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Supply Chain Management of Hard Rock Cafe International, Inc.

Supply Chain Management of Hard Rock Cafe International, Inc.

Discuss Supply Chain Management of Hard Rock Cafe International, Inc. within the Elements Of Logistics forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Without rival for years, themed restaurant phenomenon Hard Rock Cafe International, Inc. has enjoyed a stellar success that has brought ...

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Supply Chain Management of Hard Rock Cafe International, Inc.
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Netra Shetty
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Supply Chain Management of Hard Rock Cafe International, Inc. - January 8th, 2011

Without rival for years, themed restaurant phenomenon Hard Rock Cafe International, Inc. has enjoyed a stellar success that has brought forth several like-minded competitors, including Planet Hollywood, Rainforest Café, and the House of Blues. The Rank Group PLC subsidiary was founded in London in 1971 by Isaac Tigrett and Peter Morton. Separated by a bitter dispute, the founders later sold their interests and left Rank to put the pieces together. With more than 104 restaurants in 36 countries, as well as three hotel complexes, and the successful 'Hard Rock Live!' television concerts series, the Hard Rock name nearly 30 years later represented a powerful and enduring brand, and a business that was still a dominant force in its industry.

An Incredible Concept: 1971-79

The popularity of the Hard Rock Cafes grew exponentially from the inception of the first cafe on June 14, 1971, in London. Two young Americans, Isaac Tigrett and Peter Morton--who were the quintessential odd couple--borrowed money from their parents to open a quirky restaurant. They were only 22 years old at the time, and they selected Park Lane in London's fashionable Mayfair district as the site of their 'Hard Rock Cafe.' The decor and menu contrasted sharply with the lavish hotels lining posh Park Lane, where strictly enforced dress codes were the norm, and hamburgers, milk shakes, and the music of the Rolling Stones most certainly were not.

Tigrett, son of a wealthy Tennessee financier named John Burton Tigrett, had moved to England with his family at age 15, attended private school in Lugano, Switzerland, and then later spent his days in London selling used Rolls Royces to Americans. Morton came from a wealthy and venerable Chicago restaurant family, a heritage he tapped into when he opened The Great American Disaster, an American-style restaurant located in Chelsea, London. As a restaurateur, Morton was immediately successful, but his first venture was all but forgotten after he hooked up with Tigrett.

The excitement generated by the first cafe, an opening that quickly drew queues of patrons eager to take part in the Hard Rock Cafe's carnival-like atmosphere, was duplicated with each additional opening of restaurants in other cities and other countries, becoming, if anything, more intense, as the restaurants themselves became grander and earned the reputation as popular gathering spots for celebrities.

The story of Hard Rock's growth took on a contentious flavor early. Outside of youth and family wealth, Tigrett and Morton had little in common. Morton was later described as aloof, reserved, and a 'business-first businessman,' personality traits that initially complemented and then later butted against Tigrett's impulsiveness. A self-described 'raving Marxist,' Tigrett became legendary for his flamboyance and recklessness, renowned for being an eccentric figure who played the principle role in many of the titillating stories composing Hard Rock Cafe lore. One such story put Tigrett behind Hard Rock's public address microphone after London had been devastated by an Irish Republican Army bombing, announcing to the cafe's patrons that anyone holding an Irish passport could eat and drink for free. Another described Tigrett stamping across the Hard Rock's tables shouting at patrons, 'This is my restaurant! What are you doing here! Get out! This is my restaurant!'

Such incidents, as well as the storied sightings of celebrities, added to the mystique and unpredictability of a visit to Tigrett and Morton's establishments, creating invaluable marketing material for an organization that invested little time or money on traditional advertising. In fact, reports of celebrities seen imbibing or eating at a Hard Rock Cafe, coupled with Tigrett's fabled antics, began working to the two restaurateurs' advantage soon after they opened the initial Hard Rock Cafe. It was a time when the rock-n-roll genre from which the business took its name was just emerging. The eatery needed the luminaries from rock's list of idiosyncratic entertainers to make its definitive leap from a popular London restaurant to the internationally recognized nexus of celebrities, celebrity-watchers, and celebrants the Hard Rock later became, but initially it prospered as a welcome alternative to the otherwise reserved atmosphere pervading Park Lane. Its menu diverged from typical Park Lane fare as well, offering customers a simple, decidedly American selection of food and drink that included hamburgers, barbecued ribs, milk shakes, sundaes, corn-on-the-cob, and apple pie, in addition to a wide variety of beer, hard liquor, and suffusive rock-n-roll.

