PORCINIS PRONTOS Harvard Case Solution & Analysis

BACKGROUND

Porcinis Inc. was founded in 1969 as a family-owned restaurant. It had undertaken various expansion initiatives during the last two decades. The annual revenues in the year 2010 were $94.3 million. Currently, it has operations at 23 locations and employs 954 people.

The Porcinis Inc. was successful in the current market because of its uniformly high-quality food and service at each location. The prominent resources and competencies that company owned includes; extensive experience of restaurant managers, supervisory staff, chefs, a comparatively stable employee base, and the recipes of a famous Chef Mariana Molise.

The competitors of Porcinis are; Olive Garden, Cracker Barrel, Denny’s and Pizza Hut. Quality is the core competency that differentiates Porcini from others.

The restaurant market is divided into three segments;

  • Fast food
  • Single location full-service restaurants
  • Full-service chain restaurants

PROBLEM STATEMENT

The market in which Porcinis operates is reaching its saturation point. Giant restaurant chains are contemplating to expand their operations in the foreign markets. Porcinis Inc. does not have those much financial resources to expand in the foreign markets.

Thus, the problem presented in the case study is:

“How to expand in the domestic market without compromising on food and service quality”

Tom Alessio, marketing vice president at Porcinis gave an idea of opening a new chain named “Pronto.” These restaurants can be established at inter-state highway offering limited-menu. The main feature of these will be Porcinis quality food as compared to other competitors and a limited selection of beer and wines.

The real estate consultant suggested that “ideal” locations for Pronto would be:

  • Near inter-state highway exits
  • Near gas stations
  • Near economy level lodging
  • Near a large office building, office park, or shopping area
  • Within Porcinis Inc.’s operating area
  • Relatively distant from present Italian restaurant

The symptoms that are causing these problems range from limited capital availability to no access to prime real estate locations. The growth in the company was slow and there the company had limited capital to invest in expansion in the domestic markets.

Management had previously taken a go-slow approach in their traditional business however; they preferred quicker expansion for Pronto.

ANALYSIS

The three alternatives for expansion in the domestic market are:

  • Opening Company owned outlet
  • Franchising and
  • Syndication

All of the three alternatives will have different impact on the quality food and service delivered. The quality food and service is the core competency and Porcinis is going to use it to create differentiation from its competitors. It is very important to analyze the impact of each alternative on the quality of food and service. Each alternative is analyzed as under.

Alternative # 1: Opening Company owned outlet

While opening company owned outlet, the company will have to adopt a go-slow approach. The company will open 2 outlets per year if this option is undertaken. This alternative will offer Porcinis complete management of operations and the customer experience. The initial investment for opening will be totaled to approx. $2.1 million. Each site is expected to generate $2.4 million annual revenues from which 6 percent is estimated to become Porcinis’ profit.

 Company Owned
 Revenues

                     2,400,000

 Profit Margin

6%

 Profit Per site

                         144,000

The most important advantage of this alternative will be that the Porcinis will get the total control of operations and the customer experience. The investment plan for this alternative will be to purchase prime real estate sites, borrow the capital needed to construct and equip each new................

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