Porcinis Pronto: Great Italian Cuisine without the wait

Porcinis Pronto: Great Italian Cuisine without the wait

Christopher Atwell

Professor Walker

12.12.16
 Porcinis Pronto: Great Italian Cuisine without the wait

Executive Summary

The rubric of the case illustrates an importance of determining the growth opportunities related

to the particular cuisine. Where Porcini Pronto is considered to be the targeted restaurant to

utilize the expected performance of the related product and services based on the level

operational efficiency growth it possessed under the historical perspective. From the situation, it

seems that the revenues of the company were $ 94 million in the year 2010 and expected to grow

with the growth opportunities that it predicted. The company's image was estimated to develop

on the high level of performance based on the services it offered subjected to high-quality food.

Later on, the year, it has been determined that its growth was stagnant in the particular market

where it operated. It is also identified that Porcini was also looking to expand the business

activity in the international markets instead of national one because domestic market was well

saturated and not allow to grow the business at a fast pace. To implement the decision, there

were three types of options for the company that would be able to utilize the operations

efficiently. The options were: Own restaurant, Franchise, and Syndications. These options would

be used with the expected returns and operational efficiency in order to predict the best to

implement. So, it is concluded that restitution on investment of the Franchise predicted to be the

best option to execute the operations.

Introduction

Porcini's Inc. started its operations in 1969, as a family owned restaurant in Boston's North End.

Over the next two decades, Alessio opened new restaurants in Hyannis, Massachusetts,

Providence and Newport, Rhode Island, and Hartford, Connecticut. Porcini's had improved

revenues and income every except the recession period of 2008-209. With the end of the year
 Porcinis Pronto: Great Italian Cuisine without the wait

2010, Porcini's Inc. operated 23 locations, employed 954 people and also generated revenue of

$94.3 million. Porcini's profits margin was increased by 4% from the 3% the year before. The

reason behind the success of Porcini's success was that customers made the difference and made

Porcini's powerful provincial brand.

In January 2011, Tom Alessio, marketing vice president at Porcini's, Inc., of Boston, was

worried about an issue which is raised by the expansion of his restaurant business. Porcini was

slow rising confidentially held enterprise. Food and service quality was the primary concern or

challenges for his business. The initial risked the company's excellence standing; the next might

create a rapidity of growth that the company was unprepared to handle. Competitors in the

industry were serving the market by fast food or low-end outlets. Alessio highlighted some of the

goals for improving the performance of the Pronto's quality goals. These goals include the

innovative process for selecting, appraising, and rewarding employees and also use the wireless

technology to remove the time from customer billing.

The Pronto concept

Alessio for the success of restaurant listed out some of the preferences related to

customers:

Alessio set a range of dinners (not including beverages) in the $9 to $17

Lunches (without beverages) cost up to $6 to $12 range

Restaurants' service is Fast, efficient; consumers in a rush should be able to complete

their dining experiences with 30 minutes at lunch and 45 minutes at dinner time

Environment is clean and safe

 Porcinis Pronto: Great Italian Cuisine without the wait

Regarding competition: several full-time service Italian restaurant chains were operated in the

northeastern region. Likewise: Uno Chicago Grill (with 74 locations), Bertucci's (with almost 62

locations), Olive Garden (42 sites) and so on and these chains were located or predetermined to

serve travelers or n a rush diners. Pizza Hut was another probable rival because of its food and

quality was of a lower order and was apparently connected with pizza. Brand recognition was

another competitive factor, and Alessio has an idea that Pronto was at a disadvantage, mostly in

out-of-region travelers. As Denny's enjoyed 97% brand recognition nationwide.

Operating Strategy:

Alessio's operating strategy was to make new chain's strategy focus on speedy; quality service

meant that employees imitate values and norms in their attitudes and work. Pronto needs team

oriented people who were able to value the company and try to improve or increase the

profitability of the enterprise. For Halloran, Pronto was an opportunity for an experiment. Each

team of Halloran's plan was to obtain a full week of preparation and prolog of the rapid, quality

service approach and its implementation fundamentals. Pronto job applicants are required to pass

several screens: such as an interview with HR, a second requirement interview with Pathfinder

Team, a personality appraisal test and last one is to talk with the manager. Personal qualities

would include attitude which is unbeatable, communication skills, reliability, and integrity.

Problems

Absenteeism was the problem in the company which was just because of undesirable services

like: "when somebody fails to illustrate, it throws a chimpanzee jerk into our business

operations." Management system and quality were other problems in the company. When there
 Porcinis Pronto: Great Italian Cuisine without the wait

were a short number of employees in the company then employee took longer time as food gets

delivered cold, orders were mixed up.

Analysis

With a view to justifying the projected results of the three options evaluated by the company, it

has been identified that Porcini was looking to assess the business regarding expected revenues

and profits generated from the options. Under the case of the first choice, it shows that the

number of outlets would grow by 2 per year and thus produce the same level of revenue per store

if the economic condition would maintain at the same degree.

