Lovely Professioanal University

Prince Mohammad

MGT533 Students are divided in groups of 3 students each.. Each group will get a comprehensive case study, the group has to analyze the case and present in the tutorials. Group Assignment (One group would consist of 3 students) Analytical skills-12, a Communication skills-4, Question handling-6, Writeup-8

Mr. Suresh Kumar, who worked with leading food outlets in bangaluru, saw a great opportunity to start his own caf chain in 2004 in the rapidly changing city. Bangaluru had already acquired the iconic status of silicon city of India. The global it (information technology) companies setting base in the city had contributing to the changing life style and culture of the city. The IT companies specially those involved in BPO operations worked in late night shifts as per the requirements of their American and European customers. IT professionals worked long hours and partied even harder .very often young couples were employed and had little time to cooking at home .Bangaluru has large technology parks where the IT companies are clustered. These include electronic city, ITPL (international technology park), Bagmane tech park , manyata tech park , etc these companies have giant food courts within the premises where employees relax and have their meals . Some of the companies have their own food courts, where outlets sell fast food, south Indian, continental, Chinese and other meals, Kumar decided to open counters in these companies by offering quality snacks at an economical price. He entered into a partnership with aditi and ashok who had been associated as marketing executives with a leading star hotel in the city. Thus, caf worked got established with the vision of establishing a leading caf chain in the city. Caf world set up outlets in five leading IT companies in the city in 2004. these outlets served quality cakes , black forest pastries , mushroom and capsicum croissants , veg Frankie roll, burgers, sandwiches, muffins, pizzas , milk shakes, etc. at a very reasonable prince . The chain adopted a penetrative pricing strategy. The price of fast food at its outlets was significantly lower than other chains including caf coffee day and barista, which sold similar products. Because of their reasonable prince .good quality and efficient service, cafe world outlets become very popular and attracted a large number of customers. The field sales executives of caf world regularly visited IT companies to market the chain and open new outlets. Theymaintained close relationships with the staff of client companies. As the model became poplar and more companies wanted caf world outlets in their premises, it became difficult for Kumar and his partners to manage the operations .caf world also required finding for establishing new counters. Hence caf

World adopted the franchising route in 2007 .the fracnchisees were appointed to open counters in more IT companies and also establish outlets in the malls, multiplexes and shopping complexes in Bangaluru and Mysore .

Caf world kept a strong check on quality .the discerning customer in IT companies was very demanding , seeking good quality , and a wide variety all the basic ingredients sources and food was prepared in centralized kitchens that Served the outlets in the vicinity.food was prepared in very hygienic environment as per prescribed guidelines. Only nominated staff members were allowed to enter the kitchens. Garnishing and heating of snacks before service to customer was undertaken at the sales outlets. Detailed processes were specified for such garnishing heating and customer service which all outlets including the franchisees were strictly required to comply with Ms Aditi headed the team of quality control specialists who visited the outlets and carried out a periodic quality audit. Caf world also occasionally took the services of mystery shoppers to get a detailed feedback on their experiences in a prescribed format. Caf world had specified timings within which each item on its menu was to be served even during the busy peak hours since the customer was extremely time conscious. Customer care representative of caf world took regular oral feedback from the customers, many of whom were regular oral feedback from the customers, many of whom were regular visitors.

Caf world was very prompt in responding to such customer feedback. Marketing executives Ms Aditi were responsible for selection of franchisees, monitoring their operations, and collection the feedback of franchisees. The chain was very careful in selecting franchisees. It required them to be highly quality conscious. Franchisees that had an experience of working in prestigious food retail chain were preferred .all franchisees had to undergo one week training on quality control and company practices. Thereafter they were required to work in existing outlets for one week to understand customer service. Franchisees paid a fixed royalty on net sales revenue. New franchisees were also required to make a fixed payment promotion. The franchisees were required to source the food products only from caf world .this helped the chain in estimating and monitoring their sales. It also ensured that the franchisees did not underreport their sales for the purpose of royalty calculation. It is now five years since the caf world chain was established. During this period, it has become popular and established presence in the prestigious IT companies of Bangaluru and Mysore. However Kumar is of the opinion that is at crossroads. There are a number of issues which need to be examined. Caf world still does not have a standalone outlet. Kumar is considering the establishment of a few standalone outlets at strategic locations. He is also confronted with a number of problems. Franchisees are demanding more autonomy in their operations including flexibility in pricing and more choice in product menu. The customer in the IT companies and the malls where most of caf world outlets are located is often of a different profile.

The customers in IT companies come with their friends and colleagues to have a fast meal, while the customer in the malls often come with their families to shop. The malls also attract collage students, as Bangaluru is amongst the largest educational centers in the country. The requirements of the customers are accordingly different. Caf world is finding at difficult to adjust its marketing to the differing needs of these diverse segments .the Company has increased the size of menu to cater to the varying needs. Caf world now provides franchisees the flexibility in pricing. They can raise their prices up to 20 percent of the prescribed prince. Even as Kumar examines the possibility of opening stand alone outlets, he and his partners are wondering if they can extend caf world operations to other cities. Inquiries for new franchisees have been received from Mangalore, Pune, and Hyderabad. The IT companies in Bangaluru who have a presence in Hyderabad and pane can be possible targets for opening up counters and expansion in these cities. While the sales of caf world have grown substantially in last five years the profits have not kept pace. Caf worlds low penetrative pricing strategy has meant that the margins are low. Promotion and establishment expenses have been on the rise further eroding profits. Several questions confront Kumar he is wondering if caf world and reposition itself as a more up market premium and high quality outlet charging a moderately premium price. If caf world open up stand alone outlets in the premium locations in the city they would have to pay high rentals prevailing in the premium locations. In such a situation caf world will go up and revision of pricing strategy would be necessary. However, premium pricing and upmarket positioning can erode good will among the existing customers. It may also bring caf world face to face competition with other leading caf chains. However, many of caf world existing franchisees have been demanding higher price. Kumar wonders how his franchisees will react to an upmarket repositioning.

Questions What are the reasons for the success of caf world? Who does caf world manage franchising operations and maintain quality. What are the key decisions Kumar is required to take? Would you recommend a repositioning of caf world? Should caf world fist open stand alone outlets in Bangaluru or expand into other IT cities by opening up counter in IT companies there? Discuss and develop an expansion strategy for caf world.