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Middleby Corporation Essay

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1. What caused Middleby's struggles in the 1990s? The following caused the struggles of Middleby Corporation in the 1990’s: a. A period of rapid international and domestic expansion by chain restaurants during the first half of the 1990’s, which caused DFE manufacturers and suppliers to increase production capacity domestically and build assets in foreign markets. b. A decline in sales through the second half of the 90’s which was caused by a shift in domestic consumer eating habit towards healthier foods. In addition, a slowdown in Asian market, caused by the Asian economic crisis, hit chain restaurants hard and resulted in slow than anticipated growth for the DFE industry. c. Middleby’s expansion into foreign markets left …show more content…

This data suggests that Middleby’s financial health deteriorated in the late 90’s. In 1998, the increased cost of sales from the strengthening dollar along with non-recurring expense charges from a stock repurchase and write-offs particularly hard on the company’s z-score. 4. Why was the company’s 1998 covenant violation so worrisome? Middleby’s violation of its debt covenant, made the company vulnerable to its’ creditors; the result was an increased interest burden on more than $25M in long term debt. This increase in interest payments would adversely affect the company’s earnings at a time when margins were already shrinking. Considering the company’s low z-score at the time the company could have fared much worse. 5. What was the most important part of Bassoul’s five point plan? Rationalizing the company’s business model. Why: 1. Reduced overhead 2. Focus workforce 3. Product leadership (few, high quality products) 4. Increase gross margin 5. Easier and cheaper to accomplish other 4 points of plan 6. What else might he have done to improve the company’s fortunes? Other things to consider

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