Fat Angelo's Case Analysis

Fat Angelo's Italian Restaurant
The best family-style Italian restaurant in town
Aksiraporn
Piamkamol
Shinnawat
Wadhana
Situation Analysis Decision Rationale Recommendation
Companys Background: Fat Angelos

Fat Angelos was the 3 ex-colleagues in a successful chain of American-style restaurants in Hong Kong.
THE 3 PARTNERS: Andy Chworowsky: Specialized in Hotel Management Job: General Manager Dale Willetts: Specialized in Accounting with >10 years of restaurant experience Job: Finance and Accounting Chris Gallaga: Italian executive chef with >16 years in the business Job: Food and Kitchen Operations.
Wan Chai District

3,500 2
Ashley Road
4,000 2
Elgin Street, Soho

2,600 2
175
Situation Analysis
200
130
Decision Rationale
Recommendation
Homely Food & Atmosphere

Fat Angelo's is known for: Value-for-money Friendly service Lively atmosphere 2 Portions: Regular and Family Sizes Food Type: Salad/Soup Pan Pizza Pasta Main Dishes Grill/Roast Dessert
Restaurants locations attract both locals and tourists
Wan Chai District
Ashley Road
Elgin Street, Soho
Price level was approximately 60%
above that of the lower-end competitors and 50% cheaper than that of the high-end competitors.
4 3.5 3 2.5
STRATEGIC COMPETITIVE GROUP MAP
+100%
Price level
1.5 1 0.5 0 0 0.5 Fast food-styled 1 1.5 2
HK$150-HK$200
-37.5%
2.5
3 styled3.5 High-end
Good rapport with its suppliers: Benefits GPM: Impressive GPM of 75% and 10% NPM Rental expenses 30% of operating costs
Total Expenses Operating Costs
COGS 28% Other expenses 60%
Rental expense 30% COGS & other operating expenses 70%
Rental expense 12%
A turnover of more than HK$1 million per month per shop
Critical success factors (CSFs)

Italian homestyled experience Experienced key staffs Core competencies Quality Food and Service Effective marketing program Maximum Buying Leverage
Locations
Problem statement
Management wants to utilize existing area by possibly expanding to new restaurant business to sustainably obtain more profits and market share by attracting new customers and maintaining the old customers.
RESTAURANT INDUSTRY ANALYSIS USING PORTERS 5 FORCES

Rivalry No difference in switching over equal quality Customers loyalty
Substantial amount of restaurants Revenues of the restaurants depend on customer traffic
Substitutes Low switching costs Well-informed and valuecautious Customers Price-sensitive
Threat of new entrants Weak product differentiation Franchise component
Threat of buyers
Threat of suppliers
initial difficulties in obtaining credit terms
Decision Making Rationale:

What are our choices?
Utilize Existing Area
Utilization
Non-utilization
By ourselves
By Others
Do Nothing
Option 1:
Option 2:
Pizza Takeaway
Coffee Cafe
Option 3: Seafood Restaurant
Alternatives?
For Rent
Situation Analysis
Decision Rationale
Recommendation
Decision Step 1
Utilization
Generating profit from existing asset No financial problem in investing in business [Have High Cash]
Doing nothing doesnt generate anything

Non-utilization
Situation Analysis
Decision Rationale
Recommendation
Decision Step 2
RENT: By Others Generates Profits Doesnt take the business further
NEW RESTAURANT CONCEPT: By Ourselves Generates Profits Expand to New Restaurant Business
Situation Analysis
Decision Rationale
Recommendation
Choices that we have left includes
WE CLOSES ALTERNATIVE OPTION BECAUSE Not enough information Making lots of assumption Assumptions can be misleading GIGO- Irrelevant information in irrelevant output
Situation Analysis
Decision Rationale
Recommendation
Factors that effect business decision

INVESTMENT HUMAN RESOURCES
DEMAND
BUSINESS DECISION
BRANDING PROFITABLITY
RELATIONSHIP WITH SUPPLIERS

Situation Analysis Decision Rationale Recommendation
How this framework will work?

Factors that effect business decision
Very suitable
Filter out as
Suitable Not suitable
3 types of restaurants
Situation Analysis
Decision Rationale
Recommendation
FAD: Demand
PIZZA: High amount of competitors=> Highly demanded Specialized in Italian crusine Associate with pizza
CAF: High amount of competitors=> Highly demanded No specialty in this field
SEAFOOD: High amount of competitors =>highly demanded Some specialty in this field
Situation Analysis
Decision Rationale
Recommendation
FAD: Investment
PIZZA: Medium required capital
CAF: Low required capital
SEAFOOD: High required capital
Situation Analysis
Decision Rationale
Recommendation
FAD: Branding
PIZZA: Good reputation in Italian medium cost cuisine Can emphasize family value
CAF: No reputation in coffee market Individualist culturecannot encourage family value (our brand value)
SEAFOOD: Some reputation in seafood Can emphasize family value
Situation Analysis
Decision Rationale
Recommendation
FAD: Supply &Supplier
PIZZA: Gain the advantage of economies of scale Medium product life inventory
CAF: Cannot gain economy of scale Long product life inventory
SEAFOOD: Can gain some advantage of economies of scale Short product life inventory
Situation Analysis
Decision Rationale
Recommendation
FAD: Human Resources
PIZZA: Less procedure Require medium amount of workers
CAF: Simple procedureEasy Market Entrance Long product life inventory
SEAFOOD: Lots of procedure and preparation Require many workers
Situation Analysis
Decision Rationale
Recommendation
FAD: Profitability
PIZZA:
CAF:
SEAFOOD:
Use existing materials, maintain high GPM

Many customers are willing to try as extension of FA
Large profit margin per unit.

