Boston Chicken Essay examples

915 Words Apr 30th, 2011 4 Pages
Boston Chicken Case
1. - Assess Boston Chicken’s business strategy. What are its critical success factors and risks?
Boston Chicken’s business strategy comes from a different franchising structure in which BC, instead of selling store franchises to multiple franchisees, sells franchises to 22 regional area developers across the 60 largest U.S. metropolitan markets. This 22 are developers are committed to open 50 - 100 other stores. Therefore, its strategy is focused in rapid growth and reaching economies of scale.
The critical success factors come from how efficient Boston Chicken can be at finding key locations to expand and develop their brand name. In addition, their improvements in communication is a key factor for success since
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5. – How is Boston Chicken performing?
As you can see in the table below, the company is performing very well. Under the investor view, the company increased its ROE in 1994 more than3 times that of 1993. In addition, the ROA increased twice that of 1993. The current ratio also increased, indicating that their current assets can cover the current liabilities without any problem. Conversely, the leverage ratio (Debt-To-Equity Ratio) increased more than 4 times that of 1993 indicating that the company is financing more their operations. This could represent a red flag for external investors because shows cash flow troubles.
Ratios 1994 1993
ROE 6.22% 1.74%
ROA 3.79% 1.50%
Debt - Equity Ratio 64.34% 15.97%
Current Ratio 2.17 1.27
In addition, other ratios would be very helpful for investors, considering high increase in receivables, is the receivables turnover that would identify the possible problems in receivables.
6. – What assumptions is the market making about the company’s future performance and risks? Do you agree with those assessments?
There are different opinions raised from analyst in the market. Some, like Mike Moe from Lehman Brothers, stated that the stock is a strong buy; while others, like Roger Lipton from Lipton Financial Services, stated that the stores are producing losses and that the quality of Boston Chicken’s earnings was low because income comes from fees, royalties, and interest payments from

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