Levendary Caf was founded by Howard Leventhal in Colorado as a small soup, salad, and
sandwich restaurant. Over the course of his tenure as CEO Leventhal grew his modest,
entrepreneurial endeavor into a $10 billion dollar business. After 32 years the founder is
moving on to pursue other interests and new talent, Mia Foster, has been selected as his
replacement. Foster, known for her direct communication style and ability to execute, was
chosen based on her merit and breadth of perspective as previous U.S. president of a large
American fast food company.1 Foster makes this transition to CEO as of 2010 where the
company has the following financials:
Figure 11
Despite Foster’s strong track record for execution and the fact that Levendary Café has
developed a loyal customer base and strong brand, Wall Street has been cautious about the
company’s stock. Analysts point out that while the company has strong fundamentals and
consistently delivers forecasted numbers their shares still trade at a discount to similar
businesses’ stocks. They hypothesize that this is occurring because domestic business has
reached its growth potential and furthermore, they raise concerns regarding the new CEO’s
lack of international experience and question her ability to build a multi-national company.
1
Enter: China. Levendary Caf has recently burst onto the scene of this emerging market and
reported the following financials for 2010:
Figure 21
Foster views this as an opportunity to prove herself, knowing that Wall Street will be
paying close attention to the way in which she approaches the Chinese market. However,
much to her chagrin, she has recently received reports of dramatic departures from the
firm’s conceptual design, particularly in regards to the store and menu, in China.
Furthermore, the president of Levendary China appears to be unwilling to conform to the
company’s planning and reporting processes. Disconcerted by these facts, Foster sets off to
China in an effort to learn more about the Chinese operations and begin to formulate a
strategy for growth
Question 1
What is a Multi-unit Restaurant (MuR) Business? How big is it? Is it a consolidated
or fragmented industry? What are its economics (use the Porter’s Model to evaluate
profitability in addition to the data given in the case)?
A Multi-Unit Restaurant business generally consists of discrete units operated by
independent managers. The market can be categorized in three different segments:
Specialty Establishments: Business primarily serves snacks and
beverages with a typical bill under $5. Examples include Dunkin’
