Fast food restaurant Essay Example for Free

Fast food restaurant EssayDescription of colossal Burger GB is the fourth largest fast food chain worldwide, measured by the number of stores in operation. As most of its competitors do, GB offers food and combos for the three largest meal occasions breakfast, lunch, and dinner. Even though GB owns whatever of its stores, it operates under the franchising business model with 85 percent of its stores owned by franchisees (individuals own and manage stores, get franchise fee to GB, but major business decisions (e.g. , menu, look of store) controlled by GB).McKinsey study As part of its growth strategy GB has analyzed some potential acquisition targets including Heavenly Donuts (HD), a growing doughnut producer with both a U. S. and international store presence. HD operates under the franchising business model too, though a little bit differently than GB. While GB franchises restaurants, HD franchises areas or regions in which the franchisee is required to open a certain number of stores.GBs CEO has chartered McKinsey to advise him on whether they should acquire HD or not. 1. What areas would you want to explore to determine whether GB should acquire HD? The team started thinking about potential synergies that could be achieved by acquiring HD. Here are some key facts on GB and HD. divulge 1 Stores GB HD picTotal 5,000 1,020 picpicNorth America 3,500 1000 picpicEurope 1,000 20 picpicAsia 400 0 picpicOther 100 0 picAnnual growth in stores 10% 15% .Financials GB HD picTotal store sales $5,500m $700m picParent company revenue $1,900m $200m picKey expenses (% sales) picpicCost of sales 51% 40% picpicRestaurant operate costs 24% 26% picpicRestaurant property equipment costs 4. 6% 8. 5% picpicCorporate general administrative costs 8% 15% picProfit as % of sales 6. 3% 4. 9% picSales/stores $1. 1m $0. 7m picIndustry average $0. 9m $0. 8m pic 2. What potential synergies can you think of between GB and HD?3. The team thinks that with synergies, it should be possible to double HDs U. S. market share in the next 5 years, and that GBs access to capital go out allow it to expand the number of HD stores by 2. 5 times. What sales per store will HD require in 5 years in order for GB to achieve these goals? Does this seem reasonable? Use any data from Exhibit 1 you need, additionally, make the following assumptions Doughnut consumption/capita in the U. S. is $10/year today, and is projected to grow to $20/year in 5 years. For ease of calculation, fall upon U. S. population is 300m. 4. One of the synergies that the team thinks might have a big potential is the idea of increasing the businesses overall profitability by selling doughnuts in GB stores. How would you assess the profitability impact of this synergy? 5. What would be the incremental profit per store if we think we are going to sell 50,000 doughnuts per store at a price of $2 per doughnut at a 60 percent margin with a cannibalization rate of 10 percent of GBs sales?Exh ibit 2 Sales and profitability per store Units of GB sold per store 300 thousand Sales price per unit $3 per unit security deposit 50 percent Units of HD sold in GB stores 50 thousand Sales price per unit $2 per unit Margin 60 percent Cannibalization rate of HD products to GB products 10 percent 6. You run into the CEO of GB in the hall. He asks you to summarize McKinseys perspective so far on whether GB should acquire HD. Pretend the interviewer is the CEOwhat would you say?