Company Analysis Project Kona Grill Inc

Image:http://api.miraclemediatv.com/api/mmimg.php?id=27953&filename=KonaGrillHouston2.952x560.jpg&maxw=952&maxh=560.

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Economic Factors…………………………………………………………………………………………………………..

Social Factors………………………………………………………………………………………………………………

Political Factors……………………………………………………………………………………………………………

Technological Factors…………………………………………………………………………………………………….

TOOL 3: COHESION ANALYSIS………………………………………………………………………………………………….

TOOL 4: STRATEGIC BUSINESS UNITS………………………………………………………………………………………

Organizational Structure…………………………………………………………………………………………………

Key Success Factors………….……………………………………………………………………………………………

TOOL 5: REMOTE ENVIRONMENT ANALYSIS…………………………………………………………………………..

TABLE OF CONTENTS

EXECUTIVE SUMMARY……………………………………………………………….…………...…………………………..….

TOOL 1: HISTORICAL ANALYSIS………………………………………………….……………………………………………

TOOL 2: MISSION STATEMENT ANALYSIS………………………………….……………………………………………

Market Orientation Analysis…………………………………………………………………………………….……..

Ecological Factors…………………………………………………………………………………………………………

TOOL 6: GLOBALIZATION ASSESMENT……………………………………………………………………………………

Method of Entry…………………………………………………………………………………………………………….

TOOL 8: LIFE CYCLE ANALYSIS………………………………………………………………………………………………….

TOOL 9: PORTER'S 5 FORCES ANALYSIS…………………………………………………………………………………..

TOOL 7: INDUSTRY STRUCTURE……………………………………………………………………………………………….

Perceptual Map and Market Share……………………………………………………………………………….……

Power of Buyers…………………………………………………………………………………………………………….

Power of Suppliers…………………………………………………………………………………………………………

Barriers to Entry……………………………………………………………………………………………………………

Strategy Recommendation………………………………………………………………………………………………

Availability of Substitutes……………………………………………………………………………………………….

Rivalry Among Competitors……………………………………………………………………………………………..

TOOL 10: COMPETITIVE ADVANTAGE ANALYSIS…………………………………………………………………….

TOOL 11: INTERNAL AUDIT ANALYSIS……………………………………………………………………………………..

TOOL 12: FINANCIAL ANALYSIS……………………………………………………………………………………………….

Common Size Statements……………………………………………………………………………………………….

Financial Ratios……………………………………………………………………………………………………………

TOOL 13: GENERIC STRATEGY ANALYSIS…………………………………………………………………………………

TOOL 14: SWOT ANALYSIS………………………………………………………………………………………………………

Company Analysis Project: Kona Grill, Inc. Prepared by Daniel G. Gode

1http://www.konagrill.com/more/investors/stock-info

EXECUTIVE SUMMARY

The intent of this project is to further develop an understanding of strategic management

processes. This is accomplished by analyzing the organization's internal and external environments.

After determining strengths, weaknesses, opportunities, and threats, an analyst can begin to formulate

recommendations that will help strengthen the position of an organization in the industry.

Kona Grill, Inc. opened the first restaurant in Scottsdale, Arizona in 1998. Kona Grill went public

in 2005, and since then Kona Grill has expanded to 37 establishments domestically, with future

international expansion plans for Mexico and the Middle East proposed in 2015. Growth has been

realized due to careful planning and selection of locations in high income areas, with emphasis on

providing an affordable, yet exceptional, upscale casual dining experience.1

The analysis of Kona Grill throughout this project has taught me the importance of

understanding that a variety of factors can contribute to the success or demise of a firm. As a decision

maker it is imperative to stay informed by continuously monitoring not only the internal environment,

but the external environments as well. Additionally, the project taught me that while strengths and

opportunities can help give a firm a competitive edge, its the weaknesses and threats that can be

capitalized on by formulating strategies to position a firm so that these can be exploited.

Restaurants are designed to provide a contemporary ambience, with distinct dining areas,

that are capable of seating well over 200 guests comfortably. Each restaurant is uniquely designed and

situated in high consumer traffic areas with lunch and dinner served daily. Kona Grill offers over 40

house made signature sauces as part of their menu of award winning sushi and contemporary American

dishes. Due to the unique dining atmosphere, alcohol sales account for at least 30% of annual sales.

Growth has been realized in recent years despite market conditions or industry slowdowns.1 Therefore,

further analysis of Kona Grill is necessary to determine how this has been accomplished, and if the

growth is sustainable given the saturated domestic industry it operates in.


Image:http://localrevibe.com/wp-content/uploads/2014/01/Kona-Grill-Scottsdale-Ribbon-Cutting-1024x585.jpg

The purpose of this tool is to analyze strategic events in relation to the previous 10 years of historical

financial data in order to determine if corporate performance has had a positive effect on Kona Grill's

revenues and net income.


KONA GRILL INC (KONA) CashFlowFlag INCOME STATEMENT

Fiscal year ends in December. USD in millions except per share data.2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Revenue 37 51 72 76 81 88 94 96 98 119

Gross profit 22 29 14 13 12 12 17 18 18 21

Net income 0 -3 -1 -11 -22 -2 2 5 3 1

Earnings Per Share (Basic)-0.13 -0.47 -0.11 -1.6 -2.49 -0.17 0.22 0.55 0.32 0.07

1http://library.morningstar.com/stock/financials/income-statement?t=KONA&region=USA&culture=USA2http://www.marketwatch.com/story/kona-grill-prices-ipo-atop-range3http://www.bizjournals.com/phoenix/stories/2006/01/30/daily36.html4http://phx.corporate-ir.net/phoenix.zhtml?c=191864&p=irol-newsArticle&ID=10077655http://www.konagrill.com/more/investors/financial-reports20086http://nrn.com/corporate/jundt-resigns-kona-grill-s-ceo7http://www.konagrill.com/more/investors/financial-reports20108http://money.cnn.com/news/newsfeeds/articles/globenewswire/203171.htm9http://phx.corporate-ir.net/phoenix.zhtml?c=191864&p=irol-newsArticle&ID=162143110http://www.konagrill.com/more/investors/financial-reports11http://www.konagrill.com/more/investors/financial-reports2013

TOOL 1: HISTORICAL ANALYSISSt

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12https://globenewswire.com/news-release/2015/02/24/709386/10121702/en/Kona-Grill-Reports-Fourth-Quarter-and-Full-Year-2014-Results.html

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Historical Data for Kona Grill, Inc

Revenue Gross profit Net income Earnings Per Share (Basic)


Image:http://s3.amazonaws.com/myareanetwork-photos/bizlist_photos/f/141458_1449876464.jpg

The purpose of this tool is to identify strengths and weaknesses in Kona Grill's mission statement and

rank the statement itself on clarity and completeness.


Product Scope 1 2 4 5

Market Scope 2 3 4 5

Unique Competencies 2 3 4 5

Concern for Survival 1 3 4 5

Summary

Kona Grill fails to identify the target customer in the statement. The company website often

states that Kona Grill offers a sophisticated upscale casual dining experience, which could have been

incorporated into the statement concerning customer demographics.2 The conveyed message is that

the public image will be great customer service, product, in a pleasant atmosphere.

