Hamburger Haven Case Study

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Summary Windham, one of 50 Hamburger Haven franchises owned by Patterson-Erie, was not performing as well as the company had hoped. Cameron McCormick wanted to evaluate the situation thoroughly before meeting with the chief executive officer(CEO) of the company, William Patterson. The fast food industry, or the “quick service industry,” capitalized on the customer’s preference for a fast, inexpensive and tasty meal. The industry had experienced extreme growth. The fast food industry was extremely seasonal with peak sales occurring in the summer months. The parent company expects that each of their restaurants achieve at least $50,000 in annual profits. However, more importantly, they look at each restaurant’s cash of our financial obligations. Of course, they want the cash flow to be in excess of breakeven; otherwise, they have to subsidize that restaurant until it is able to positively contribute. In the case of Windham, this continuous subsidizing has forced them to maximize our line of credit from the bank, straining our relationship with them The HHC set out strict guidelines requiring all of its franchises to have a standard restaurant design, menu, suppliers, uniforms and signage. Based on our sales projections, they built the larger format restaurant and took out an $881,000 loan to cover all restaurant costs. In the first year of operations, Windham’s average monthly sales were only 79 per cent of those of the local area of dominant influence. This percentage dropped to 75 per cent in 2001. Unfortunately, Windham has not yet shown an improvement in sales in 2001. It seems that the restaurant’s service element is largely contributing to the problem. During the February mystery shop, they were disappointed to see that the Windham restaurant received a zero grade out of 15 on employee friendliness and a zero grade out of 30 on the

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