Boston Chicken, Inc. Essay

954 Words Jul 21st, 2013 4 Pages
Boston Chicken, Inc.

Siwen Cheng

1. Assess Boston Chicken’s business strategy. What are its critical success factors and risks?
Boston Chicken is a company to operate and franchise food service stores that sold meals featuring rotisserie-cooked chicken, fresh vegetables, salads, and other side dishes. Its concept is to combine fresh, flavorful, and appealing meals associated with traditional home cooking with a high level of convenience and value. Boston Chicken focused its expansion through franchising the company through large regional developers rather than selling store franchises to a large number of small franchisees. In that, an established network of 22 regional franchises that targeted their operations in the 60 largest
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Most of who were financed by the franchiser assuming that the franchisee stores will be profitable and sustainable and will generate sufficient income to repay their debts. However if the stores are unable to repay their debts, Boston Chicken will have to incur huge losses in Notes receivables affecting its liquidity prospects.
Boston Chicken shares both the upside and downside risk for financed franchise restaurants according to agreement of franchise.

3. What adjustments, if any, would you make firm’s accounting policies?
Boston Chicken avoids consolidating the financed developer operations in its financial statements. It effectively has control over the financed area developers through its option to purchase.
The royalty, franchise fee and interest income would be eliminated; the company would show its share of the sales revenue and cost from stores; the notes receivable would be eliminated and the firm would report its share of the assets and liabilities of the franchisees.

4. What questions would you ask management about the company’s performance?
The information needed to estimate the profitability of store for franchisees can

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