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McKinsey Case Compettion

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McKinsey Case Compettion

  1. 1. MCA - McKinsey Case Competition 2011 Porcini’s Pronto Team „PacKaGeD‟ November 19, 2011 Kitty Chow Pramod Jindal Derek Wenngatz Girish Chhatwani
  2. 2. AgendaMCA - McKinsey Case Competition 2011 • Executive Summary • Current Situation & Problem Statement • Ways Forward • Recipe for Success • Options for Growth • Company Own-and-Operate Model • Balanced Growth • Risks • Recommendations
  3. 3. Executive SummaryMCA - McKinsey Case Competition 2011 • Procini‟s Growth Strategy – Leveraging Porcini‟s strengths for growth • Strategies and Options Considered – Launch Porcini‟s Pronto Concept – Company Owned-and-Operate • Risks – Mitigation strategies
  4. 4. AgendaMCA - McKinsey Case Competition 2011 • Executive Summary • Current Situation & Problem Statement • Ways Forward • Recipe for Success • Options for Growth • Company Own-and-Operate Model • Balanced Growth • Risks • Recommendations
  5. 5. Current Situation & Problem StatementMCA - McKinsey Case Competition 2011 How can Porcini‟s grow their business at greater than 5% annually, through to 2018? Current domestic segments saturated Overseas growth not Need new domestic for full-service feasible segment for growth restaurants
  6. 6. Grow by Targeting Traveller Market: Porcini’s “Pronto”MCA - McKinsey Case Competition 2011 Maintain Porcini’s Pronto Porcini‟s • Target customers on interstate highway with Expand Porcini‟s table-served meals, at flagship reasonable price Options – Segment not saturated – Potential to grow beyond Catering industry average Launch Pronto
  7. 7. Recipe for Pronto’s SuccessMCA - McKinsey Case Competition 2011 Value Drivers Core Competencies • Innovative recipes Quality Food • Fresh ingredients • Artful presentation • Hiring the right people • Quality training program Rapid Service • Wireless Technology • “Great Italian Cuisine without the Wait” Value & • Priced lower than Porcini Convenience • Location
  8. 8. AgendaMCA - McKinsey Case Competition 2011 • Executive Summary • Current Situation & Problem Statement • Ways Forward • Recipe for Success • Options for Growth • Company Own-and-Operate Model • Balanced Growth • Risks • Recommendations
  9. 9. Best Returns with Company Own-and-Operate ApproachMCA - McKinsey Case Competition 2011 7,000 X $ 1000 Cumulative Profits (PV) each Year 6,000 Company-owned Franchise Syndicate 5,000 4,000 3,000 2,000 1,000 0 1 2 3 4 5 6 7 8 NPV @ 2.5% Assumptions: Growth Rate • Financing costs included in 94% margin Company Own-and-Operate $ 6.5 Million • Pronto growth rate = Industry rate = 2.5% • Hurdle rate = 6% Syndicate $ 4.4 Million • All values pre-tax Franchise $ 3.2 Million
  10. 10. Pronto’s PotentialMCA - McKinsey Case Competition 2011 Sensitivity Analysis: NPV vs. Potential Growth Rate 25% 23% 20% 15% 14% 10% 10% 5% 0% 2.5% 6% 8% Revenue Growth RatesPorcini‟s Strengths + Matching Value Drivers = Potential for Above Average Growth
  11. 11. AgendaMCA - McKinsey Case Competition 2011 • Executive Summary • Current Situation & Problem Statement • Ways Forward • Recipe for Success • Options for Growth • Company Own-and-Operate Model • Balanced Growth • Risks • Recommendations