Kona Grill attempts to differentiate itself from competitors by alluding to an exceptional

experience with industry leading customer service. However, this is the same message that competitors

try to convey, as quality service is expected throughout the food and service industry.

Kona Grill's concern for survival is partially evident in the mission statement, as customer

experience is one of the critical components to the organizations success or failure.

2http://www.konagrill.com/more/investors/presentations

TOOL TWO: MISSION STATEMENT ANALYSIS

Kona Grill's Mission Statement Our mission is to deliver an outstanding guest experience to every guest, every day and in every

restaurant1

Mission Statement Ranking and Analysis

(Ranking: 1 being the worst to 5 being the best)

Kona Grill identifies the food and service industry with the mention of restaurants, however, no

mention of product offerings, such as, fresh sushi, cocktails, or other popular entrée items. The main

product being addressed is the intent to provide exceptional customer service. Therefore, this is a

customer oriented mission statement with a philosophy to deliver an outstanding guest experience,

which relates to the intended quality of service and product.

1http://retailindustry.about.com/od/retailcompanymissionstatements/ig/Corporate-Mission-Statements-US-Global-Retail-amp-Restaurant-Companies/Kona-

Grill-History-Founders-Facts-and-Trivia.htm

Overall, the mission statement ranks as a 2 with room for improvement. The improvements could

start with product scope, by detailing how the food, drinks, or restaurant stands out from competitors

in the industry. Market scope is lacking in the statement, which could be addressed by using key words

like upscale or sophisticated along with casual when referring to the experience in the statement.

Development is needed in the unique competencies category, perhaps adding how the proprietary

sauces for the food might be rated in the industry in order to deliver a unique food experience.


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Evidence: 10k Annual reports discuss the use and reliance upon

Management Information Systems, social media platforms,

and Konavore loyalty program, in order to monitoring

customer traffic and feedback in order to improve procedures

and menu items.2

3 1 2 3 5

4 1 3 4 5

5 1 2 4 5

Evidence: 10k Annual report discusses monitoring customer

satisfaction, but does not discuss specific measures other

than sales growth.3

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7 1 2 3 5

8 1 2 3 5

Evidence: Kona Grill provides a contact page on website for customers

to provide feedback, additionally social media platforms, such

as Facebook, Twitter, Instagram, Foursquare, and online

review systems such as Yelp and Google.4

9 1 2 4 5

Evidence: 10k Annual report states that the MIS is used in conjunction

with customer feedback to improve processes and menu

items, but no evidence to suggest how this is accomplished or

how often this is reviewed5

10 2 3 4 5

Evidence: Kona Grill is not using the available online tools to effectively

assess customer service

5http://www.konagrill.com/more/investors/financial-reports

Kona Grill Market Orientation Scale

(Based on Deshpande & Farley, 1996)1

1Based upon Deshapande and Farley. Understanding Market Orientation: A Prospectively Designed Meta-Analysis of Three Market Orientation Scales2http://www.konagrill.com/more/investors/financial-reports3http://www.konagrill.com/more/investors/financial-reports4http://www.konagrill.com/more/contact

There is evidence that Kona Grill disseminates data/information

gathered about customer satisfaction.

There is evidence of the measures Kona Grill uses to assess

customer service

TOOL TWO: MARKET ORIENTATION ANALYSIS

Kona Grill's company mission and objectives seem to be driven

primarily by customer satisfaction.

I believe Kona Grill exists primarily to serve customers.

There is evidence that Kona Grill gathers information from

customers to assess the quality of their products and services.

There is visible evidence that Kona Grill monitors their level of

commitment to serving their customer needs.

Kona Grill's strategy for competitive advantage is based on an

understanding of customer needs.

Kona Grill seems to communicate information and experiences

about their competitors.

There is visible evidence that Kona Grill measures customer

satisfaction systematically and on an on-going basis.

I believe Kona Grill is more customer-focused than their chief

competitors.


Image:http://www.eastonway.com/wp-content/uploads/2013/04/kona-grill.jpg

The purpose of this tool is to examine Kona Grill's actions through the lens of the stated goals,

objectives, and policies.


Assessment:


2http://media.corporate-ir.net/media_files/IROL/19/191864/Committees/CodeBusinessConductEthics.pdf


TOOL THREE: COHESION ANALYSIS

Kona Grill, Inc. does not clearly outline goals and objectives; however, policies and objectives can be found in the

annual reports to support forward looking statements, which are stated in investor presentations and related material. The

stated goals, objectives, and policies do not clearly align with the company mission statement, as the statement has a broad

focus on customer satisfaction, but overall goals will still have an impact on customer satisfaction and therefore will support

the company mission.

Analysis: (Rating 4) Aligns and supports mission of providing exceptional guest experience

Analysis: (Rating 3) Integrates with mission to deliver exceptional experience in every restaurant

Analysis: (Rating 5) Disciplined franchise model will attract both consumers and investors, which will

strengthen Kona Grill's position in the industry

Goals• Pursue Disciplined Growth

Objectives

•"We plan to grow organically through unit expansion, with a target of 20% unit growth annually over the next several years. We achieved a unit growth rate of 20% for 2014, with five openings during the year."1

Policies

•"We review potential sites in both new and existing markets that meet our target customer demographics, real estate, and investment return criteria."1

Goals• Legally Compliant International Expansion

Objectives

•"Executed development agreement for Mexico with 6 restaurants to be opened over a 7 year period", and signed letter of intent for the Middle East; development agreement in process"3

Policies

•"All employees and directors must respect and obey the laws of the cities, states, and countries in which the Company operates."2

Goals

• Continue to Develop a Disciplined Franchise Model To Attract Domestic and International Investors

Objectives

•" We expect to open seven new restaurants in 2015."1 "Although the actual preopening expenses for a particular location depend upon numerous factors, we expect cash preopening expenses of approximately $425,000 per location, and non-cash preopening rent expense ranging from $50,000 to $100,000 per location."1

Policies

•"All of the Company’s books, records, accounts, and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions, and must conform both to applicable legal requirements and to the Company’s system of internal controls."2


Image:http://s3.amazonaws.com/foodspotting-ec2/reviews/4128457/thumb_600.jpg?1381187428

The purpose of this tool is to analyze how Kona Grill is organized and the criteria that are used to

measure our performance in the marketplace.


Assessment:


2http://www.konagrill.com/more/investors/financial-reports3http://www.konagrill.com/menu

Developing strategic business units as the company continues to grow will be

an opportunity for Kona Grill to differentiate its product line and provide additional

sources of revenue.

TOOL 4a: ORGANIZATIONAL CHART

Kona Grill, Inc. Executive Officers

Kona Grill operates as one unit or independently and does not have strategic business units

to assess for tool four.

Revenue for 2014: $119,097,000 USD2

TOOL 4c: STRATEGIC BUSINESS UNITS

President & Chief Executive Officer

Berke Bakay

Chief Financial Officer

Christi Hing

VP of Development

Marci Riude

VP of Operations

Jenny Elkins

VP of Food and Beverage

Chris Moran

VP of International Development

Carlos de Leon


Key Success Factors (KSF)Kona Grill, Inc.

