Business Case Study Analysis – Frank’s All-American BarBeQue Overview Robert Rainsford is a twenty-eight-year-old facing a major turning point in his life. He has found himself unemployed for the first time since he was fifteen years old. Robert holds a BS degree in marketing from the University of Rhode Island. After graduation, a firm that specialized in developing web presences for other companies hired him. He worked for that firm for the last seven years in New York City. Robert rose rapidly through the company’s ranks, eventually becoming one of the firm’s vice presidents. Unfortunately, during the last recession, the firm suffered significant losses and engaged in extensive downsizing, so Robert lost his job. He spent months looking for a comparable position, yet even with an excellent résumé, nothing seemed to be on the horizon. Not wanting to exhaust his savings and finding it impossible to maintain a low-cost residence in New York City, he returned to his hometown in Fairfield, Connecticut, a suburban community not too far from the New York state border. He found a small apartment near his parents. As a stopgap measure, he went back to work with his father, who is the owner of a restaurant—Frank’s All-American BarBeQue. His father, Frank, started the restaurant in 1972. It is a midsize restaurant—with about eighty seats— that Frank has built up into a relatively successful and locally well-known enterprise. The restaurant has been at its present location since the early 1980s. It shares a parking lot with several other stores in the small mall where it is located. The restaurant places an emphasis on featuring the food and had a highly simplified décor, where tables are covered with butcher paper rather than linen tablecloths. Robert’s father has won many awards at regional and national barbecue cook-offs, which is unusual for a business in New England. He has won for both his barbecue food and his sauces. The restaurant has been repeatedly written up in the local and New York papers for the quality of its food and the four special Frank’s All American BarBeQue sauces. The four sauces correspond to America’s four styles of barbecue—Texan, Memphis, Kansas City, and Carolina. In the last few years, Frank had sold small lots of these sauces in the local supermarket. As a teenager, Robert, along with his older sister Susan, worked in his father’s restaurant. During summer vacations while attending college, he continued to work in the restaurant. Robert had never anticipated working full-time in the family business, even though he knew his father had hoped that he would do so. By the time he returned to his hometown, his father had accepted that neither Robert nor Susan would be interested in taking over the family business. In fact, Frank had started to think about selling the business and retiring. However, Robert concluded that his situation called for what he saw as desperate measures. Initially, Robert thought his employment at his father’s business was a temporary measure while he continued his job search. Interestingly, within the first few weeks he returned to the business, he felt that he could bring his expertise in marketing—particularly his web marketing focus—to his father’s business. Robert became very enthusiastic about the possibility of fully participating in the family business. He thought about either expanding the size of the restaurant, adding a takeout option, or creating other locations outside his hometown. Robert looked at the possibility of securing a much larger site within his hometown to expand the restaurant’s operations. He began to scout surrounding communities for possible locations. He also began to map out a program to effectively use the web to market Frank’s All-American BarBeQue sauce and, in fact, to build it up to a whole new level of operational sophistication in marketing. Robert recognized that the restaurant was as much of a child to his father as he and his sister were. He knew that if he were to approach his father with his ideas concerning expanding Frank’s All-American BarBeQue, he would have to think very carefully about the options and proposals he would present to his father. Frank’s All-American BarBeQue was one of many restaurants in Fairfield, but it is the only one that specializes in barbecue. Given the turnover in restaurants, it was amazing that Frank had been able to not only survive but also prosper. Robert recognized that his father was obviously doing something right. As a teenager, he would always hear his father saying the restaurant’s success was based on “giving people great simple food at a reasonable price in a place where they feel comfortable.” He wanted to make sure that the proposals he would present to his father would not destroy Frank’s recipe for success. Case Study Short Answer Questions Students should answer each question individually. Each question will be submitted separately via Moodle on completion of the relevant Module. Each question should be a minimum of 1 page in length QUESTIONS TO BE ATTEMPTED AFTER COMPLETION OF MODULE 1 Question 1: Discuss how Robert should explicitly consider the customer value currently offered by Frank’s All-American BarBeQue. In your discussion, comment on the five value benefits and the perceived costs. Question 2: Robert has several possible options for expanding his father’s business—find a larger location in Fairfield, add a takeout option, open more restaurants in surrounding communities, incorporate web marketing concepts, and expand the sales of sauces. Review each in terms of value benefits. QUESTIONS TO BE ATTEMPTED AFTER COMPLETION OF MODULE 2 Question 3: In Chapter 2 “Your Business Idea: The Quest for Value”, Robert Rainsford was introduced in the FRANK’S ALL-AMERICAN BARBEQUE case. He has returned to the family business and is very enthusiastic about expanding the business. He has identified four options: (a) expanding the restaurant either at its current site or elsewhere in Fairfield; (b) opening several similar-sized restaurants in nearby towns; (c) using the Internet to expand sales; and (d) expanding the sales of Frank’s sauces from a local store to a regional supermarket chain. Any one of these ideas would represent a change from his father’s business model. Given that he had not expressed any interest in the management of the