Boston Chicken Essay

908 Words May 8th, 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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On the other hand, the company does not count with an allowance for the receivables. This allowance will reduce their net income at the point that would reflect a bigger loss from the investor’s view. After reviewing these points above, it is evident that the accounting policies applied by Boston Chicken do not reflect the risks and their real performance.
3. – What adjustments, if any, would you make to the firm’s accounting policies?
Due to the fact that Boston Chicken is financing the operations of their franchisees (they appear to be Variable Interest Entities under the FASB 46), it is convenient to them to consolidate their financial statements in order to reflect the performance of the franchisees.
In addition, I would implement an allowance method for uncollectable accounts. By doing this, it is more certain that Boston Chicken’s reflect some of the risk they are taking.

4. – What questions would you ask management about the company’s performance?
The information given by the managers is vague because they don’t show detailed store information. I would ask managers to show:
• Detailed information about store performance: This will include numbers by store that will show individual performance.
• Real Company-Operational Information: this excludes royalty revenues and other issues that hide the real operational performance of the company.
• A complete detail of payments made to the loans by the

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