Café Cupcake Case

Group 4 BM-A
Akshay B19004
Ankit B19006
Ivy B19021
Kriti B19024
Nikhil B19030
Pranav J B19033
Company background:

Emma Aneisha Jonathan

Bisset Davis Patel
Founder Co Founder CEO

Mer Exponential
ge Southern Style
Café Cupcake 2010 r Growth, 20 • IPO planned in 3 years
2009 Sandwich Shop
new outlets • Rating drops to 3.8
• Expansion Vs
Consolidation dilemma
7 outlets
Café Cupcake opened

2009 2010 2011 2013-16 2017-18

Centralised operations, more Centralised operations, lesser Decentralised operations, lesser

specialisation, more formalisation specialisation, max formalisation
Industry Analysis
Market Share of Restaurant Industry-2016
CAGR of Restaurant Industry in US 214
273

14.0%

12.0%

10.0% 9

8.0% 22

6.0% 29

45 227
4.0%

2.0%

0.0% Full Service Quick Service Fast Casual Snack/Bakery

Full Service Quick Service Fast Casual Snack/Bakery Bar/Tavern Cafeteria Others Bar/Tavern Cafeteria Others

CAGR-06-16 CAGR 16-21

• Full service restaurant accounted for max share of revenue

• Highest growth was captured by fast casual restaurants(12.5%)
• High barriers to entry – Intense competition, strict regulations
• High employee turnover rate ~ 72.9% compared to 46.3% in private sector
• Poor employee satisfaction- low pay, stressful working condition etc.
Café Cupcake – Value Proposition
A bit of southern hospitality where one could unwind & indulge a little

Company focused on offering a delightful experience through:

• Quality product

• Affordability

• Great Service

Key Strategy

• Keeping the menu distinctive & indulgent

• Quick Service & Southern Hospitality

• Offerings varied upon southern style sandwiches and rotating selection of tempting handmade cupcakes
Café Cupcake – Business Model

Direct Business Café Business

• Selling cupcakes and other product to
other enterprises
• Business started as direct business only
• Generated positive cash flow for the
enterprise
• Relatively less effort was required
• Exclusivity of the brand getting diluted
• Café Cupcake owned cafés on their
owned/rented properties
• Sold wide range of southern style food+
Cupcakes
• Not very profitable
• Employee dissatisfaction very high
• Structure/HR issues
Café Cupcake – Problems
• Employees felt overworked/ stressful work conditions
Work
Condi • Work schedules without notice
tion
• Service time was very less that led to stressful nature of job

• Low pay
Pay/
Prom • Often people were hired on temporary basis with low pay
otion • High attrition rate

Feedb • String of poor feedback from customers on TripAdvisor

ack
• Feedback pertained to poor service, long waiting time
of
Custo • Very less flexibility in orders after new systems were formalized
mers
• Employees provided poor rating on Glassdoor (3.6/5)
Café Cupcake – Corrective Actions
ACTIONS OUTCOM
E


in 2013
 Staff reorganization Elimination of redundant staff
 New operations strategy that centralized  Improved quality, service time
by Emma
taken
production in one location  Lower cost on account of lean system
sults  Only 3 bakers were retained  Emma/Davis could effectively manage
Actions/Re  More focus on quality, on time delivery operations

 Struck balance between flexibility &  Effective percolation of communication

Jonathan control across hierarchy
by  Estd systems/structure to increase  Increased operational efficiency
taken employee ownership  Lower Cost
sults  Organized quarterly meetings of  Improved employee morale
Actions/Re SM/RM/Assistant Manager  Sometimes SM hired friends that led to
 SM authorized to hire at store level poor service
 SM empowered to award bonus ($20-50)
Café Cupcake – Dilemma

Consolidation Traditional Direct Business:

Vs Vs Healthier To continue or
Expansion Menu discontinue?
 Criteria Consolidation Expansion
Employee satisfaction Increases Reduces with accelerated expansion
Customer satisfaction Increases Affected by rapid expansion
Financials Stagnant Growth
Risks More(loss of real estate deals etc) Less

Criteria Healthy Menu Traditional Menu

Customer loss risk High-People crave southern comfort Low
Core Value Proposition Different Matches
New Customer Acquisition High Low

Criteria Continue Direct Business Discontinue Direct Business

Financials Secure At risk

Pressure on Café Lesser Increase
Freedom of Café to expand More, as Café will be independent Café will be a do-or-die situation
Recommendations
• They have seen that once consolidated; they can grow better. They should give the
current HR policies some time to settle and then go for growth.
• This includes imparting proper training to managers so that they can give proper
bonuses to employees, integrate the formalised manual into the workforce etc.

• They can pilot healthy option in some places where the population is more urban
and health conscious to check the customer preferences.
• They should not dilute their value proposition all at once.

• Direct business should not be discontinued as it is a very profitable branch.

• They can look at hiring specialized workforce for this so that there is no
dissonance.