Hsb Levendary Cafe Essay

2319 words - 10 pages

Levendary Cafe is a chain of restaurants that specialize in wholesome foods with high quality ingredients served in a timely manner at comfortable locations founded by Howard Leventhal. They maintain a large base in the US with a catchy marketing slogan of. “Tasty Good Freshness”. In the years leading to their IPO they became an organic restaurant featuring organic breads and hormone free naturally raised beef for its various products. They were also internally discussing a move into the China Market. They maintained 3,500 company and franchised owned stores showing when in January 2011 they became publicly traded and named Mia Foster its CEO. It holds its headquarters in Denver Colorado ...view middle of the document...

Chin is seeing rapid growth in Multi-unit Restaurants.
The China Market is considered a prime place for quick/ specialty service multi-unit restaurants that offer a ticket value in the $8 to $12 range. China also boasts a GDP growth of 14.5% growth which has contributed to a strong emerging middle class. The market for these types of restaurants has nearly doubled its total revues over the last five years, RMB 1.106 trillion to RMB 1.996 trillion, due to that rapidly increasing middle class of people who are looking for cost affective fast places to dine. Both Mcdonalds and KFC have seen rapid expansion in the country since the early to mid 1990's. These factors were paramount in appointing Louis Chen as its head of China operations.
Chen undertook a monumental effort to grow the Levendary brand in China, opening the first location in the Pudong region of Shanghai, which quickly grew to 23 locations in the following couple of years. Once the company went public in 2011 it was necessary for Mia Foster to appoint international financial advisers to oversee the companies overseas financial in order to comply with GAAP standard reporting practices. This was met with some resistance from Chen due to his inability to comply with both the US and China's reporting procedures. It was also around this time that the found of the company decided to see how the establishments overseas were doing. He was not pleased, in various locations they had changed the decor and service style as well as the menu to better accommodate the local flavors and tastes. This is where Mia Foster has been left to make some critical decisions in regards to the companies future in China.
Q1) 1. What is a Multi-unit Restaurant (MuR) Business? How big is it? Is it a consolidated or fragmented industry? Evaluate profitability of this industry? Use Porter’s Five Force Model to evaluate the economics (in addition to data in the Case)

A1) A Multi-unit Restaurant business is a collection of dining places that could best be described as franchises in the US and abroad. It is also encapsulated in owning one or more of these chains in a demographic location. They encompass a three general categories being: Specialty establishments which offer drinks and snacks with some prepared food; Quick service restaurants which provide counter and drive-thru dining choices; and Casual dining restaurants which offer a full range menu and seating availability. Some establishments do offer a combination of these three categories. Within the US they represent approximately 30% of the total $600 Billion food service and contracts industry. Because of the estimated 960,000 food location located in the US this industry is highly fragmented. In looking at Porters Five forces, with respect to MuR's, we can evaluate the economics of starting a new restaurant chain as follows. Threat of new entry: This can be a difficult because of the overwhelming costs associated with starting one restaurant, let...

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