Before long celebrities began patronizing the cafe; the rock group Led Zeppelin reportedly sent whiskey bottles crashing against the walls one evening, and Carole King wrote a musical tribute to the rock-n-roll haven. Eric Clapton's guitar found its way onto a hook on the cafe's wall, and then Pete Townshend, of The Who, donated his guitar in riposte, along with a note that read, 'Mine's as good as his.' The two guitars became part of the cafe's growing rock memorabilia collection, while the magnetic power of the Hard Rock to attract celebrities also pulled in notable personages from outside the world of music: the Duke of Westminster stopped by, director Steven Spielberg ate lunch there every day during the filming of Raiders of the Lost Ark, and numerous other celebrities made widely reported visits to the raucous anomaly on Park Lane.

The publicized reports of who did what at the Hard Rock benefited Morton and Tigrett commensurately. Soon, the London restaurant was the destination for tourists and local denizens, a site to pay homage to the famous and the peculiar. Although the Hard Rock was a marketing boon, the swell of excitement it generated created one obstacle for Tigrett and Morton to hurdle: customers lingered, dawdled, and gawked, remaining for hours to take part in the paparazzi-filled days and nights, but they purchased little, engendering a debilitatively slow customer turnover rate stunting profits. The solution Tigrett and Morton reached, however, was relatively simple; they turned up the volume of their music, increasing the decibel level in the cafe and, as a result, increasing the patron turnover rate. Louder music meant people talked less, ate and drank faster, and loitered less, a change that quintupled the cafe's turnover rate and lifted its profit performance to match its popularity. Tigrett and Morton also moved into merchandising during this time, offering shirts, hats, watches, and coffee mugs with the Hard Rock logo, which contributed significantly to Hard Rock's bottom line.

As the restaurant became increasingly popular and successful, however, the relationship between Tigrett and Morton was becoming increasingly strained. In 1974 Tigrett made an about-face in his personal life, when the former 'raving Marxist' became a Hindu convert and devoted follower of spiritual leader Sai Baba. Espousing a 'Love All, Serve All' tenet, Tigrett moved in with Ringo Starr's ex-wife, Maureen Starkey, in 1976. He later married her, referring to her, with typical Tigrett bravado, as his greatest piece of rock memorabilia. By the end of the 1970s, however, Tigrett's all-inclusive doctrine of love excluded Morton, and the two partners went their separate ways, beginning with Morton's return to the United States in 1979.

The End of an Era: 1980-89

A protracted separation ensued between Tigrett and Morton, during which the two former partners fought a battle over the legal rights to the Hard Rock name. Three years later, in 1982, the situation was resolved when Morton gained the rights to the Hard Rock name for all the world west of the Mississippi River, and all the world east of the Mississippi River was granted to Tigrett. There were exceptions to this demarcation line (Morton was given the rights to Chicago, and Tigrett was awarded Dallas), but from 1982 forward there would be two companies controlling the Hard Rock name and operating Hard Rock Cafes--Morton's Hard Rock America, Inc. and Tigrett's Hard Rock Cafe International, Inc. What followed was a more truculent era in Hard Rock's history.

Morton's Hard Rock America beat Tigrett's Hard Rock Cafe International to the punch when it opened the first Hard Rock in the United States in 1982. Located in Los Angeles, Morton's Hard Rock was backed financially by Hard Rock devotee Steven Spielberg, Hollywood film studio magnate Barry Diller, actor Henry Winkler, and singers Willie Nelson and John Denver, who helped Morton transport the Hard Rock concept across international borders for the first time. But, although Morton first brought the concept to the United States, Tigrett was the first to realize immediate success with the concept, opening a Hard Rock in New York City with the financial assistance of comedian Dan Aykroyd and actor Yul Brynner. Critics hailed Tigrett's New York restaurant as the first successful effort to incorporate the disparate elements that made the London Hard Rock the success that it was, and crowds flocked to the new venue. Inside the New York Hard Rock, Tigrett assembled the first guitar-shaped bar, the largest collection of rock-n-roll memorabilia, and his 'God Wall,' a tribute to the inspirational forces guiding people's lives, featuring, among other things, a photograph of Sai Baba, a giant Krugerrand, and an enormous Quaalude.

After the opening of the New York Hard Rock, the two former partners continued to compete. Morton opened a café in San Francisco in an old automobile showroom; Tigrett opened one in Stockholm in 1985 and then opened the largest Hard Rock up to that time in Dallas in 1986. While Tigrett and Morton built their respective empires, others joined the fray by appropriating the Hard Rock name and independently opening ersatz Hard Rock Cafes in Amsterdam, Bombay, Bangkok, and Manila. By the late 1980s, after nearly 20 years in existence, the Hard Rock concept had engendered a confusing mess. Of all the proprietors operating Hard Rock Cafes, both legitimate and illegitimate, those who knew each other did not like each other, and those who did not know each other had every incentive to remain incognito. The restaurants themselves were flourishing, but behind the scenes a tempest was gathering force.