Therefore, the growth of the revenues would be increased in the next upcoming years

accordingly. The cost under the given scenario seems high and not allow Porcini to boost its

profit margins instead to continuously generating negative earnings. So, the reason for this cost is

the fact that it owned the restaurant with full operated costs and expenses.

Under the predictions of the company with relating to implementing the franchises to the

international market. It has been analyzed that the revenue per outlet would be the same because

every outlet is attached to the margin imposed on the per income criteria of the company. The

difference is the growth rate of outlets that franchise would perform better than the first option.

Therefore, the net revenues of the selected years are more than two times of the owned

restaurant.

The reason for this is to eliminate the additional expenses and costs bear by Porcini during the

certain course of actions, and thus the more revenues would boost the outlets over the number of

selected years. There would be no cost associated with such option because no expense would
 Porcinis Pronto: Great Italian Cuisine without the wait

bear by the company instead of the franchise itself. So, it shows that the profit margins would

boost to 22.40 million within ten consecutive years. The cash flows would be the same as the

benefits because there is no cost associated with franchise operations. The net present value of

the selected years would be $15.33 and consider good impact over the projected performance of

Porcini.

In a case of syndication option, the key element to expect the business is to collaborate with

other companies in order to mutually agreed under the shared profit margins. Under the given

scenario, the shared interest would perform by the businesses and improve the operations under

mutual consent.

Therefore, with this options, it has been analyzed that the company would perform better

services and increase the global operations under the partnerships with other international brands

of the similar industry. However, the revenue per outlet would be the same as set by the standard

authority of Porcini but the growth rate of the stores would not perform more than the Franchise

option because of the limitations and barriers established by the partners and not have freedom to

make independent decisions under the partner (Investor in this case) would decide to implement.

On the other side, the cost of sales would be lower than the first option because all the parties

under the partnership would contribute the expenses of the business. So, the free cash flows

generated under this scenario would be higher than the previous scenarios and consider an

increase in the net present value of the outlets under the business.

To determine the current value of all the options evaluated by the company, a discount rate of

6% would be imposed in each scenario. Thus, under the calculated values, the net present value
 Porcinis Pronto: Great Italian Cuisine without the wait

of owned restaurant would generate more than all other options but composed of a high cost of

activities regarding operating expenses. Therefore, it indicates that the best choice for the

company is to choose the syndication options to utilize the business globally because it doesn't

have control in international markets and require the support of the global investors to expand

the business accordingly.

The return on investments for all the scenarios identifies different results based on the level of

revenues and profit margins they generated. So, it shows that the highest return on investment is

made by the Franchising business operations because it consists of no operating costs bear by

Porcini. On the other side, Syndications would also perform high return on investment because

investors would have control over the operations of the business and might consist of a mutual

contribution of the costs and operating expenses instead of the firm itself. Therefore, it is

concluded that the best option would go for the Syndication option to minimize the risk of loss

subjected to lack of business expansion globally.

Conclusion/Recommendation

From the following results, it is concluded that all the options would be suitable for the business

expansion but provide a different picture to maintain the operations of the business under

control. In the first option, the business would operate the activity with full responsibility to bear

the cost and operating expenses; the cash flows, in that case, would seem lower than the expected

one. The second option is quite useful to expand the business because it requires franchising

activities that would have no cost over the business instead of the franchise itself.
 Porcinis Pronto: Great Italian Cuisine without the wait

The third option illustrates the syndication activities under which, the ownership would be

granted to the global investors or to interact with international business to perform the revenues

and profits under mutual consent. Thus, it is recommended from the following results that the

third option would be more useful for the business expansion because the domestic industry is

still saturated and not require to expand, where Porcini was looking to expand globally through

the related information suitable for the firm success in long-term.

So, under the case, build partnerships with the global investors or companies would provide a

clear picture and direction of how to manage the operations globally. In order to provide accurate

operational flow to execute the syndication option, the company should provide full authority to

the investors about the possible opportunities to generate the profits through the related

investments and form a fixed charged fee to increase the profit margins instead of focusing on

the variable results.

On the other side, it should concentrate on the implementation of the activity campaign to attract

the investors to take interest for long-term investment decisions. It would be made through the

use of global syndication process under which, every business related to an industry provide a

recommendation on the firm opportunities and success and might take interest to form

partnerships to increase the operational efficiencies in order to maintain the business flow under

control as well as set the mutual interest to cover the operational responsibilities in a

collaborative way.

With all these recommendations, it is concluded that Porcini should choose syndication as the

primary activity to perform the business correctly and meet the vision and mission of the

company. It also shows that a restaurant has already subjected to high-quality food, thus only
 Porcinis Pronto: Great Italian Cuisine without the wait

require the support of the global investors or the businesses to increase the brand awareness over

time.

Exhibit

Initial investments
Owned Restaurant 17
Franchise 1
Syndications 2
Total profits
Owned Restaurant 8.35
Franchise 4.37
Syndications 6.05
Return on investments
Owned Restaurant 0.50
Franchise 4.37
Syndications 2.52

Profits

9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Owned Restaurant Franchise Syndications