Be Our Guest Summary

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Be Our Guest Case Study

Founded in 1983, Be Our Guest is a firm dedicated to assisting catering companies in their equipment needs. Catering to a higher echelon of the catering business community, it offered very elegant inventory that could be used at many top notch hotels. Furthermore, some of the industry success factors that Be Our Guest prides itself upon are maintaining positive relationships, high quality service, and high customer satisfaction. Traditionally, it is that that keeping a customer is much cheaper than getting a new one. Be Our Guest adhered to this idea and built its business model on a customer first mentality: one that proved to be successful. As a matter of fact, in terms of revenue, the company managed to triple it revenue to 3,000,000 in approximately 7 years. Despite this growth in revenue, the company’s net earnings have been declining as result of increasing general and administrative expenses. Financially, there are several things that must be pointed out. First and foremost, it is important to point out the seasonality of the industry. For instance, the first quarter of 1997 shows revenue of $237,638, whereas the second quarter jumps up to $894,434. This is important when going over the financials from a lenders point of view because it shows that there is some volatility in the income statement. To expand on the issue, year to year sales are inconsistent as well due to the nature of the business. As the case points out, revenues for June 1997 were 35% more than the previous year. However, May 1997’s revenues were only slightly larger than the year before. Also, Mr. Lovata explains, “It’s hard to really judge the year’s financial situation until June when our revenues actually start showing what the year will be like.” As a loan officer I would see this company as one which is relatively sound but also has some potential red flags. First and foremost, I would be concerned about the cash flow to debt service ratio. For 2008,...
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