Then Robert Earl approached Tigrett with an offer of acquisition. The son of a British pop singer, Earl was several years younger than Tigrett and Morton. He had attended the University of Surrey, where he took courses in operating food and drink establishments. Thereafter he was involved in several food industry successes and had quickly amassed a restaurant empire totaling 70 restaurants by the time he merged his company President Entertainments with Pleasurama PLC, a London-based leisure group, in 1987. The transaction yielded Earl $63 million.

One of the first deals Earl completed for Pleasurama was the acquisition of Tigrett's half of the Hard Rock business. Tigrett had since taken his Hard Rock Cafe International public, selling a small portion of the company to London investors in 1984. Three years later, Drexel Burnham Lambert sold another parcel of the company to American investors, an ill-timed $40 million offering made prior to the stock market plunge in October 1987, which sent Tigrett's stock cascading downward. Less than a year later, in August 1988, Tigrett sold his Hard Rock holdings to Earl and Pleasurama for $100 million, ending his 17-year tenure as a Hard Rock showman.

Hard Rock's notoriety earned it several pages in Milton Moskowitz's 1988 book The Global Marketplace. The author cited Hard Rock as a winning formula, one that worked irrespective of geographic boundaries and divergent cultures, with a Hard Rock Cafe performing as well in Australia as one in Iceland. This universal popularity of the Hard Rock concept represented a rare achievement in the global restaurant industry; traditional, full-service restaurants like Hard Rock seldom managed to move across international borders with any success. In addition, Hard Rock Cafes achieved their success without benefit of any prodigious marketing effort; to a large degree they generated business merely by their existence--and this was an unprecedented feat.

Meanwhile, Tigrett went on to superintend the development of a pyramid-shaped sports arena in Memphis and the construction of a hospital for the poor in India, while Earl took the four Hard Rocks located in Tigrett's eastern sector and quickly sought to increase their number. Earl's corporate affiliation with Pleasurama, meanwhile, came to an end in 1989, when the leisure company was acquired by Mecca Leisure PLC.

A Renaissance for Hard Rock: 1990-95

After Mecca Leisure PLC acquired Pleasurama, it in turn was swallowed by the Rank Organisation PLC, a British-based conglomerate, in 1990. By the time the dust had settled, there were 25 Hard Rocks dotting the globe, counting both Morton's and Earl's, the newest, largest, and most successful being the Orlando, Florida Hard Rock, which opened in 1990 and almost immediately began serving 5,000 customers a day.

The Orlando Hard Rock belonged to Earl, as did nine more Hard Rocks slated for construction in the coming years. Surprisingly, during this time, Tigrett and Morton found themselves agreeing on one issue: neither could abide Earl. Tigrett condemned Earl for treating the Hard Rock concept like a cash cow to be duplicated again and again until its novelty was exhausted, and Morton and Earl had become adversaries during the course of their business relationship. Earl and Morton jointly owned Hard Rock Licensing Corporation, the company controlling the exclusive rights to Hard Rock's lucrative trademarks. The licensing entity also served as a proving ground for both Hard Rock owners' divergent views as to which direction the name should be taken. A running feud between the two had begun almost as soon as Earl bought Tigrett's half of the Hard Rock empire, and as time progressed the animosity had intensified.

Earl irrevocably aggravated tensions in 1991 when he opened Planet Hollywood in New York, one block away from the Hard Rock Cafe, with his own band of celebrity investors, including film producer Keith Barish, director John Hughes, and actors Arnold Schwarzenegger and Bruce Willis. Designed by Anton Furst (who created the sets for the first Batman film), Planet Hollywood was to the film world what Hard Rock was to rock-n-roll, a restaurant that housed memorabilia from the film industry and provided customers with an opportunity to enjoy the glamour of Hollywood. Earl's new establishment angered Morton, who charged that Earl had illegally copied the Hard Rock concept. Earl flatly denied Morton's charge, stating to New York magazine, 'Planet Hollywood was carefully designed so there would be no accusation whatsoever of duplication. You'll find zero similarity.'

By the summer of 1992, however, less than a year after the New York Planet Hollywood had opened, Morton had found enough similarities between Planet Hollywood and Hard Rock Cafes to bring three lawsuits against the Rank Organisation and Robert Earl. Earl responded later in the year by announcing his intentions to leave Rank and pursue his Planet Hollywood-related business interests, which opened the door for a new leader of Tigrett's former Hard Rock holdings.