Ranking

Determinants of KSFGuest Satisfaction (service)

Number of Complaints

Growth of Loyalty Program

Superior Product

Industry Awards

Menu Mix

Product Differentiation

Maximize Revenue/Cost Control

Adjusted EBITDA

Sales Growth

New Unit Sales Performance

Average Weekly Sales

Market Share

Number of Restaurant Openings

Current Domestic Units

Benchmarking versus industry

Unit Growth vs. Same Store Sales

Average Check vs. Competition

(KSF Ranked 1 to 5 in terms of priority, 1=least important, 5=most important)

1http://hospitalityindustrygeek.blogspot.com/2012/12/key-success-factors-for-restaurants.html

2http://investors.thecheesecakefactory.com/phoenix.zhtml?c=109258&p=irol-reportsannual

3http://investors.bbrg.com/secfiling.cfm?filingid=1495479-14-5&cik=



1

TOOL 4b: KEY SUCCESS FACTORS

Industry

Ranking

Strength or

Weakness

Overall Analysis

Kona Grill, Inc. uses a number of key measures that are considered relevant in the full service

restaurant industry. Kona Grill's main weakness lies with its overall position in the market, as Kona Grill is

still entering its growth phase. Kona Grill places a high priority on new restaurant openings, however, the

main emphasis has been on performance of the stores. Kona Grill executives have shut down several

stores due to poor sales. The main risk for Kona Grill's continued growth is related to maintaining a good

brand image. Kona Grill has won a variety of awards for food, as well as restaurant atmosphere, and is

developing a loyal following. This is evident by the growth of its loyalty program Konavore, as well as,

market growth.

Strength

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1 5 Weakness

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Image:http://cdn1.benzinga.com/files/imagecache/1024x768xUP/images/story/2012/gettyimages-161109299.jpg

The purpose of this tool is to uncover opportunities and threats arising from the remote environment.


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1.00 3.47 3.6 Opportunity

1http://www.bls.gov/iag/tgs/iag722.htm

2http://smallbusiness.chron.com/types-economic-factors-can-affect-fast-food-industry-36923.html

3http://nrn.com/finance/2016-holds-mixed-outlook-restaurant-operators

4http://marketrealist.com/2015/02/how-food-inflation-impacts-restaurant-industry/

5http://marketrealist.com/2015/02/restaurant-indicator-savings-rate-disposable-income-increase/

ECONOMIC FACTORS

Inflation Rate4

Oil Prices/Energy Costs3

0.33

Threat

1.32

0.26

0.92

0.68

0.42

1.32

0.39

0.69

0.51

0.56

TOOL 5: ANALYSIS OF THE REMOTE ENVIRONMENT:

0.13

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Economic Factors

Availability of Credit2

Unemployment Rate1

Disposable Income5

Neutral

Threat

Opportunity

Opportunity


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1.00 3.28 2.88 Threat

1http://www.epi.org/publication/restaurant-workers/

2http://www.sandandsuccotash.com/significance-of-the-work-ethic-in-restaurants/

3http://marketrealist.com/2015/05/consumer-confidence-impacts-restaurant-industry/

4http://smallbusiness.chron.com/seasonal-factors-affecting-restaurant-industry-31192.html

5https://restaurantsustainability.files.wordpress.com/.../why-are-young-managers-leaving-the-restaurant-industry

0.42

0.39 0.26

1.12 0.84

Changes in Quality of Life5 0.13 Threat

Work Ethic2 0.23 Opportunity

Consumer Confidence3 0.28 Threat

Social Factors

0.66 0.44

0.69 0.92

SOCIAL FACTORS

Degree of Unionization1 0.22

0.42


Threat

Seasonal Changes4 0.14 Neutral


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1.00 3.00 2.28 Threat

1http://www.foodpolitics.com/tag/calorie-labeling/

2http://www.restaurant.org/advocacy/Minimum-Wage

3http://marketrealist.com/2014/12/chipotle-funds-restaurant-unit-growth-without-debt/

4https://www.transparency.org/country/#MEX5https://www.qsrmagazine.com/executive-insights/top-10-taxes-and-fees


Foreign Corruption4 0.2 0.6 0.4 Threat

0.22 0.66 0.44 Threat

Ease of Capital Movement3 0.15 0.45 0.45 Neutral

Taxation Levels5

Minimum Wage Regulation2 0.3 0.9 0.6 Threat

Political Factors

FDA Regulation Changes1 0.13 0.39

POLITICAL FACTORS

0.39 Neutral


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1http://www.restaurant.org/advocacy/Data-Security

2http://www.restaurant.org/News-Research/News/Find-out-how-mobile-technology-will-drive-restaura

4https://www.linkedin.com/pulse/10-trends-reshaping-restaurant-industry-aaron-d-allen

5http://jht.sagepub.com/content/25/4/386


Complexity5 0.05 0.1 0.15 Neutral

Innovation4 0.13 0.39 0.52 Opportunity

Mobile Application2 0.3 1.2 1.5 Opportunity

Trademarks/ Patents3 0.25 0.75 0.5 Threat

System/ Data Security1 0.27 0.81 0.54 Threat

Technological Factors

TECHNOLOGICAL FACTORS

3http://www.garestaurants.org/legal-knowledge-center-blog/sorry-were-closed-why-trademark-protection-is-important-in-the-restaurant-industry


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1http://www.theguardian.com/environment/2014/mar/31/climate-change-food-supply-un

2http://www.restaurant.org/Industry-Impact/Conservation

3http://www.restaurant.org/News-Research/News/Turn-up-the-heat-on-energy-efficiency

4https://www3.epa.gov/

5ir.uiowa.edu/cgi/viewcontent.cgi?article=5369&context=etd

Noise5 0.08 0.24 0.16 Threat


Energy Conservation

Requirements3 0.22 0.66 0.88 Opportunity

Air Pollution Controls4 0.17 0.51 0.51 Neutral

Applicability of Recycling2 0.2 0.6 0.8 Opportunity

Climate Change/ Natural

Disasters1 0.33 0.99 0.66 Threat

Ecological Factors

ECOLOGICAL FACTORS


Economic Factors

Social Factors

Political Factors

Minimum Wage Regulation

Foreign Corruption

Taxation Levels

Attributes Opportunity/Threat Assessment

REMOTE ENVIRONMENT ANALYSIS:

CONCLUSIONS

Unemployment Rate

Disposable Income

Inflation Rate

Overall Assessment

Oil Prices/Energy Costs

Degree of Unionization

Work Ethic

Consumer Confidence

Changes in Quality of Life

Overall Assessment

Overall Assessment

Threat

Threat

Threat

Threat

Threat

Opportunity

Opportunity

Threat

Opportunity

Threat

Disposable income is increasing

Rate is falling, decreased supply of labor

Inflation is slowing, market stability

Prices are rising, cost of operations affected

Health of domestic economy improving

Industry has experienced labor strikes,

demand for increased wages

Increased wages, increased productivity

Threat

Threat

Threat

Opportunity

Confidence is fluctuating, upcoming

elections

Healthcare Affordability Act, increasing

penalties and costs

Uncertainty of labor, mandatory quality of

life costs, and consumer confidence

States raising minimum wage rates

Inflation adjustment tax, and state changes

International expansion into Mexico

proposed.

