Boston Chicken Essay
Individual Case Analysis Boston Chicken, Inc.
MSAF670 – MSAF Capstone
Brian Wendel
Boston Chicken was founded in 1989 by Scott Beck to operate and franchise food service stores with the firm’s concept to combine fresh, flavorful, and appealing meals associated with traditional home cooking with a high level of convenience and value (Palepu, 2013). The firm was basically trying to create the atmosphere for a customer of getting a home cooked meal at a reasonable price and in very little time. “Our strategy,” Beck noted “is to be a home meal replacement. Our number one competitor is pizza.” (Palepu, 2013). Boston Chicken described its main goals as strengthening its area developer organizations, creating communications infrastructures …show more content…
Dual-income families are searching for an affordable alternative to preparing meals at home. Boston Chicken satisfies this need by preparing food that customers view as high quality, healthy and convenient. This home meal replacement is a hit with value-customers” (Palepu, 2013). Roger Lipton on the other hand has a different point of view. Lipton feels that “the quality of earnings is very low, since all of Boston Chicken’s income comes from fees, royalties, and interest payments from franchisees, most of whom were financed by the franchiser” (Palepu, 2013). Looking at the company’s income statement, Boston Chicken shows tremendous financial results, but once a more detailed look into the financial statements is taken, specifically with respect to the financing activities, the circumstances change. To provide financing for its rapid growth, Boston Chicken went public in November of 1993. Boston Chicken raises money by issuing stock and issuing of debentures, which they then lend to its franchisees. This creates a problem because there is a high risk that the franchisees will not return the money owed on the loan and the interest on the loan is high. The reason for the high risk is that the franchisees will not be able to return the money on the loan is because many of the franchises they were loaning money to were not profitable. According to Lipton, actual average weekly sales were only $18,900 per store, implying that franchisees were losing money (Palepu,
MSAF670 – MSAF Capstone
Brian Wendel
Boston Chicken was founded in 1989 by Scott Beck to operate and franchise food service stores with the firm’s concept to combine fresh, flavorful, and appealing meals associated with traditional home cooking with a high level of convenience and value (Palepu, 2013). The firm was basically trying to create the atmosphere for a customer of getting a home cooked meal at a reasonable price and in very little time. “Our strategy,” Beck noted “is to be a home meal replacement. Our number one competitor is pizza.” (Palepu, 2013). Boston Chicken described its main goals as strengthening its area developer organizations, creating communications infrastructures …show more content…
Dual-income families are searching for an affordable alternative to preparing meals at home. Boston Chicken satisfies this need by preparing food that customers view as high quality, healthy and convenient. This home meal replacement is a hit with value-customers” (Palepu, 2013). Roger Lipton on the other hand has a different point of view. Lipton feels that “the quality of earnings is very low, since all of Boston Chicken’s income comes from fees, royalties, and interest payments from franchisees, most of whom were financed by the franchiser” (Palepu, 2013). Looking at the company’s income statement, Boston Chicken shows tremendous financial results, but once a more detailed look into the financial statements is taken, specifically with respect to the financing activities, the circumstances change. To provide financing for its rapid growth, Boston Chicken went public in November of 1993. Boston Chicken raises money by issuing stock and issuing of debentures, which they then lend to its franchisees. This creates a problem because there is a high risk that the franchisees will not return the money owed on the loan and the interest on the loan is high. The reason for the high risk is that the franchisees will not be able to return the money on the loan is because many of the franchises they were loaning money to were not profitable. According to Lipton, actual average weekly sales were only $18,900 per store, implying that franchisees were losing money (Palepu,