(823,127)
3,403

1,906,233
205,262
3,497

1,477,168
558,579
3,480

Source: The Company

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Bembos Burger Grill

EXHIBIT 5
BEMBOS MENU AND PRICES IN SOLES

Types of Hamburgers

Junior Medium Traditional Junior Medium

Combos Combos

Traditional
Combos

Classic Hamburgers
Classic

5.5

8.5

10.5

10.9

13.9

Cheese

5.9

9.5

11.5

11.9

14.9

Royal

6.5

9.9

11.9

15.9

Cheese Bacon

6.9

10.9

12.9

15.9

Monumental Cheese (double meat patty)

7.9

10.9

Hamburger

3.9

6.5

8.9

Hamburger A la Pobre

4.9

6.9

12.5

13.9

Hamburger Rompe y Baja

4.9

6.9

12.5

13.9

8.9

10.9

12.9

15.9

Special Hamburgers
German (Sauerkraut sauce and potato
sticks)
Peruvian (sweet potatoes fries and Creole
sauce)

8.9

10.9

Hawaiian (English ham and pineapple)

10.9

12.9

Mexican (guacamole and nachos)

10.9

12.9

French (mushroom sauce and potato

sticks)

12.9

14.9

Bembos Platters
Classic Salad

7.9

Diet Burger + soft drink

12.9

Chicken Order

14.9

Diet Chicken

13.9

Bacon Grill

15.9

Gaucho Festival

16.9

Cheese Fingers

9.9

Chicken Nuggets

7.9

9.9

Chicken Sandwiches
Crisp Chicken

5.9

12.9

Chicken Grill

8.9

14.9

Side Dishes
French Fries

3.5

Fried Onion Rings

Soft Drinks
Source: The Company

3.5
(12 oz)

4.5

5.9

3.9

5.9

4.4
(16 oz)

5.5
(21 oz)

Journal of International Business Education 1(1)

EXHIBIT 6
SAMPLES OF COUPONS

139

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EXHIBIT 7
PRICE COMPARISON
Prices of the Principal Hamburger Chains

Bembos

McDonalds

Medium

6.5

4.9

4.9

Small

3.9

3.9

Tradicional

Burger King

Special with Cheese

Large
Medium
Small

11.5

9.5

9.9

6.5

5.9

5.5

Combos
Adults2

13.9

12.9

13.9

Children4

13.9

10.9

12.5

Sources: Bembos y Maximixe.

Notes:
1.
Bembos (Hamburger); McDonalds (Macnfica); Burger King (Whopper).
2.
Includes a traditional medium hamburger with French fries and soft drink
3.
Bembos, Lunchbox; McDonalds, Happy Meal; Burger King, Kids Meals
4.
Includes a small traditional hamburger with French fries, soft drink and toy.

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EXHIBIT 8
PERCENTAGE OF TOTAL SALES PER PRODUCT, PRICES, VARIABLE COSTS PER
PRODUCT AND FIXED COSTS
Table 1: Percentage of Sales per Product Group
Description of Product Groups

Percentage of
Sales

Traditional Hamburgers

32.26%

Combos

24.82%

Childrens lunch boxes

10.93%

Medium Hamburgers

7.92%

French fries

7.06%

Menu Platters

5.63%

Soft drinks

4.27%

Junior Hamburger

4.18%

Chicken Sandwich

1.10%

Cheese Fingers

0.88%

Chicken Nuggets

0.64%

Onion Rings

0.31%

Source: The Company

Table 2: Prices and Average Variable Costs per Product Heading, in Soles
Description of Products

Prices

Variable
Cost
Per Product

Traditional Hamburger

11.00

6.69

Combos

13.75

8.32

Childrens Lunch Box

13.90

6.35

Medium Hamburger

9.10

5.62

French fries

4.50

2.90

Menu platters

13.70

7.72

Soft drinks

4.40

2.52

Junior Hamburger

6.10

3.69

Chicken Sandwich

7.40

4.39

Cheese Fingers

9.90

5.15

Chicken Nuggets

8.90

4.58

Onion Rings

4.90

2.93

Source: The Company

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Table 3: Annual Fixed Costs in US $

Fixed Costs

US $

Fixed Cost per Restaurant

72,275.04

Production Costs*

108,713.56

Administrative Costs of Central Offices

1,109,380.00

* Includes storage costs

Source: The Company

APPENDIX A
MCDONALDS AND BURGER KING IN THE WORLD ENVIRONMENT AND IN
LATIN AMERICA
MCDONALDS
McDonalds was founded in 1940 in San Bernardino, California. It had more
than 29,000 restaurants in 121 countries and was the largest and most
successful chain in the world. It is estimated that 70% of its restaurants all over
the world operated under the system of franchises.
The model of franchise of this trademark consisted of McDonalds being
the owner (or the one who rents to the third party) of the restaurants. The
franchisee bought the equipment as well as the right to operate the trademark
for twenty years and McDonalds received royalties for 5% of the monthly
sales plus a 3% service charge as a marketing fund.
The franchisee promised to maintain the standards of quality, service and
value and it was hoped they would sponsor some local charity event. One of
the advantages that the franchisee had were extensive marketing studies that
included customers attitudes and perceptions, types of purchase and prices
and measured McDonalds performance versus that of its competition.
In 1999, the chain opened practically one restaurant per day in Latin
America, reaching a total of 1,750 that year. The largest market was Brazil,
followed by Mexico and Argentina.
With the aim of reducing its operational costs the corporation increased its
purchases from local suppliers in several of the countries where it operated. In
that way, in Peru during the second trimester of 2000 McDonalds bought

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more than 66% of its total provisions from the national market, a percentage
that it planned to increase in the following years.
In the fourth trimester of 2001, the net earnings of McDonalds decreased
for the fifth consecutive period as a result of the reduction of sales in Latin
America, (3%) and Asia (4%).

BURGER KING
It was founded in Miami in 1957. This chain was present in 59 countries with
a total of 11,370 restaurants. More than 92% of its restaurants were operated
as independent franchises.
Burger King had 213 locations in 9 Caribbean countries, 159 of which
were in Puerto Rico. In Latin America the corporation possessed a total of 317
restaurants distributed in 14 countries, 125 of which were in Mexico.
Towards 2000 in Latin America the company bought between 75 and 80%
of its key provisions in the country where it operated.
In August of 2001, Burger King cancelled its foreseen investment plans
to be carried out in Argentina, Chile and Paraguay during the next two years
for a total of US $60 million due to a reduction in its sales.