Increased operating costs related to

political factors


Technological Factors

Ecological Factors

REMOTE ENVIRONMENT ANALYSIS:CONCLUSIONS (CONTINUED)


Mobile Application

Trademarks/Patents

Innovation

Overall Assessment

System/Data Security

Climate Change/Natural Disasters

Applicability of Recycling

Energy Conservation Requirement

Noise

Overall Assessment

Threat

Opportunity

Opportunity

Threat

Opportunity

Opportunity

Opportunity

Threat

Opportunity

Threat

Advancements are improving efficiency and

customer satisfaction

Increased Ransomware attacks

Focused marketing, customer satisfaction,

and operating efficiency

Patent assertion entities are targeting

restaurants

Automation, mobile applications, and food

processes

Impacting food supplies, environmental

policies increase operating costs

Recycling costs are relatively low in many

areas

Energy efficiency standards result in

increased energy savings over time

Increased noise in urban centers impacting

restaurant atmosphere

CSR can result in increased profits, as cost

savings, or increased customer loyalty


Image:http://www.intelligent-aerospace.com/content/dam/avi/online-articles/2012/11/shutterstock_globalization.jpg

The purpose of this tool is to uncover possible opportunities and threats from the global

environment. Additionally, this tool will seek to prepare a foundation for use by Marketing and

Operations to formulate strategic plans at the functional level.


I. Synopsis

Executed development agreement for Mexico

6 restaurants to be opened over a 7 year period (Mexico City and Monterrey)1

Signed letter of intent for the Middle East; development agreement in process1


TOOL 6: GLOBALIZATION ASSESSMENT

Kona Grill's Domestic Footprint1

Kona Grill's International Footprint

Kona Grill does not have an international footprint at this time; however, international expansion plans are as

follows:

Kona Grill currently operates 37 restaurants domestically, which are represented on this U.S. map.


II. Int. Revenues vs. Domestic III. Int. Prop. & Eqiup. vs. Domestic

Domestic International Domestic International

revenues 119 0 2014 Property & Equipment (in millions USD)2

54 0

IV. International Revenues vs. Domestic (2012-2014)

2010 2011 2012 2013 2014

Domestic Revenue 88 94 96 98 119

International Revenue0 0 0 0 0

Franchising

Opportunities:

Threats:

1http://www.transparency.org/country/#MEX


3http://www.transparency.org/country/#CAN

Opportunities exist for the expansion of domestic restaurants; however, international expansion provides the

opportunity to enter new markets that have fewer upscale dining establishments. Key considerations when entering new

markets relate to corruption, crime, infrastructure, and affordability. Mexico provides opportunities in the coastal tourist

destinations. Franchising would be ideal as this has less risk for a relatively new business in the industry. We will benefit from

the North American Free Trade Agreement (NAFTA), as this will reduce barriers that would restrict movement of capital or the

import or export of goods necessary to meet quality control.

Mexico is a riskier proposition than Canada, which is also part of NAFTA, as Mexico has a corruption perceptions

index rank of 95 out of 168 countries with a score of 35 out of 100.1 A score of 0 means the most corrupt, with 100

representing no corruption. In comparison Canada has a score of 83 out of 100, and ranks 9th out of 168 countries, and has a

population with higher income levels, but with added competition as the main threat in this market.3 The Middle East poses a

great deal of risk due to current political and civil unrest throughout the region, however, a few areas are exceptions to this

risk, such as the United Arab Emirates.

GLOBALIZATION ASSESSMENT

(CONTINUED)

Preferred Method of Entry:

119, 100%

0, 0%

2014 Revenues (in millions USD)2

Domestic

International 54, 100%

0, 0%

2014 Property & Equipment (in

millions USD)2

Domestic

International

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2014

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Kona Grill, Inc. Revenue (2010-2014)2

International Revenue Domestic Revenue


Image:https://a.dilcdn.com/bl/wp-content/uploads/sites/25/2014/10/Spicy-Kazan-3-copy.jpg

The purpose of this tool is to gain a perspective of the overall industry structure and examine

competitors using relevant criteria to determine our positon in the industry.


NAICS code 722511: Full-Service Restaurants

Sales (2014)2

BJ's $845,570,000The Cheesecake Factory $1,144,900,000Yard House $250,000,000Bonefish Grill $500,000,000Bravo Brio $408,310,000Joe's Crab Shack $837,000,000Kona Grill $119,100,000Del Frisco's Grille $301,800,000

2http://bi.galegroup.com/essentials/company/1286411?u=tel_a_apsu

3http://www.statista.com/statistics/218829/us-full-service-restaurants-food-and-drink-sales/

0.141%

1http://siccode.com/en/naicscodes/722511/fullservice-restaurants

TOOL SEVEN: DEFINING THE INDUSTRY

This U.S. industry comprises establishments primarily engaged in providing food services to patrons who

order and are served while seated (i.e., waiter/waitress service) and pay after eating. These establishments

may provide this type of food service to patrons in combination with selling alcoholic beverages, providing

carryout services, or presenting live nontheatrical entertainment.1

Kona Grill matches this industry definition as the restaurants provide an upscale seated environment, food

prepared from scratch, as well as, beverages that are either alcoholic or non-alcoholic, which are served by

waitstaff.

Below is the perceptual map of Kona Grill's market share compared to direct competitors in the restaurant industry

Market Share (2014)3

Market Share of Kona Grill's Competitors

0.396%0.536%0.117%0.234%0.191%0.392%0.006%

Profitability

Pro

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Image:http://inmotionbuilders.com/blog/wp-content/uploads/2012/06/Kona-Sugarland-TX-01.jpg

The purpose of this tool is to gain a visual perspective of where Kona Grill is located in the life cycle

relative to the industry by comparing revenues over a 10 year period.


Fiscal year ends in December. USD in millions except per share data.2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Kona Revenue (USD in Millions)37 51 72 76 81 88 94 96 98 119

Industry Revenue (USD in Billions)101 117 127 140 147 155 143 102 121 139

Analysis:

1http://bi.galegroup.com.ezproxy.lib.apsu.edu/essentials/comparisonTool/industry?u=tel_a_apsu&entities=722511&metric=revenue#

TOOL 8: LIFECYCLE ANALYSIS

Kona Grill opened the first restaurant in 1998 and has since expanded to 37 locations. Based off

expansion and marketing we are set to move out of the introduction stage, and into the growth cycle

relative to a mature industry. This is evident starting from 2012, where we continued to enjoy increased

revenues despite an industry slowdown.

37

51

72 7681

8894 96 98

119

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Kona Grill, Inc. vs. IndustryTotal Revenue

Kona Revenue (USD in Millions) Industry Revenue (USD in Billions)


Image:https://leaderchat.files.wordpress.com/2011/09/career-growth-image.jpg

The purpose of this tool is to uncover the threats and opportunities facing Kona Grill from the Full-

Service Restaurant industry.


