Case Paper 2
Little Red Roaster’s Growth Strategy
To expand business and increase profits for Little Red Roaster’s catering and/or wholesaling services, while maintaining quality goods and customer experience.
Expansion of Catering Services: Facts and Analysis
1) Fact: In order for Gordon Green to increase her catering services she must expand her Wortley Village store location to accommodate the space needed for ordering preparations. This renovation would cost LLR a total of $22,350.
Analysis: The annual net income ending October 31, 2002 was $23,561. LLR has the ability to cover the $22,350 expenses needed for the catering renovations without adding a significant loss to the company. This does not include expenses in delivery, packaging, and additional employees. We assume that the estimated costs for the part-time wholesale staff and promotions would be close to the costs of hiring a part-time catering staff. This would be an additional estimated cost of $19,500 or a 13% increase of her current salary and benefits expenses. This would put LLR at a net loss of $18,289. This would only be the case if Gordon Green does not increase the company’s catering orders. Being that this is highly unlikely, given the market share and her current catering demand, Gordon Green can safely move into increasing her business without financial worry (more supported detail in Fact 2). Because her ratio of net income to expansion expenses is fairly even, she would be a good candidate for a small short-term loan. She then has the option to use the other net income to cover hiring, packaging, and delivering expenses with only minimal debt.
2) Fact: The company’s current catering revenue is $27,619. LRR averages three catering orders per week. The maximum production capability at Covent Garden Market was five catering orders a week.
Analysis: Gordon Green...