  12. 12. Greatest Prospects with Company Own-and-OperateMCA - McKinsey Case Competition 2011 Company Syndicate Franchise Owned Short Run Return (1-3 years)  Long Run Return (8 years)   Pilot Concept  Minimized Risk   Protect Porcini Brand  
  13. 13. Pronto Allows for Balanced GrowthMCA - McKinsey Case Competition 2011 Potential of Pronto’s Industry Risk • Long run growth potential • 60% failure rate within 3 years * • Rapid growth increases risk * Managed Growth • Ensure feasibility • Assess ideal rate of growth “measured risk” * “Why Restaurants Fail”, Cornell Hotel and Restaurant Administration Quarterly, 2005
  14. 14. AgendaMCA - McKinsey Case Competition 2011 • Executive Summary • Current Situation & Problem Statement • Ways Forward • Recipe for Success • Options for Growth • Company Own-and-Operate Model • Balanced Growth • Risks • Recommendations
  15. 15. Risks & MitigationMCA - McKinsey Case Competition 2011 Failure of the • Two Pronto pilots Pronto‟s Concept • Company owned-and-operate model Damage to • Maintain strict quality control of food and Porcini‟s service Reputation • Direct management involvement Improper Pronto‟s • Traffic study Locations • Marketing / Branding Market & Industry • Balanced expansion Volatility • Value for money
  16. 16. RecommendationsMCA - McKinsey Case Competition 2011 How can Porcini grow their business at greater than 5% annually through to 2018, in the domestic market? 1. Launch Porcini‟s Pronto concept 2. Grow via company owned-and-operated approach 3. Pilot to determine long run potential of the Pronto‟s concept
  17. 17. QuestionsMCA - McKinsey Case Competition 2011
  18. 18. Appendix A – Porcini’s Pronto FinancialsMCA - McKinsey Case Competition 2011 2011 2012 2013 2014 2015 2016 2017 2018 Company Owned # of restaurants 2 2 4 6 8 10 12 14 Investment $ (4,200,000) $ - $ (4,200,000) $ (4,200,000) $ (4,200,000) $ (4,200,000) $ (4,200,000) $ (4,200,000) Revenue $ 4,800,000 $ 4,920,000 $ 9,843,000 $ 15,138,150 $ 20,694,906 $ 26,523,038 $ 32,632,642 $ 39,034,150 Profits $ 288,000 $ 295,200 $ 590,580 $ 908,289 $ 1,241,694 $ 1,591,382 $ 1,957,959 $ 2,342,049 Present Value $ 271,698 $ 262,727 $ 495,862 $ 719,450 $ 927,866 $ 1,121,862 $ 1,302,154 $ 1,469,431 Cum Present Value $ 271,698 $ 534,425 $ 1,030,287 $ 1,749,737 $ 2,677,604 $ 3,799,465 $ 5,101,620 $ 6,571,050 Franchise # of restaurants 0 0 4 8 12 17 22 28 Investment $ (1,000,000) $ - $ - $ - $ - $ - $ - $ - Revenue $ - $ - $ 9,600,000 $ 19,440,000 $ 29,772,000 $ 43,014,450 $ 57,035,566 $ 74,138,354 Profits $ - $ - $ 192,000 $ 388,800 $ 595,440 $ 860,289 $ 1,140,711 $ 1,482,767 Present Value $ - $ - $ 161,207 $ 307,966 $ 444,947 $ 606,470 $ 758,638 $ 930,306 Cum Present Value $ - $ - $ 161,207 $ 469,173 $ 914,120 $ 1,520,590 $ 2,279,228 $ 3,209,535 Syndicate # of restaurants 0 0 2 5 8 12 16 20 Investment $ (1,250,000) $ - $ (252,000) $ (378,000) $ (1,628,000) $ (504,000) $ (504,000) $ (504,000) Revenue $ - $ - $ 4,800,000 $ 12,120,000 $ 19,807,500 $ 30,276,300 $ 41,389,811 $ 53,046,075 Profits $ - $ - $ 192,000 $ 484,800 $ 792,300 $ 1,211,052 $ 1,655,592 $ 2,121,843 Present Value $ - $ - $ 161,207 $ 384,007 $ 592,053 $ 853,744 $ 1,101,064 $ 1,331,271 Cum Present Value $ - $ - $ 161,207 $ 545,214 $ 1,137,267 $ 1,991,010 $ 3,092,074 $ 4,423,345 PARAMETERS COSTS REVENUES Growth Rate 2.50% Cost per Prontos (owned) $ 2,100,000 Rev Per Prontos: $ 2,400,000 Discount Rate 6% Cost to syndicate $ 2,500,000 Cost to franchise $ 1,000,000

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