Boston Chicken, Inc.

952 Words4 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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The additional data request from management are as follows:
The analyses indicate that the franchisees are profitable at this level of sales; some franchisees appear to be having cash flow problem, since footnote 7 points out Boston Chicken had been forced to make advances to franchisees to fund local and national advertising; the sales from same store and distribution of same store sales; late payments by franchisees; the total cash floe generated by all stores.

5. How is Boston Chicken performing?
The ROE of Boston Chicken from 1993 to 1994 shows the improvements from 1.7% to 6.2%, which is due to the improvements of Net Income. The increase in the number of stores from which Boston Chicken is the factor contributing to the improvements. The revenue shows the leap from $8.282 million in 1992 to $42.53 million in 1993 to $96.15 million in 1994.The new stores leading to an increase in royalty and franchise fees which is the reason of the increased revenue. NOPAT margin and EBITDA margin shows improvement in proportion to Net Income margin that indicates there is no change in interest. Profit margins indicate that the company’s performance has improved markedly in 1994.The stock value for Boston Chicken for 1994 was about $7 and the actual stock price was about $16 at the end of 1994. This indicates that Boston Chicken has been overvalued due to the optimistic view of market because of the present revenue growth rate and the inclusion of royalties and initial
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