A5 porcini pronto operation debasis chakraborty-403503


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A5 porcini pronto operation debasis chakraborty-403503

  1. 1. Executive Summary: Porcini’s vision is to expand rapidly in the market. The key executive teammembers in Porcini included Alessio – VP Marketing, Kurt Jensen – VP Operation, Wanda Halloran-HR Director, and Mariana Molise- Chief Chef. Porcini’s mission is to leverage its strengths for growth.Considering the strength and options available, organization’s overall strategies are to launch pronto’sconcept and adapt company owned-and-operate model. In the later section we will also discussappropriate risk and mitigation strategies to make sure we have advised proper risk managementstrategies [ext1] to adopt pronto’s concept.Business Objective: What Porcini is looking for?Porcini is looking for new opportunities to grow its established brand into new markets throughout theNortheast. The markets for full-service restaurants are nearing to a saturation point at both in-city andshopping mall locations. For this reason, Porcini’s is considering to open limited-menu outlets called“Pronto” at interstate highways. Porcini’s management is considering the options of franchising,syndication, and a company-operation model to increase their footprint, while maintaining itsreputation for excellent food and service. After doing some financial analysis of this three options,franchising is the most profitable option; syndication is the best comprehensive option for Prontobecause it also allows the company to preserve its brand image.The first option for Porcini’s management is to look at the franchising approach to accelerate growth.This option could provide the greatest Return on Investment (ROI); however, it may compromisesome key elements of the business model (Exhibit 1). The first issue that franchise is thinking that itmay compromise Porcini’s reputation for high quality service. The biggest questions to themanagement whether “it will take a risk to hand over its control to the outsider and that may damageits band value. It is almost sure that the legal/regulatory contract would require the franchises to meetPorcini’s standards, but that can break down their practice”. The thought of having a brand image inthe hands of outsiders is a key deterrent to the franchising model. Management’s next concern is thevalue of the Porcini’s brand. Since “Porcini’s isn’t a household name like Burger King, it’s doubtful thatPorcini’s could extract high fees and royalties from franchisees”. These concerns outweigh franchisingprofit potential. The past success of the company came from complete control over the diningexperience, and because franchising compromises this, management must pass on this option. In2010 it was awarded best chain services. The plan is to add few demanding services such as bearand wines along with innovative foods to attacks Traveler.Problem and ChallengesThe real problem is that the organization failed to carry on its rapid growth due to recourse constraintsand its inability to become a powerful brand in the market.To better understand the strength and weakness of Porcini’s new model, we have provided SWOTanalysis [ext2], cumulative analysis for company owned, syndicate and franchisees [ext3].Organization StrategyPorcini Pronto’s strategies to make this very successful are Process excellence and Coststrategy such as innovative Process, food with low cost and faster service, HR Strategy such asemployee rewarding , stock option, leave encashment, performance bonus, Hiring strategy such ashiring right attitude people and training to enhance soft and hard skill, IT Strategy - Wireless facility toswap the credit and debit card in the table itself to pay bill, big TV screen with greeting, marketingpromotion and entertainment .CEO’s vision is “To become great Italian cuisine without wait”.Driver and Success FactorThe various key factors that drives the Porcini’s success are outstanding service quality, food quality,and value for money, branding reputation, Innovative food with reasonable cost to deliver as “fleshDebasis Chakraborty International Business School EMBA Porcini Pronto Case