Stepping into the breach was Art Levitt, formerly of the Walt Disney Company, who was selected as the president and CEO of Hard Rock Cafe International in early 1993. Assuming his new post, Levitt inherited 22 Hard Rock Cafes in 13 countries, almost all of which were vestiges of Earl's prolific years at Rank. With these highly successful properties--the New York Hard Rock, for instance, ranked as the city's third largest tourist attraction (trailing only the Empire State Building and the Statue of Liberty)--Levitt had his hands full in steering the Hard Rock franchise and keeping an eye on its former wunderkinds. In 1992 another musically themed restaurant threatened Hard Rock's reign--the House of Blues, from another former insider, Isaac Tigrett. His new brainchild centered on the blues rather than rock-n-roll and offered live performances and late dining with the ambience of a nightclub.

In 1993 new Hard Rocks opened in a host of exotic locations, including San Juan, Miami, Mexico City, Bali, and Taipei. The following year, another four international restaurants opened (in Beijing, Cozumel, Kowloon, and Madrid), while Hard Rock set out to conquer the country music capital of the world, Nashville. Although many had criticized Robert Earl's rapid expansion, Hard Rock had brought 20 more restaurants into its fold in under three years. Competition had something to do with it, as Earl's Planet Hollywood continued to branch out and another themed restaurant chain, Rainforest Café, debuted in 1994. By the next year, as Hard Rock sprouted 14 new locations, Rainforest Café went public, as did Planet Hollywood. Both were initially successes, and Hard Rock quaked just a bit.

Themed Restaurants Hit Their Zenith: 1996-2000

With competitors popping up around the globe, often within spitting distance, Hard Rock continued its aggressive expansion with 13 new restaurants in 1996. Yet the biggest news of the year was the Rank Organization, which had changed its name to Rank Group PLC, scoring a coup by acquiring Peter Morton's Hard Rock America as well as the ownership to Hard Rock Canada, owned by Nick Bitove. The Hard Rock name and brand, a formidable and lucrative force around the world, was now owned by one entity in total control of the increasingly popular trademark. Meanwhile, Tigrett's House of Blues chain opened a heavily touted restaurant/club in Chicago and Earl's Planet Hollywood aggressively expanded as well. Yet all was not well in the flashy industry, as the market seemed to overload on garishly themed restaurants.

By early 1997, Hard Rock underwent a major change; its reputation came to mean much more than a chain of phenomenally successful restaurants with rock-n-roll history on its walls. Soon Hard Rock actually came to mean music, as the company teamed up with VH1 for 'Hard Rock Live!,' a weekly television series. Each show featured performances by top names from the music industry, from the hottest new groups to legends from the annals of rock history. Aired on MTV's younger and increasingly popular sibling VH1, 'Hard Rock Live!' was a hit and soon spawned a concert series and record deal with Rhino Records. Stages were added to the Hard Rock restaurants in Orlando and Mexico City, creating complexes for food, fun, and live rock-n-roll performances.

Fresh from its flourishing television series, Hard Rock Cafe International leapt in three disparate directions in 1998: the first was inking a deal with the NBA (National Basketball Association) in February to open ten basketball-themed restaurants; the second was a jump into the hospitality industry when the first Hard Rock Hotel opened in Bali in May; and the third was the debut of the company's official web site, www.hardrock.com. The Bali beach complex was a tropical paradise with Hard Rock's signature restaurant and 418 luxurious, musical era-themed rooms; the web site touted a wide range of activities (news, webcasts, promotions, sweepstakes, online shopping) and company information.

In 1999 Peter J. Beaudrault was named president of Hard Rock Cafe International, a year that marked the fall of Robert Earl's Planet Hollywood chain into Chapter 11. Among the downtrodden were the sports-themed All Star Cafes, part of Earl's crumbling empire. An undisclosed number of Planet Hollywoods and All Star Cafes were either closed or soon would be, while Hard Rock opened new eateries in Indiana, Florida, Tennessee, and Japan, bringing the total tally to 104 Hard Rock Cafes in 36 countries, with no sign of slowing down. One new restaurant, in particular, was bittersweet, as the chain went back to its birthplace, England, to open a café in Manchester. Although neither Tigrett nor Morton was involved, in a sense, Hard Rock had come full circle. The chain's memorabilia collection, originally begun as a whim, now traveled from one restaurant to another, made up of more than 60,000 one-of-a-kind items that Sotheby's valued at more than $30 million.

Although it was probably true that Tigrett and Morton had high hopes for their unique restaurant concept, neither had imagined just how successful the Hard Rock Cafes would be. With a story as colorful as its decor, the 29-year-old chain showed no signs of slowing down as it approached the new millennium. Like the 50-something Mick Jagger and Eric Clapton, Hard Rock Cafe International proved its rock-n-roll empire aged quite nicely.

Principal Operating Units: Hard Rock Cafes; Hard Rock Hotels; Hard Rock Records; Hard Rock Live!; Hard Rock Concerts.

Principal Competitors: Planet Hollywood International, Inc.; Rainforest Café, Inc.; HOB Entertainment Inc.
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