business, how should he go about approaching his father with these ideas? If the company expands, should Robert approach his sister and her husband about taking a more active role in the business? What should their roles be? Question 4: Frank Rainsford has been, in effect, the CEO of Frank’s All-American BarBeQue since its inception. His major role has been that of restaurant manager, receiving support from his assistant manager Ed Tobor for the last fourteen years. Frank has two children, a son and daughter, who both worked in the restaurant as teenagers. His daughter has worked periodically at the restaurant since she graduated from high school. Frank’s son, who recently lost his job, has returned to work for his father. The son produced several plans to expand the business, including the opening of a second restaurant and the extensive use of social media. After careful consideration, Frank has decided to open a second restaurant, but this has presented him with a major problem—how to assign responsibilities to personnel. His son wants to be designated the restaurant manager of the second restaurant and made the vice president of marketing. Ed Tobor also wants to be the manager of the new restaurant. His daughter has expressed an interest in being the manager of either restaurant. How should Frank resolve this problem? QUESTIONS TO BE ATTEMPTED AFTER COMPLETION OF MODULE 4 Question 5: One night after the restaurant had closed, Frank Rainsford sat down with his son, Robert. Frank had finished reading his son’s business plan for a third time. Robert sensed that his father had some sort of reservations. “What’s the matter, Dad? Didn’t you like the plan?” Frank paused and said, “Bobby, from a technical standpoint I think you have done a very, very credible job, but you are right. I do have some concerns.” Disappointed, Robert asked his father to lay out his concerns. Frank told him that opening another restaurant was a huge and expensive undertaking. He knew that Robert understood the financial risks, but he was not sure that his son understood the problems associated with getting people to come to a new restaurant. Frank was straightforward and told his son, “I have been at this for thirty-plus years. It took me years to build up my client base. I really know my customers and what they like. Up until this year the only marketing I did was flyers and a few ads in the local paper and the church bulletin. How are we going to understand our customers at the new location? We are going to have to fill it up quickly if we are to pay the bills. I know I’ve had some good success with selling the sauces during the last few years, but remember that I’m selling them from Harry’s grocery store. His customers already know me and my product. Your plans for ramping up sauce sales are great, but again, how are we going to get people to know who we are and interested enough to by a six dollar bottle of barbecue sauce?” Frank went on to tell his son that he knew that Robert was extremely knowledgeable about marketing and the use of the Internet. He reminded Robert that he had given him a greatly enlarged marketing budget in 2010. If you were Robert, how would you go about alleviating your father’s concerns? (You may want to consult Chapter 16 “Appendix: A Sample Business Plan” and review Robert’s business plan for a new restaurant.) Answer the question from a marketing perspective. Question 6: Frank’s All-American BarBeQue is planning to significantly expand its takeout business. Currently, customers come into the restaurant and order from the menu. With the new Darien facility and website, customers will be able to order online or fax an order to the restaurant. Frank and Robert have been arguing over how to structure the takeout portion of their operations. Frank wants to maintain the approach where customers order items from the menu. Robert believes that in today’s world, it would be more convenient for customers to order complete prepackaged meals. Father and son have argued about the nature of these meals. Frank has suggests a limited number of standard meals that could be prepared during the day and sold in the evening when commuters are returning home. However, this might mean that excess inventory would be built up on unwanted items. Robert wants to offer greater variety. These would include a main course, two side dishes, and a dessert. Because there could be a large number of combinations, most would have to be made after the receipt of an order. The “rush” to make these meals would drive up costs. How would you go about pricing these two types of meals? Question 7: In the Appendix (Chapter 16 “Appendix: A Sample Business Plan”), you will find the business plan for Frank’s All-American BarBeQue. This plan examined several possible locations for a second restaurant. Frank and Robert considered several factors when evaluating alternative towns as possible locations. Some of these included population size, average income, travel times, and percentage of population. Based on the data, they selected Darien, Connecticut. Do you agree with the decision? Why or why not? Do you think other factors should have been considered? If yes, what would you recommend? QUESTIONS TO BE ATTEMPTED AFTER COMPLETION OF MODULE 5 Question 8: In the Appendix (Chapter 16 “Appendix: A Sample Business Plan”), you will find the income statements and balance sheets for Frank’s All-American BarBeQue for the years 2006 to 2010. Compute some of the key financial ratios for this business and discuss the meanings of any trends. Question 9: Locate the average values of these values for the restaurant industry and comment on how well or poorly Frank’s All-American BarBeQue appears to be doing with respect to the industry. Question 10: Frank’s business plan in the Appendix (Chapter 16 “Appendix: A Sample Business Plan”) provides projected income statements and balance sheets for a five-year forecast horizon. Compute the same ratios as in Exercise 1 and comment on your results. Marking Each question will be marked on the following scale: • 0 points – No response or response did not address question • 1 point – superficial or partial response • 3 points – complete response that adequately addresses all aspects of the question • 5 points – excellent response that draws on external evidence and other high quality sources