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1http://www.restaurant.org/News-Research/Research/Facts-at-a-Glance

4http://www.bls.gov/opub/btn/volume-3/how-does-consumer-spending-change-during-boom-recession-and-recovery.htm

5http://www.123helpme.com/power-of-suppliers-and-power-of-buyers-view.asp?id=166907

2https://www.ohiodominican.edu/uploadedFiles/Library/CoursePages/Courses/Bus/Bus498/Application-PortersFiveForcesModelPaperExample.pdf

3http://www.thinkingbookworm.com/blog/2012/05/effects-of-a-switching-cost-and-b-differentiated-products-in-porters-five-forces-model.html

TOOL 9: PORTER'S 5 FORCES ANALYSIS:

Buyer Volume5 0.08 0.24 0.32 Opportunity

0.54 Threat

0.4 Opportunity

Threat

Changes in Consumer Traffic

Patterns2 0.25 0.75 1

POWER OF BUYERS

Opportunity

Power of Buyers

Large Number of Providers1 0.3 0.6 0.6

Buyer Switching Costs3 0.27 0.54

Changes in Consumer Spending

Patterns4 0.1 0.3


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1http://www.gourmetmarketing.net/bargaining-power-suppliers-restaurant-industry/

2https://www.cleverism.com/bargaining-power-of-suppliers-porters-five-forces/

3http://panmore.com/burger-king-five-forces-analysis-porters-model

4http://www.businessnewsdaily.com/5446-porters-five-forces.html

Power of Suppliers

Farming Practices1

0.3 0.9 1.2


POWER OF SUPPLIERS

Government Stockpiling1 0.08 0.24 0.24 Neutral

0.92 Opportunity

Changes in Inventory Levels2 0.15 0.45 0.45 Neutral

0.23 0.69

Number of Important Suppliers5 0.2 0.6 0.8 Opportunity

Threat of Forward Integration3 0.04 0.12 0.12 Neutral

OpportunitySuppliers' Contribution to

Quality or Services4



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1.00 3.00 3.03 Threat

1http://people.ucsc.edu/~nuclear/econ1/testinfo/chapter16.pdf

2http://smallbusiness.chron.com/entry-barriers-restaurants-36947.html

4http://changingminds.org/disciplines/marketing/understanding_markets/barriers_entry.htm

5http://www.referenceforbusiness.com/small/A-Bo/Barriers-to-Market-Entry.html

6http://www.econoclass.com/imperfectcompetition.html

7http://smallbusiness.chron.com/economies-scale-service-industry-81253.html


Brand Loyalty6 0.09 0.27 0.36 Opportunity

Access to Distribution3 0.25 0.75 1.00 Opportunity

Threat

Government Regulation4 Neutral0.6 0.6

0.260.39

0.2

Economies of Scale7 0.05 0.15 0.15 Neutral

Capital Requirements5 0.13

0.3 0.3 Neutral

Availability of Property2 0.18 0.54 0.36 Threat

Barriers to Entry

Product Differentiation1 0.1


BARRIERS TO ENTRY


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1.00 3.00 2.2 Threat

2http://www.investopedia.com/articles/personal-finance/102315/why-restaurant-biz-has-narrow-profit-margins.asp

3http://knowledgecenterforstudents.blogspot.com/2011/10/restaurant-industry-analysis.html

5http://scholarsarchive.jwu.edu/cgi/viewcontent.cgi?article=1008&context=mba_student

1http://www.thinkingbookworm.com/blog/2012/05/effects-of-a-switching-cost-and-b-differentiated-products-in-porters-five-forces-model.html

Availability of Substitutes

User Switching Costs1 0.21


AVAILABILITY OF SUBSTITUTES

Leisure Substitutes3 0.19 0.57 0.38 Threat

0.63 0.42 Threat

Substitute Price/Value2 0.22 0.66 0.44 Threat

Profitability of Substitute

Producers5 0.18 0.54 0.36 Threat

Availability of Close Substitutes4 0.2 0.6 0.6 Neutral



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1http://www.statista.com/statistics/300819/cost-of-online-advertising-in-franchise-restaurants-us/

2http://smallbusiness.chron.com/variable-fixed-costs-restaurant-operation-81771.html

3http://marketrealist.com/2014/12/overview-u-s-restaurant-industry/

4http://www.restaurant.org/News-Research/Research/Forecast-2016


0.63 0.63 Neutral

Rivalry among Competitors

Advertising Costs1 0.18


RIVALRY AMONG COMPETITORS

Diversity of Competitors5 0.15 0.6 0.45 Threat

Relative Industry Growth4 0.24 0.72 0.96 Opportunity

Product Features3 0.22 0.66 0.88 Opportunity

0.54 0.72 Opportunity

Fixed Costs2 0.21


Power of Buyers

Power of Suppliers

Barriers to Entry

Large Number of Providers Threat Market saturation providing alternatives

PORTER'S 5 FORCES ANALYSIS:

CONCLUSIONS


Changes in Consumer Traffic Patterns Opportunity Seeking improvement for healthier diet

Changes in Consumer Spending

PatternsOpportunity Desire fresh and healthy ingredients

Buyer Switching Costs Threat Low cost/ high market saturation

Buyer Volume Opportunity Frequent dining out

Overall Assessment OpportunityConsumer's are seeking healthier food

options at moderate cost

Number of Important Suppliers Opportunity Increase in specialty food suppliers

Farming Practices Opportunity Increased supply of organic food

Suppliers' Contribution to Quality or

ServiceOpportunity Increase in sustainability practices

Access to Distribution Opportunity Increased access in highly developed areas

Brand Loyalty Opportunity Variety sought by consumers

Capital Requirements Threat Increased cost, increased capital needs

Overall Assessment OpportunityIncreased supply results in more

competition

Availability of Property Threat Class A commercial space is in limited supply

Overall Assessment Threat Limited capital resulting in slower growth


Availability of Substitutes

Rivalry among Competitors

CONCLUSIONS (CONTINUED)

User Switching Costs Threat Low cost goods, high market saturation

PORTER'S 5 FORCES ANALYSIS:

Substitute Price / Value Threat High market saturation of substitutes


Leisure Substitutes Threat High market saturation of substitutes

Profitability of Substitute Producers ThreatLow cost leader options such as fast food

chains

Overall Assessment ThreatSaturation of market, increased

competition, lower profit margins

Advertising Costs OpportunityCompetitors still focused on mass marketing

advertising

Product Features Opportunity Limited menu from competitors

Relative Industry Growth Opportunity Growth in a mature industry

Diversity of Competitors Threat Wide array of products in industry

Overall Assessment Opportunity Ability to adapt to consumer demands


Image:https://leaderchat.files.wordpress.com/2011/09/career-growth-image.jpg

The purpose of this tool is to analyze the threats associated with our major competitors, and identify

the opportunities that will allow us to successfully position ourselves in order to compete against

them in the marketplace.


Sales (2014)2

Yard House #########

Bonefish Grill#########

Bravo Brio #########

Kona Grill #########

Del Frisco's Grille#########

WeightsKona Grill,

Inc.

Bonefish

GrillBravo Brio

Del

Frisco's

Grille

Yard

House

0.22 4 5 3 2 1

0.19 3 2 1 4 5

0.21 5 4 3 2 1

0.2 1 5 4 2 3

0.18 2 3 5 1 4

3.06 3.86 3.18 2.2 2.7

Analysis:

1http://bi.galegroup.com/essentials/company/1286411?u=tel_a_apsu

TOOL 10: COMPETITIVE ADVANTAGE ANALYSIS

Opportunity for Maximizing Revenue and Cost Control: We currently realize growth while not operating at

peak efficiency, which is evident in the lack of information in areas of our financial reports. Additionally,

international expansion will require further development of cost controls due to increased risk related to

foreign markets.

Threat related to Market Share: Against direct competitors we make up 7% of the industry and are still

vulnerable to changes in comparable restaurant sales, market conditions, and consumer awareness of our

brand.