Lots of competitors 125 people; too big for cafe Not expert in cafe
Large profit margin per unit

Little expertise for seafood .
Situation Analysis
Decision Rationale
Recommendation
Factors that affect bus decision
PIZZA
CAFE
SEAFOOD
Demand Investment Branding Relationship with suppliers HR Profitablity
Situation Analysis
Decision Rationale
Recommendation
Specific Risk on Pizza Option
No Customer Base Cannibalization w/ FA Many (38) Competitors Nearby
Situation Analysis
Decision Rationale
Recommendation
No Base-Customer: Capture New Ones!

Capture the Overflow:
able to survive simply by capturing the overflow.
Existing Customers:
For those who are bored, Serve as Extension of FA specialized in Pizza
New Customers:
For: 1.Young Locals
2. Tourists
Situation Analysis
Decision Rationale
Recommendation
Cannibalization: New Food Variety

Same Experience:
Maintain the feeling of Genuine, Homely, Welcome Service & Ambience
Pizza Only:
Serve only Pizza and Pizzas Variety
Situation Analysis
Decision Rationale
Recommendation
38 Competitors Nearby: We are on different stand

Have Specialization on Food:
Same Pizza Taste & Quality but with more variety
Have Strong Branding:

Proven Authentic Experience from FA will be maintained and expected here!
Different Market Segment

None of others nearby capture our customers
Situation Analysis
Decision Rationale
Recommendation
Specific Risk on Pizza Option Diagram
No Customer Base
Cannibalization on FA
Many (38) Competitors Nearby
Capturing Overflow from FA
Exisitng FA Customers
New Customer
Different Menu
Have Strong Branding
Same Experience, Different Menu
Have Specializatio n on Food
Different Market Segment
Tourists
Young Locals
Specialized on Pizza
Extension of FA
Situation Analysis
Decision Rationale
Recommendation
Recommendatio n:
Use Existing Brand & Specialties to create Unique New Restaurant Low Competition on Same Market Segment Maintain Impressive GPM of 75%
Situation Analysis
Decision Rationale
Recommendation
Q&A
Why no financial forecast?
Lack of information Create Bias as the future has been foreseen
Why dont you determine new concept instead?

Insufficient information; require lots of assumptions and imaginations
MAPS
Italian Caf Seafood
BACK
Situation Analysis
Decision Rationale
Recommendation

Fat Angelo's Case Analysis

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Fat Angelo's Italian Restaurant

The best family-style Italian restaurant in town

Situation Analysis Decision Rationale Recommendation

Companys Background: Fat Angelos

Wan Chai District

Elgin Street, Soho

Homely Food & Atmosphere

Restaurants locations attract both locals and tourists

Wan Chai District

Elgin Street, Soho

Price level was approximately 60%

STRATEGIC COMPETITIVE GROUP MAP

1.5 1 0.5 0 0 0.5 Fast food-styled 1 1.5 2

COGS 28% Other expenses 60%

Rental expense 30% COGS & other operating expenses 70%

Rental expense 12%

A turnover of more than HK$1 million per month per shop

Critical success factors (CSFs)

RESTAURANT INDUSTRY ANALYSIS USING PORTERS 5 FORCES

Substitutes Low switching costs Well-informed and valuecautious Customers Price-sensitive

Threat of new entrants Weak product differentiation Franchise component

Decision Making Rationale:

Option 3: Seafood Restaurant

Doing nothing doesnt generate anything

Choices that we have left includes

Factors that effect business decision

RELATIONSHIP WITH SUPPLIERS

How this framework will work?

Suitable Not suitable

CAF: High amount of competitors=> Highly demanded No specialty in this field

PIZZA: Medium required capital

CAF: Low required capital

SEAFOOD: High required capital

SEAFOOD: Some reputation in seafood Can emphasize family value

FAD: Supply &Supplier

CAF: Cannot gain economy of scale Long product life inventory

FAD: Human Resources

PIZZA: Less procedure Require medium amount of workers

CAF: Simple procedureEasy Market Entrance Long product life inventory

SEAFOOD: Lots of procedure and preparation Require many workers

Use existing materials, maintain high GPM

Large profit margin per unit.

Large profit margin per unit

Factors that affect bus decision

Demand Investment Branding Relationship with suppliers HR Profitablity

Specific Risk on Pizza Option

No Customer Base Cannibalization w/ FA Many (38) Competitors Nearby

No Base-Customer: Capture New Ones!

Cannibalization: New Food Variety

38 Competitors Nearby: We are on different stand

Have Strong Branding:

Different Market Segment

Specific Risk on Pizza Option Diagram

Many (38) Competitors Nearby

Capturing Overflow from FA

Have Strong Branding

Same Experience, Different Menu

Have Specializatio n on Food

Different Market Segment