    Question 9

    This segregation coercionecasts that there conquer be a restraintcible augmentation in acquisitionforce in the next five years behind the fissure of a second restaurant in Darien. The acquisition brinks are expected to extension from $850,000 in 2011 to $1,600,000 by the year 2015 an surplus of 20 percent restraint entirety five years.

    Pro Restraintma Acquisition and Loss       2011 2012 2013                  2014 2015

                                                     3 3 4                  0 7

    Direct require of sales        $2,095,844 $2,292,580 $2,452,282     $2,626,871 $2,817,939

    Cooks unyieldingroll                 $120,000 $120,600 $121,500            $122,500 $123,500

    Other requires of sales          $0 $0                $0 $0 $0

    Entirety require of sales         $2,215,844 $2,413,180  $2,573,782 $2,749,371 $2,941,439

    Gross brink                $ 1,975,839 $2,171,983     $2,330,782 $2,504,369 $2,694,838

    Gross brink %         47.14% 47.37%           47.52% 47.67% 47.81%

    Operating Expenses

    Servers unyieldingroll              $278,400 $278,400      $232,500 $234,500 $212,600

    Advertising/promotion       $0 $0                $0 $0     $0

    Other servers expenses        $0 $0               $0 $0  $0

    Entirety servers expenses        $278,400 $278,400 $232,500         $234,500 $212,600

    Servers    %                     6.64% 6.07% 4.74%         4.46% 3.77%

    General and Negotiative Expenses

    Payroll                                    $96,000 $96,600 $99,000    $100,000 $ 101,000 Dispenseing/promotion          $12,000 $0 $0    $0 $0

    Depreciation                            $0 $0   $0 $0 $0

    Rent                                      $180,000 $0 $0                     $0 $0 Utilities $13,200              $0 $0 $0 $0

    Insurance                               $22,000 $0 $0                    $0 $0

    Payroll taxes                        $74,160 $74,340 $67,950           $68,550 $65,565

