PowerPoint Presentation
Levendary CafeThe China ChallengeIntroductionThe Foundation & expansionFounded by Howard LeventhalStarted off as a small soup, salad and sandwich restaurantNow a chain of 3500 cafes, $10billion businessSpun out of private equity ownership in January 2011Mia Foster- the new CEOInternational presence- only in Dubai and ChinaFalls in the Quick casual categoryAverage checks in the range of $8 to $12 (US)The Wall Street Hostility:-Domestic business fully tapped-Fosters lack of international management experience
The China Opportunity 1.4 billion population; Urban pop Per capita incomeHigh growth in the Chinese food services industry- 80% between 2004 & 2009, quick service sector fastest growing- 85%Foreign fast food companies attracted attention- Asian food especiallyFew successful local chainsThe star performer- KFC- 3000 restaurants in 450 citiesLocalized menu items e.g. McDonalds China MacDeparture from US concept e.g. Pizza Hut as high-end casual dining restaurantLevendary China- 23 restaurants, departure from US store design and menu selection
The Levendary ConceptThe customers Point of View: Eating at Levendary makes me feel richSuccess Factors for a FranchiseeSuccess Factors for a FranchiseeDemand analysis (Metro vs Metro-Suburb) LocationMetro ChinaMetro-Suburb ChinaMetro USSuburban USAnnual Sales$806000$288000 $10320000$2126000Square Footage150050025004000Sales/ Sq. Foot$537.33$576 $4,128$531Average Daily Traffic2604303210560Average Daily Traffic/Sq. Foot0.1730.861.2840.14Average Check$10$2 $15$12Total Daily Check$2600$860 $48150 $6720Total Daily Check/Sq. Foot$1.73$1.72$19.26 $1.68
Lower average cheque means profits can be made only through volumes Chen is trying to maintain a high volume per square feet in Metro-Suburb ChinaSales per square foot slightly better for Metro-Suburb China where as it is Suburban sales is 1/8th that of Metro USTotal daily check per square foot equal for both cases in China but varies largely in the USConsidering a higher rental per square foot in Metro China, margins might still be higher at Metro-Suburb ChinaChances of capacity under utilization in Metro China
Financials (Levendary US vs. Levendary China)Common Size Income StatementLevendary USLevendary ChinaSales100%100%Food & Paper Expenses28%51%Labor Expenses32%12%Occupancy Expenses8%24%Marketing Expenses13%2%Pre-opening Expenses0.3%12%General & Admin Expenses8%5%
Levendary Chinas food and paper expenses are much higherLabor rates are cheaper in China and provides cost advantageOccupancy expenses for China can be cut by moving to the metro- suburb areas where demand is also growing overallLevendary China should improve on its marketing activities since marketing expenses are remarkably lowPreopening expenses seem to be high in China because of going through the government processes it get permits/ approvals to open the outlets and staffing costs
Stage TheoryThe entrepreneur suitable for starting up a business from scratchA manager capable of replicating the success and expanding a business over a territory in a short timeA manager capable of expanding a venture over a large territory by standardizing operations and processes to the extent possibleHe should be able to apply his knowledge and experience in other situations or benefit the organization as a whole IntroductionGrowthMaturityAbout ChenFind suitable replacement:Same look and feel across all outletsChange in Accounting methods Risks:Monitoring the new resourceDifficulty in finding real estate Difficulty in building contact networkBenefit from Chens experience & contact networkNo change in accounting methods with respect to China operationsTo-doRisk of brand dilutionFinding a way to reconciliate China accounts so that that they maintain the integrity of the HQ at USBenefit from Chens experience & contact networkSimilar look and feel across all outlets but changes in menuMaintain Brand nameTo-do:Define clearly the responsibilities of Chen and his performance parametersTake collective decisions on major plans or entriesPoliticalEconomicSocial
Chinas rice obsessionHybrid strategyChen is following the Levendary look and feel and most of the menu in the urban areas but changing it drastically for the Suburban areasTake time to research the market and discuss the strategy before opening in a different kind of locationHow important is China to Levendary?Competence of local OrganizationHighLowStrategic Importance of Local environmentHighLowChina has a lot to teachEntering and adapting the business strategies in China will give the novice Levendary, the experience in managing international businessThis experience and knowledge can enable entry into other Asian marketsDetect signals of change in the customer tastes
Chen has a lot to learnChen should take time to do research in China before opening the outletsChen should be able to transfer his Chinese experience to the head quartersHe should be more open to suggestions from Head quarters so that the core proposition is not lostChen should be sensitive to the changes in tastes so that the strategies can be changed and the decision regarding entry into other markets can be made easierSheet1Column1Levendary USLevendary ChinaSales100%100%Food & Paper Expenses28%51%Labor Expenses32%12%Occupancy Expenses8%24%Location Metro China Metro-Suburb China Metro USSuburban USAnnual Sales $806,000.00$288,000.00$10,320,000.00$2,126,000.00Square Footage 150050025004000Sales/ Sq. Foot $537.33$576.00$4,128.00$531.50Average Daily Traffic 2604303210560Average Daily Traffic/Sq. Foot 0.17333333330.861.2840.14Average Check $10.00$2.00$15.00$12.00Total Daily Check $2,600.00$860.00$48,150.00$6,720.00Total Daily Check/Sq. Foot $1.73$1.72$19.26$1.68
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Sheet1Column1Levendary USLevendary ChinaSales100%100%Food & Paper Expenses28%51%Labor Expenses32%12%Occupancy Expenses8%24%Marketing Expenses13%2%Pre-opening Expenses0.3%12%General & Admin Expenses8%5%Location Metro China Metro-Suburb China Annual Sales $806,000.00$288,000.00Square Footage 1500500Sales/ Sq. Foot $537.33$576.00Average Daily Traffic 260430Average Daily Traffic/Sq. Foot 0.17333333330.86Average Check $10.00$2.00Total Daily Check $2,600.00$860.00Total Daily Check/Sq. Foot $1.73$1.72
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