Benchmarking vs. Industry: This is rated neutral, as all of the competitors implement benchmarking in the

industry in order to stay on top of current trends in a competitive industry.

Opportunity of Superior Product: Our focus on creating stand out dishes, sauces, and cocktails has been

recognized by customers and industry critics, resulting in various awards. These awards are giving us a

competitive advantage against competitors through marketing initiatives.

Key Success Factors (KSF)

Total Success Rating

(Rating Scale 1 to 5, with 5 being the best)

Opportunity for Guest Satisfaction: Kona Grill's focus on serving award winning dishes in a casual upscale

atmosphere is a competitive advantage versus known competitors in this industry.

Guest Satisfaction

Superior Product

Maximize Revenue/Cost Control

Market Share

Benchmarking vs. Industry

Yard House16%

Bonefish Grill32%

Bravo Brio26%

Kona Grill 7%

Del Frisco's Grille19%

Market Share by Revenue of Direct Competitors (2014)1

Yard House

Bonefish Grill

Bravo Brio

Kona Grill

Del Frisco's Grille


Image:https://d9hblenkye35w.cloudfront.net/media/thumbnail/ext/xl/http%253A%252F%252Fscontent-a.cdninstagram.com

The purpose of this tool is to uncover strengths and weaknesses arising from within our internal

operating environment. This requires us to rate and assess the 5 key functional areas of operations.


MARKETING

Breadth of Product Line [ ] [ ] [ X ] [ ] [ ] [- -]

Sales Concentration (few products/customers) [ ] [ ] [ X ] [ ] [ ] [- -]

Marketing Research Capability [ ] [ X ] [ ] [ ] [ ] [W]

Market or Submarket Share [ ] [ ] [ ] [ X ] [ ] [ S ]

Product/Service Expansion Potential [ ] [ ] [ ] [ X ] [ ] [ S ]

Life Cycle of Key Products [ ] [ ] [ X ] [ ] [ ] [- -]

Distribution Channels (#, Coverage, Control) [ ] [ X ] [ ] [ ] [ ] [W]

Effectiveness of Sales Force [ ] [ X ] [ ] [ ] [ ] [W]

Image, Reputation, & Quality of Product/Service [ ] [ ] [ ] [ X ] [ ] [ S ]

Effectiveness of Sales Promotion & Advertising [ ] [ ] [ X ] [ ] [ ] [- -]

Pricing Strategy & Pricing Flexibility [ ] [ ] [ X ] [ ] [ ] [- -]

Marketing Input to New Product Development [ ] [ X ] [ ] [ ] [ ] [W]

After-Sale Service Capability [ ] [ ] [ X ] [ ] [ ] [- -]

Goodwill, Brand Loyalty [ ] [ ] [ X ] [ ] [ ] [- -]

Assessment

Ability to Raise Short Term Capital [ ] [ ] [ X ] [ ] [ ] [- -]

Ability to Raise Long Term Capital (Debt/Equity) [ ] [ ] [ ] [ X ] [ ] [ S ]

Cost of Capital [ ] [ X ] [ ] [ ] [ ] [W]

Tax Considerations [ ] [ ] [ ] [ X ] [ ] [ S ]

Relations with Owners, Investors, Stockholders [ ] [ X ] [ ] [ ] [ ] [W]

Leverage Position [ ] [ ] [ ] [ X ] [ ] [ S ]

Price-Earnings Ratio [ ] [ X ] [ ] [ ] [ ] [W]

Working Capital [ ] [ X ] [ ] [ ] [ ] [W]

Cost Control, Ability to Reduce Costs [ ] [ X ] [ ] [ ] [ ] [W]

Financial Size [ ] [ X ] [ ] [ ] [ ] [W]

Efficiency of Accounting & Information Systems [ ] [ X ] [ ] [ ] [ ] [W]

1http://www.gurufocus.com/term/ROIC/KONA/Return-on-Invested-Capital/Kona-Grill-Inc

2http://www.nasdaq.com/symbol/kona/guru-analysis/fool#/anchor6

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FINANCE

TOOL 11: INTERNAL AUDIT ANALYSIS

INTERNAL STRENGTHS AND WEAKNESSES

AUDIT CHECKLIST

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Standard menu size

On par with industry

Newer firm, less capability

Growth relative to industry

Room for expansion


Fewer restaurants

Smaller sales force

Award winning dishes



Little evidence found


Loyalty program (Konavore)

On par, relative to size

No current L/T debt

Dec 2015, -12.84% ROIC1

Taxes have been low

Pressure from stockholders

Low debt with modest growth

Lack of important figures2

Less capital than industry

Smaller firm with less control

Smaller relative to industry

Lack of financial information


PRODUCTION / OPERATIONS

Raw Material Costs & Availability [ ] [ X ] [ ] [ ] [ ] [W]

Supplier Relationships [ ] [ ] [ X ] [ ] [ ] [- -]

Inventory Control Capability [ ] [ ] [ X ] [ ] [ ] [- -]

Inventory Turnover [ ] [ ] [ ] [ ] [ X ] [ S ]

Location of Facilities [ ] [ ] [ ] [ ] [ X ] [ S ]

Utilization of Facilities [ ] [ ] [ ] [ ] [ X ] [ S ]

Effect of Economies of Scale [ ] [ ] [ X ] [ ] [ ] [- -]

Use of Subcontracting & Outsourcing [ ] [ ] [ X ] [ ] [ ] [- -]

Degree of Vertical Integration (Value Added) [ ] [ ] [ X ] [ ] [ ] [- -]

Age of Facilities & Equipment [ ] [ ] [ ] [ ] [ X ] [ S ]

Effectiveness of Production Control Procedures [ ] [ ] [ ] [ ] [ X ] [ S ]

Top Management Skill, Capabilities, & Interest [ ] [ ] [ X ] [ ] [ ] [- -]

Employees’ Skill & Morale [ ] [ ] [ ] [ X ] [ ] [ S ]

Relative Labor Relations Costs [ ] [ ] [ X ] [ ] [ ] [- -]

Effectiveness of Personnel Policies [ ] [ ] [ X ] [ ] [ ] [- -]

Use of Incentives to Motivate Performance [ ] [ ] [ X ] [ ] [ ] [- -]

Ability to Level Peaks and Valleys of Employment [ ] [ ] [ X ] [ ] [ ] [- -]

Employee Turnover & Absenteeism [ ] [ ] [ ] [ X ] [ ] [ S ]

Average Experience Level of Employees [ ] [ ] [ ] [ X ] [ ] [ S ]

Presence of Specialized Skills? [ ] [ ] [ X ] [ ] [ ] [- -]

Research & Development Budget [ ] [ ] [ X ] [ ] [ ] [- -]

Patents, Trademarks, and Legal Protection [ ] [ ] [ X ] [ ] [ ] [- -]

Product Innovations Relative to the Industry [ ] [ ] [ ] [ X ] [ ] [ S ]1http://www.konagrill.com/more/investors/presentations

PERSONNEL

RESEARCH & DEVELOPMENT (TECHNICAL)

Assessment

Assessment

Relative to industry

No reported R&D


Award winning dishes




Less turnover in operations

Used effectively




Less turnover, more experience

All facilities relatively new

Award winning, strong reviews

High turnover, difficult to assess

Higher morale, modest skill




Higher cost/less availability

High traffic, fresh ingredients

Class A office space1

INTERNAL AUDIT ANALYSIS

(CONTINUED)

INTERNAL STRENGTHS AND WEAKNESSES

AUDIT CHECKLIST

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Assessment

(CONTINUED)

The internal audit analysis looked at five key functional areas of Kona Grill, and uncovered deficiencies in

marketing, finance, and production. Areas for improvement are related to a need for more suppliers and

improved supplier relations to ensure quality product availability, while being supplied at a lower cost. Target

marketing through use of social media has been adequately meeting the needs for growth, but relative to the

industry there is a need to increase our marketing channels. The key concern highlighted is the reporting of

financial data, as lack of financial information is cause for concern related not only to investor confidence, but to

also ensure we are meeting regulatory compliance.

