deployed through its activities {see Exhibit 4. 4}. A rm' 5 activities. therefore. are one ofthe key internal drivers of performance differences across rms. Activities are distinct actions that enable rms to add incremental value at each step by transforming inputs into goods and services. Managing a supply chain. running the company*s IT system and websites. and providing customer support are all examples of distinct activities. Activities are narrower than functional areas such as marketing because each Functional area comprises a set of distinct activities. FIve Guys' core competency is to offer a simple menu of fresh. high-quality burgers and fries and a great customer experience. To command a premium price for these products and "Pagem service. Five Guys needs to engage in number of distinct activities. Though it may seem simple. the ability to implement diverse sets of distinct activities every day across multiple geographic locations is no small feat. The activities begin with sourcing ingredients. From the start. the Murrell sons have always selected only the best ingredients without knowing their cost. They viewed cost as a distraction from their ability to identify and select only the freshest. tastiest. highest-quality toppings and condiments. For example. the mayonnaise they selected after a blind taste test turned out to be the most expensive brand on the market. It also happened to be sold by a notoriously difcult vendor. but they stuck with him because he offered the best mayonnaise. In addition. sourcing locally is also important to the Five Guys brand. The 15 free toppings that Five Guys offers are locally sourced whenever possible. Likewise. the fresh-baked buns are local as well. in that they come from bakeries that Five Guys built near their stores so they could guarantee their freshness. In most chain restaurants fries are a sim- le side dish; for Five Guys. however. __ __ at care. lccording to fo ' ' looklike the l..-1-1...l -i.I-.|- - . '.- g -. :'- starch. Soaking prevents the potatoes from absorbing t e pure peanut oil as they are cooked. which gives them their unique Five Guys signature texture and taste. Ubsessing about every detail does not end at the sutll'llllr Chain- The Murrell family also obsesses over how to lay out each storer in particular the cooking area. Unlike other hamburger chains that use the same grill for their meat and buns. Five I{.iluys uses a dedicated grill for its burgers and a separate toaster for buns. Although this approach requires additional equipment. and thus increases cost and operational complexity. it allows for perfectly grilled burgers and perfectly toasted buns. This all contributes to Five Guys' higher perceived value among customers. which then allows the rm to charge premium prices for the products using a simple cost-plus-margin formula. Each activity that Five Guys engages in is focused on delivering premium burgers and fries. How to maintain this effort if the company were to franchise weighed heavily on jerry Murrell's mind. He worried that the distinct activities needed to deliver what Five Guys stood for could not be duplicated away from the ve original Washington. [LC-area stores. In particular. he worried that if the activities could not be copied exactly. then they could control neither the quality of the product nor the customer experience. This lack of control could then lead to a diminished brand and risk the loss of Five Guys' hard-eamed reputation. It is not surprising. then. that Five Guys waited as long as it did to franchise. It felt it needed to develop the perfect system for its distinct activities before it could expand beyond the home area. When Five Guys opened its store in Richmond. 'virginia. a mere 10D miles fmm its rst store in Arlington. Jerry Murrell couldn't sleep for weeks. despite knowing he had a perfect system in place.\" Today. this set of distinct activities needs to be new in mm- We I-ulh:ilulh :ilu nun-.- an