Pepsico Restaurants Case Analysis Essay

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PepsiCo’s Restaurants

Definition of Problem

Senior Management of PepsiCo is evaluating the potential acquisition of two companies – Carts of Colorado and California Pizza Kitchen – in order to expand the company’s restaurant business. If indeed PepsiCo decides to pursue the acquisition of one or both, they must decide how to align each of these business units in its historically decentralized management approach and how to forge relationships between the acquired business units and existing business units. In their evaluation, Senior Management is faced with the question of whether the necessary capital investment in order to purchase one or both of the businesses can be profitable for each of the acquired business units, but must
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With the previous merger with the Frito-Lay Company, and acquisitions of Pizza Hut, Taco Bell, and Kentucky Fried Chicken, PepsiCo successfully ventured into different segments in the food services industry, but was also able to create synergies with its soft drink product. PepsiCo also attempted to integrate into trucking transportation and bottle manufacturing in the 1970s.
PepsiCo faces two very different companies in its most recent potential acquisition. Carts of Colorado is a designer, manufacturer, and merchandiser of mobile food carts – not directly in the food services industry, they do cater to a large corporate customer base along with PepsiCo that includes Coca-Cola, Burger King, Dunkin Donuts, and Mrs. Fields. Alternatively, California Pizza Kitchen is a casual dining restaurant with 25 locations in eight states, typically located in affluent areas.
Sales for Carts of Colorado in 1991 were $7,650,000 and EBITDA in 1991 was $945,187 or a 12% operating margin. The mobile food business has had success since it is estimated that the 20,000 units sold by Carts of Colorado are generating about $2 billion in foodservice sales annually (an average of $100,000 per cart). It is believed internally at PepsiCo that Carts of Colorado is 18 months ahead of its competition in engineering and design. Given that PepsiCo, through its Pizza Hut, Taco Bell, and

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