A conceptual model for quantifying the effects of a new entrant in a competitive restaurant market

Abstract

A challenge often faced by restaurant operators is to deal with the effects of a new restaurant opening up in their local market. The preexisting restaurants' management teams are invariably unsure about how the opening of the new restaurant will affect their established market share and revenue streams. The current paper has two major objectives. First, this paper proposes a conceptual model for quantifying the changes in the market shares of all the restaurants in a market, when it is known that a new restaurant will be opening up in the near future. Second, this paper shows, through the use of simulated data, how the model developed can be applied for making strategic decisions. A popular stochastic model known as the Markov Model is used to analyze the dynamics of market share when consumers switch brand.

Publication Title

Quick Service Restaurants, Franchising, and Multi-Unit Chain Management

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