No Marshmallows, Just Term Papers
1. Strategy and risks
a. Business strategy
Boston Chicken targets the “home meal replacement at affordable cost” market. The main axes of the strategy are the following:
• Aggressive growth strategy (numbers of stores / geographical coverage): This rapid expansion is achieved by signing franchise agreements with area developers who get mandate to open a large number of stores.
• A limited number of stores are operated directly by the company. Self-operated stores can be sold to area developers.
• High operational efficiency: Maintain good control of quality, communication, marketing, customer feedback (with significant investments for infrastructure)
b. Critical success factors
The brand must be developed extremely rapidly to be able to compete with major players of fast-food industry which might decide to enter the “home meal replacement market”. It relies on:
• Experience and skills of the area developers
• Efficiency to provide supplies to franchises (It is one of the purposes of the flagship stores)
Innovation is another key factor:
• Ability to respond quickly to new opportunities, by understanding the market and listening to customers feedback
• Ability to develop and penetrate new markets
• Introduction of flagship stores including kitchen facilities to ensure timely delivery of fresh ingredients to satellite stores
On top of this, Boston Chicken should secure global agreements with food suppliers in order to secure its costs.
On the long run, when/if the speed of growth decreases, franchises must generate sufficient profit so the company will get enough income from the royalties.
The future wealth of the company largely depends on the financial health of the franchises. However, their financial statements are not disclosed. As Boston Chicken finances area developers, there is a credit risk.
The strategy to limit the number of directly operated stores also increases dependency on area developers and concentration...