We have been experiencing success in recent years with increased sales figures and continued expansion;

however, inconsistency related to profit margin still exists. Our internal strengths need to be nurtured, such as

having quality personnel in operations to help continue to maintain a positive brand image. Additionally, we

should continued to develop a variety of award winning dishes in order to help increase brand awareness in the

industry.

TOOL 11: INTERNAL AUDIT ANALYSIS


Image:http://images.wisegeek.com/computer-graphs.jpg

The purpose of this tool is to gain a general perspective of our financial health by examining common

size statements and financial ratios and benchmarking ourselves against two of our direct

competitors.


2014 % 2013 % 2012 % 2014 % 2014 %Net Sales 119 100 98.25 100 96.02 100 301.81 100 408.31 100

C.O.G.S. (D&A) 104.94 88.18 86.1 87.63 63.96 66.61 242.28 80.27 338.07 82.80

Gross Margin 14.06 11.82 12.15 12.37 32.06 33.34 59.53 19.72 70.24 17.20

Cost & Expenses:R&D (----) (---) (----) (---) (----) (---) (----) (---) (----) (---)SG&A 13.2 11.08 9.02 9.18 7.04 7.33 31.44 10.42 54.79 6.31Other 1.12 6.06 0.74 6.06 (----) 5.86 17.13 5.68 (----) 4.97

Total 118.14 17.14 95.14 15.24 90.67 13.19 137.7 16.10 101.86 11.28

Operating Income 1 (---) 3 (---) 5 (---) 25 8.10 15 3.80Income Before Tax 0.703 0.60 2.88 2.90 5.29 5.50 24 (---) 4.15 3.90Income Tax (----) (---) 0.169 (---) 0.036 (----) (---) (---) 0.32 0.30Net Income 0.7 0.60 2.71 2.80 4.79 5.00 17 (---) 3.83 3.60

2014 % 2013 % 2012 % 2014 % 2014 %Cash, S-T Investments 36.76 38.95 6.06 12.15 8.17 20.77 3.74 1.10 0.43 0.17Acct. Receivable (Net) 0.39 0.41 0.85 1.69 0.29 0.73 10.18 3.18 7.08 3.45Inventories (----) (---) (----) (---) (----) (---) 16.59 5.19 3.13 1.24Other Current 2.13 2.25 1.5 3.01 1.13 2.88 9.13 2.92 5.64 2.24

Tot. Current 39.37 41.61 8.4 16.85 9.59 24.38 39.63 12.40 17.89 7.11

Net Prop., Plant, Equip. 53.94 57.15 40.35 80.92 28.93 73.56 155 48.90 178.88 71.05Other Fixed Assets 1.17 1.24 1.11 2.23 0.81 2.06 0.34 4.10 0.19 20.45

Total Assets 94.37 100 49.87 100 39.33 100 319.67 100.00 251.76 100.00

Current Liabilities 12.25 12.98 14.88 29.83 8.54 21.72 41.74 (---) 59.69 (---)

Long-Term Debt (----) (---) (----) (---) 0.21 0.52 (----) (---) 56 22.24Deferred Tax Liabilities (----) 1.53 (----) 2.48 (----) 4.18 16.18 0.91 50.87 (---)

Total LT Debt (----) (---) (----) (---) 0.21 (---) (----) (---) 56 (---)Total Debt (----) (---) 3.5 (---) 0.5 (---) (----) 13.06 (----) (---)

Stockholder's Equity 65.43 69.33 22.36 44.83 18.87 47.98 210.98 66.00 53.78 21.36Tot. Equities 65.43 100 22.36 100 18.87 100 210.98 100.00 53.78 100.00

1 http://www.marketwatch.com/investing/stock/kona2 http://www.marketwatch.com/investing/Stock/DFRG?countrycode=US3 http://www.marketwatch.com/investing/stock/bbrg4 http://www.morningstar.com/stocks/XNAS/KONA/quote.html5 http://www.konagrill.com/more/investors/financial-reports

COMMON SIZE INCOME STATEMENT (USD IN MILLION; 2012-2014)

COMMON SIZE BALANCE SHEET (USD IN MILLION; 2012-2014)

TOOL 12: FINANCIAL ANALYSIS

KONA KONA KONA DFRG BBRG

KONA KONA KONA DFRG BBRG


DFRG

RATIOS 2010 2011 2012 2013 2014 Trend S/W 2014

Liquidity

Current 0.45 0.76 1.12 0.56 3.21 Increasing S 0.95

Quick 0.31 0.64 0.99 0.46 3.03 Increasing S 0.33

Leverage Ratios

Debt-to-Total Assets-Ratio 0.596 0.57 0.52 0.55 0.31 Decreasing S 0.34

Debt-to-Equity Ratio 1.476 1.34 1.08 1.23 0.44 Decreasing S 0.515

Long-Term Debt 0.003 0 0.01 0 0 Decreasing S 0

Activity Ratios

FA Turnover 0.023 0.03 0.03 0.03 0.03 Neutral S 0.022

Total Assets Turnover 0.019 0.02 0.24 0.02 0.02 Neutral S 0.001

Average Collection Period 0.001 0 0 0 0 Neutral S 0.001

Profitability Ratios

Operating Profit Margin -0.01 0.02 0.05 0.03 0.01 Neutral W 0.08

Net Profit Margin -0.02 0.02 0.05 0.03 0.01 Neutral S 0.055

ROE -0.09 0.12 0.26 0.13 0.02 Neutral W 0.081

1 http://www.marketwatch.com/investing/stock/kona

2 http://www.marketwatch.com/investing/Stock/DFRG?countrycode=US

3 http://www.morningstar.com/stocks/XNAS/KONA/quote.html

4 http://www.konagrill.com/more/investors/financial-reports

5 http://investor.dfrg.com/annuals.cfm

5 YEAR RATIO ANALYSIS

KONA


2010 2011 2012 2013 2014

Current 0.45 0.76 1.12 0.56 3.21

Quick 0.31 0.64 0.99 0.46 3.03

2010 2011 2012 2013 2014

Debt-to-Total Assets-Ratio0.596 0.572 0.52 0.552 0.307

Debt-to-Equity Ratio1.476 1.338 1.084 1.23 0.442

Long-Term Debt0.003 0 0.005 0 0

LIQUIDITY AND FINANCIAL LEVERAGE

KONA GRILL, INC.