  2. 2. cooking in great atmosphere”, cleanliness in the toilet and bathroom, ownership and processexcellence.Porcini’s Pronto success factor is also driven by value driven vs. its core competencies [reference 3 inthe appendix]. Pronto’s model has shown various potential opportunities and it targets customer ofinterstate highway, with table served meals at reasonable price. There is a big opportunity as thissegment is not saturated and current statistics shows, it has potential to grow above industry average.Pornto has also planned to use Porcini’s balanced scorecard to analyze the overall quality of servicesand customer satisfaction.Porcini is also looking for aggressive growth and key drivers included process excellence and costcontrol, operation efficiencies, improve the quality with reducing the restaurant space .CurrentlyPorcini has 142 seat with 6900 Sqft where as the proposed Porcini Pronto’s will be having 85 seat with4200 sqft. [Reference to exhibit 3].The strategy is to setup at Porcini Pronto with limited menuavailable option and it could be resulted with faster service, cost reduction, quality excellence andbetter customer satisfaction. The expected setup cost at Porcini Pronto is $2.1 million with revenue$2.4 million for each side and expected profit is 6%, where as with the current Porcini, it is $4.3 million.Deeper AnalysisFranchises is the most profitable option as it can generate revenue from licensing, but there is athreat that it can damage the brand value as the potential threat is that, it can lost the quality andorganization control . The profit model will be 5-6% royalties and upfront fees. As Porcini doesn’t haveconstruction unit the better option for them is to buy or lease the land in an attractive location. In thiscase there will be 1 million costs for legal and 2% pretax profit. They have started royalty Card such asPorcini’s Pal card, $3 discount in customer’s next visit. The greatest prospect of company owned andoperate model will be fit in all aspects such as Short run return, Long Run return, Pilot Concept,Maximized Risk ,Protect Porcini brand value.There are various other factors such as reasonable/lower cost model: dinner cost ($9 - $17) compareto lunch cost ($6 to $12) will generate higher volume of sales in the peak lunch and dinner time, Timeand Demand management strategy can be adopted so there will be operational efficiency and it isexpected that in average customer will spend 45 min for dinner and 30 min in lunch and it will optimizewith low waiting time. Organizational efficiency such as highly skilled staff with average team size of12-15 People.In the syndicate option, cost is 4% of annual revenue and the transaction cost is 6% of the propertyvalues. The cumulative analysis has produced that growth rate vs. profit is high in case of companyowned and company operated option.Conclusion and RecommendationConsidering the fact that Porcini’s long term strategy is to grow 5% annually through y2y till 2018, hereare following recommendation• Launch Porcini’s pronto concept• Grow via company owned and operated approach• Pilot to determine the long run potential of the pronto’s concept.Debasis Chakraborty International Business School EMBA Porcini Pronto Case
  3. 3. ReferenceFailure of the Pronto’s concept • Two pronto’s pilot• Company owned and operated modelDamage to the Porcini’srepudiation• Maintained strict quality control of the food and service• Direct Management involvementPronto’s improper location • Traffic strategy• Marketing and brandingMarket and Industry velocity • Balanced expansion• Value for moneyExhibit 1: Risk and Mitigation StrategyStrength Opportunity• Reputation• Quality food• High quality of service• Powerful Design to meet Fastservice• Highly trained staff• Expansion throughout in national• Create strong Brand value• Put near highway exit and most busy places intown Centre• Attack Travelers with fast food and drink optionsWeakness Threat• Recourse constraints• No brand Power• Slow growth rate• Complete with already established market player• Reputation lost in franchisees model• Limited selection of foods• Lost control of process• Restaurant is Saturated in town centersExhibit 2: SWOT AnalysisNAV @2.5% Growth rateCompany owned and operate $6.5 MillionSyndicate $4.4 MillionFranchisee $3.2 MillionAssumption: Franchisees costs including in 94% margin, Pronto’s growth rate =Industry rate = 2.5%, HurdleRate = 6%, All values are in Pretax, If we analysis the NAV vs. Potential growth. Porcinis’ Strength + Matchingvalue driver = Potential for above average growth .With 2.5% growth it will be 10% , with 6% it is 14% and with8% it is 23%.Exhibit 3: Cumulative Profit AnalysisParameterCurrent Growth rate 2.5%Discounted rate 6.00%CostCost per Pronto $21,00000Cost to syndicate $25,00000Cost to franchisee $10,00000RevenueRevenue per Pronto’s $24,00000Debasis Chakraborty International Business School EMBA Porcini Pronto Case
  4. 4. Company own Syndicate FranchiseesShort run returnLong Run returnPilot ConceptMaximized RiskProtect Porcini brandExhibit 4: Greatest Prospects With Company own and operate vs. Syndicate andFranchisesExhibit 5: Bigger picture and way to move forward, Options to Porcini Pronto,Success Mantra for Pronto’s growth and success, Balance growth strategy for ProntoDebasis Chakraborty International Business School EMBA Porcini Pronto Case