Elephant Bar Restaurant: Mezzanine Financing Harvard Case Solution & Analysis


In 1979, the first branch of Elephant Bar Restaurant was opened by Nancarrow, the initial periods of the restaurant didn’tprove to be so successful, but after 1997 the restaurant’s performance has improved drastically. During 1997 and 2003 the restaurant expanded aggressively, and by 2002 it had 23 branches in California. The strategy of Elephant Bar was different from the other restaurants such as, the restaurant closing time was way too early as compared to the other restaurants, and the aimbions of the restaurants are also different from its rivals which make it possible for the restaurants to achieve desired growth. The lunch meals and alcohol drinks are the main source of revenue of the Elephant Bar which accounts for approximately 65% of total revenue. Elephant Bar Restaurant is considered to be an expensive restaurant which charges more than its competitors.

The restaurant is only operated in California.Management is considering to open the chain of the restaurants in the other states such as Texas and Kansas. Elephant Bar is managed by the experienced and competent management along with the access to acheap source of finance which can make the expansion process smoother. To raise funding for the acquisition, the administration is considering issuing mezzanine financing debt option to Allied Capital.

Elephant Bar Restaurant Mezzanine Financing Harvard Case Solution & Analysis

Qualitative Analysis:

It can be said that the Elephant Bar Restaurant is performing well in the current economic condition and has good growth prospects in the future. The customers are very satisfied with its current performance, the service of the restaurants appears to be quite well, and many customers had shown high brand loyalty for Elephant Bar. On the other hand, the strategies of the management also seem to be quite useful, different themes of the restaurants in different areas are appealing to the customers. Nothing is mentioned in the case study scenario which indicates that the company faces some quality and hygiene issues. These are the very critical factors for the restaurants and failure to comply with these regulations may result in the punishment and penalties from government and regulatory authorities.

It can be said that the management of Elephant Bar Restaurant is competent enough to turn around the performance of the restaurant; the top management is very committed and enthusiastic regarding the positive performance of their organization. On the other hand, the lower management is also honest, responsible and accountable for their work, thus, another positive aspect of the restaurant.

Moreover, it has been reported that an employee who is responsible for the preparation of food is suffering from Hepatitis A, it is anticipated that as a result of his diseases Elephant Bar can face some negative response from customers, and similarly the investment committee could also perceive it as negative. On the other hand, Elephant Bar Restaurant might face some investigation from the regulatory authority, if regulatory authorities find Elephant Bar Restaurant negligent or guilty, it can impose fines and penalties and even might cancel their operating license. This might be a serious case and will have to be given adequate attention of investment committee before finalizing the investment decision..................

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