0

0.5

1

1.5

2

2.5

3

3.5

2010 2011 2012 2013 2014

Kona Grill, Inc. Current, Quick Ratios

Current Quick

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2010 2011 2012 2013 2014

Kona Grill, Inc.Leverage, Debt/Equity Ratios

Debt-to-Total Assets-Ratio Debt-to-Equity Ratio Long-Term Debt


2010 2011 2012 2013 2014

FA Turnover 0.023 0.027 0.031 0.029 0.025

Total Assets Turnover0.019 0.023 0.24 0.022 0.017

Average Collection Period0.001 0.001 0.001 0.001 0.001

2010 2011 2012 2013 2014

Operating Profit Margin-0.013 0.024 0.054 0.029 0.005

Net Profit Margin-0.018 0.022 0.05 0.028 0.006

ROE -0.092 0.117 0.262 0.132 0.016

ACTIVITY AND PROFITABILITY

KONA GRILL, INC.

0

0.05

0.1

0.15

0.2

0.25

0.3

2010 2011 2012 2013 2014

Kona Grill, Inc.Activity Ratios

FA Turnover Total Assets Turnover Average Collection Period

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

2010 2011 2012 2013 2014

Kona Grill, Inc.Profitability Ratios

Operating Profit Margin Net Profit Margin ROE


4

5

6

Analysis:

1 http://www.marketwatch.com/investing/stock/kona

2 http://www.marketwatch.com/investing/Stock/DFRG?countrycode=US

3 http://www.marketwatch.com/investing/stock/bbrg


5http://investor.dfrg.com/annuals.cfm

6http://investors.bbrg.com/secfiling.cfm?filingID=1495479-15-14&CIK=1495479

COMPANY NET SALES / EMPLOYESS (2014)

Note: 10K reports for these 3 companies did not have information related to whether or not these were full time or part time

employees

$37,156.16

Kona Grill has an employee contribution of $43,418.52 per employee, which is less than

Del Frisco's Grille, but more than Bravo Brio. This appears to be an optimal situation as Del Frisco's

Grille appears to have a need for more employees, resulting in potential employee dissatisfaction and

higher turnover. Bravo Brio has a lower employee contribution, which might be interpreted as having

too many employees on staff, resulting in less efficient operations. Based off this analysis, productivity

appears to be a strength for Kona Grill at this time.

$43,418.52

$301,805,000/4,745 =

$408,309,000/10,989 =

$63,604.85

$119,097,000/2,743 =

PRODUCTIVITY ANALYSIS

KONA GRILL, INC.


Image:http://restaurantnewsrelease.com/wp-content/uploads/2013/10/Kona-Grill-Flourless-Chocolate-Cake.jpg

The purpose of this tool is to examine our compatibility with the 3 major generic strategies, and

determining which one provides the best fit for Kona Grill.


Intense Supervision of Labor

Assessment:



TOOL 13: GENERIC STRATEGY ANALYSIS

Kona Grill displays characteristics of each of these three generic strategies, however best fit is in

the differentiation strategy. Our mission statement is customer focused, with emphasis on providing an

outstanding guest experience, in any restaurant, on any given day. Currently, we do not have a strong

investment into research and development, however, we offer over 40 distinct handmade sauces, and

craft dishes from fresh high quality ingredients. Continuing to focus on menu development, along with

continuous expansion and improvements of our restaurants, we should be able to continue strengthening

our position in differentiation.

NOCore competency or distinctive advantage in at least one functional area

Strong position in at least one segment of their defined market

YES

Focus(Product Leadership)

CRITERIA

Overall Assessment

YES NO

Overall Assessment Overall Assessment

Sustained Capital Investment

Ready Access to Capital

Strong Process Engineering Skills

Low Cost Leadership(Operational Excellence)

CRITERIA YES NO

Differentiation(Customer Intimacy)

CRITERIA

Strong Marketing Capabilities

Strong Product Engineering

Corporate Creative Flair

Strong R& D

Product Designed for Ease of

ManufactureStrong Distribution Channels

Corporate Reputation for Quality or

Technological Leadership

Long Industry Tradition or Unique

Skill Set

Strong Internal Cohesiveness

Among Departments

Subjective Measurement of

Personnel for Incentive Purposes as

Opposed to Quantitative Measures

Ability to Attract Talented Labor and

Management

Low Cost Distribution System

Tight Cost Controls

Frequent, Detailed Control

Reports

Highly Structured Organization

Structure

Incentive Based on Strict

Quantitative Targets


Image:http://www.mbharch.com/work/restaurants/konagrill/02.jpg

The purpose of this tool is to determine and recommend four separate strategies based off of the

strengths, weaknesses, opportunities, and threats uncovered in the previous tools.


S,W,O,T

03, 05

S1, S3

T2, T3

S5, S2

O1, O3

W1, W5,

W2

T1, T2, T3,

W3, W4,

W5

TOOL 14: SWOT ANALYSIS

Strengths Weaknesses Opportunities Threats(S1) Disciplined

Franchise Model

(W1) Market Share (O1) Develop

Strategic Business

Units

(T1) Rising Energy

Costs

(S2) Guest

Satisfaction

(W2) Marketing

Capability

(O2) Consumer

Disposable Income

(T2) Minimum Wage

Regulations

(O3) International

Expansion

(T3) System/Data

Security

(S4) Increasing

Liquidity Trend

(S5) Employee

Productivity

(W4) Accounting /

Financial Efficiency

(W5) Raw Material

Costs / Availability

(O4) Technological

Innovation

(O5) Changes in

Consumer Demand

Alliance

(Opportunities &

Weaknesses)

Covert

(Threats &

Weaknesses)

Developing a strategic business unit such as merchandise line of apparel and

accessories can help marketing efforts and help us to branch out of the food

industry. Merchandise items can be sourced from international vendors, and

sold at tourist destinations, similar to many other restaurant franchises in the

industry.Threat of rising operational costs with the increased cost of capital, while also

lacking financial information, makes it evident that implementation of a new

Enterprise Resource System or Financial Management Information System

needs to be put in place or updates are need for the existing systems. This

should have the added benefit of data security.

A variety of strengths, weaknesses, opportunities, and threats have been uncovered up until

this point for the operating environment, industry environment, and remote environment. As there

appear to be evenly distributed throughout the project this helps support my belief that we are just

entering the growth phase of our life-cycle. This analysis will formulate a recommendation based off

the previously identified SWOT, in order to pursue continued growth.

Strategy Recommendation

Strategy RecommendationExploitive

(Opportunities &

Strengths)

Based off the opportunity for international expansion and our disciplined

franchise model, we should continue to pursue growth by expanding

internationally by means of franchising as a method of entry into foreign

markets. Award winning dishes and sauces should be focused in areas that

have increased consumer demand for Asian/American fusion, such as tourist

destinations overseas.

Defensive

(Threats &

Strengths)

Due to the threat of proposed minimum wage increases it would be best to

continue monitoring employee productivity relative to the industry. Employee

training and development, with targeted raises beyond minimum wage rates,

will help retain quality staff and thereby ensure continued guest satisfaction.

This should have the added benefit of reducing the threat of data breaches

from disgruntled employees.

(T4) Climate Change

(T5) Patent Assertion

Entities

(S3) Superior Product (W3) Cost of Capital


Company Analysis Project Kona Grill Inc

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