    Other

    General and adm. expenses $0                    $0 $0   $0 $0

    Entirety

    general and adm. expenses $397,360 $ 170,940      $166,950 $168,550 $166,565

    General and negotiative %    9.48% 3.73%   3.40% 3.21% 2.96%

    Other Expenses

    Other unyieldingroll                             $0 $0 $0                  $0 $0

    Consultants                               $0 $0 $0                   $0 $0

    Comments

    An segregation of the Frank’s Entirety American Barbecue shows that the union has realized a restraintcible augmentation in acquisitionforce in the las years including the latest year. Frank’s Entirety-American barbecue government should coercionecast a continued augmentation in acquisitionability, which should be transfer into multiformity and expatiation initiatives. The union’s acquisition brinks should be expected to extension at a scold of 50% p.a translating to enfold the scold of trade augmentation and acquisitionforce or the general year. In being the financial figures of Frank’s Entirety American Barbecue are bloom and powerful. This specifys a assured closeness of the restaurant in the dispense. With the entrant of Robert disprevalent the restaurant’s ranks, there can barely be rectify days onwards restraint the restaurant. It already has a powerful mark closeness in the dispense being the barely restaurant majoring in barbecue. The covert restraint its transformat5ion to superior heights lies in the dispenseing strategies that conquer be adopted. Online dispenseing is undivided of the dispenseing strategies that Robert could correction as a dispenseing implement. Such practices should catapult the restaurant to enfold its general acquisitionability. Another top rate not attributeffectual attributableing is that the restaurant has a assured and original established chief. This main material should not attributeffectual attributeffectual attributeffectual be left uninvested restraint a hanker occasion. It could be correctiond to variegate into other products and dispenses environing the kingdom.

    Question 10

    Financial Harmony Segregation restraint the five years

    1. Quick Harmony

    Quick Harmony = (General Proceeds – Inventory) / General Liabilities

                                                      2011 2012 2013         2014 2015

    Entirety general proceeds            $1,523,636 $2,566,983 $3,909,241     $5,375,249 $6,995,341

    Inventory                           ($72,421)         ($79,197)        ($109,296)      ($117,245)      ($125,954)

    Net Proceeds                          1451215 $2487786 $3799945      $5258004 $6869387

    General liabilities               $344,745 $294,338 $306,350       $323,120 $343,926

    Quick harmony =                       $1451215        $2487786         $3799945      $5258004        $6869387

                                                $344,745 $294,338 $306,350     $323,120 $343,926

                                               4.2 8.5 12.4                  16.3 20.0

    The general harmony is correctiond to mete an entity’s cece to unite its general obligations. The overhead results specify that the restaurant has been effectual to retain assured liquidity where it has can be effectual to unyielding general liabilities. The curve has as-well been increasing aim the restaurant is more bloomy than it was impure years gone.

    1. Default to Equity Harmony

    Default to equity harmony = entirety default – Entirety Owner’s Equity

                                     2011 2012 2013                        2014 2015

    Entirety Liabilities     $607,145     $469,138        $481,150              $497,920         $518,726

    Entirety chief           $1,354,402 $2,535,755   $3,866,002 $5,315,239      $6,914,524

    Default harmony =                  0.44 0.19     0.12 0.09            0.08

    The restaurant has a bloomy default harmony. This is becacorrection the chief limitation restraint the union is better than its liabilities. This media that it is capeffectual of envelope its scanty signal and hanker-signal liabilities.

    1. Default to proceeds harmony

    Default to proceeds harmony = Entirety Liabilities / Entirety Proceeds

                                                  2011 2012 2013             2014 2015

    Entirety Liabilities                  $607,145     $469,138        $481,150              $497,920         $518,726

    Entirety proceeds                       $1,961,546 $3,004,893 $4,347,151          $5,813,159 $7,433,251

        Default to proceeds harmony =       0.30 0.16            0.11 0.09      0.69

    Default to proceeds harmony metes an entity’s entirety liabilities opposing its proceeds. The liabilities are considered as a percentage of entirety proceeds. The overhead results specify that Frank’s Entirety American Barbecue has the cece to unyielding-off its hanker-signal liabilities using its proceeds. The proceeds are as-well sufficient to enclose more funds in the forthcoming.