What management succession issues do you detect in this case?
The paper must be in APA format and include the following:
1. Cover page
2. An abstract
3. An Introduction
4. Provide a overview of the case study
5. Summarize the key pints made in the case study
· What management succession issues do you detect in this case?
· What steps could Rámon Cardenas have taken to avoid them?
· Lucy and Bill eventually were able to purchase Red Iguana from her father for $560,000. Describe at least three methods that the family could use to establish the value of the business.
a. What factors make placing a value on a business difficult?
6. Answer the questions above and below in full detail.
7. Conclusion
6. As you work on this case study, answer the following questions:
• Should Lucy and Bill consider changing entity types?
-Why, or why not?
• Define Formal business planning and everything that goes into a successful plan
· Break down a formal business plan
Submit a 6-page descriptive case study utilizing the case in the text book, and two academic or peer-reviewed sources. The title and references pages do not count towards the page count.
Case #4, p. 835, in Scarborough, N.M. & Cornwall, J. (2015). Entrepreneurship and effective small business management (11th ed.). Pearson: Boston, MA
The paper must be in APA format and include the following:
1. Cover page
2. An abstract
3. An Introduction
4. Provide a overview of the case study
5. Summarize the key pints made in the case study
· What management succession issues do you detect in this case?
· What steps could Rámon Cardenas have taken to avoid them?
· Lucy and Bill eventually were able to purchase Red Iguana from her father for $560,000. Describe at least three methods that the family could use to establish the value of the business.
a. What factors make placing a value on a business difficult?
6. Answer the questions above and below in full detail.
7. Conclusion
6. As you work on this case study, answer the following questions:
• Should Lucy and Bill consider changing entity types?
-Why, or why not?
• Define Formal business planning and everything that goes into a successful plan
· Break down a formal business plan
Submit a 6-page descriptive case study utilizing the case in the text book, and two academic or peer-reviewed sources. The title and references pages do not count towards the page count.
Case #4, p. 835, in Scarborough, N.M. & Cornwall, J. (2015). Entrepreneurship and effective small business management (11th ed.). Pearson: Boston, MA
Case 4 Red Iguana
Should a Family-Owned Restaurant Open a Second Location Nearby to Accommodate the Crowds that Appeared after It Was Featured on the Food Network?
In 1965, Rámon and María Cardenas, immigrants from Mexico, left their jobs in a restaurant in San Francisco and moved to Salt Lake City, Utah, where they purchased a restaurant called Casa Grande. They served authentic Mexican dishes that they learned to make in their native state of Chihuahua, unlike the “Americanized” version of Mexican food that most restaurants serve. “People were not used to their kind of Mexican food,” says Lucy Cardenas, the couple’s daughter, who now runs the family business with her husband, Bill Coker. Initially, sales were slow, but over time, the restaurant built a loyal customer following, and in 1970 Rámon and Maria moved the restaurant to a downtown location.
By 1985, Casa Grande was struggling, prompting the Cardenases to shutter it and open a new restaurant named Red Iguana in Salt Lake City’s working-class west side. With its moderate prices and enormous—and enormously varied—menu, Red Iguana thrived, generating $300,000 in sales in its first year. Red Iguana’s sales have increased every year, reaching $1.9 million in 2003. María died in 2002, and an exhausted Rámon was ready to close the restaurant despite its success. Lucy and Bill were eager to take over the family business, but Rámon’s traditional views made him hesitant to turn the restaurant over to a woman, even if she was his daughter. “My father would have given my brother the business [simply] because he was a man,” recalls Lucy, “but we bought it from my Dad. He wanted to sell the business to me, not to me and my husband, because it’s part of the family. It was at times painful.”
After they purchased Red Iguana for $560,000, Lucy and Bill embarked on a modernization initiative, introduced a computerized restaurant management system, upgraded the electrical system, and purchased the parking lot next door. To improve food consistency across shifts, Lucy had her father cook every dish on the menu in front of her and had the chefs write down every recipe, something that Rámon had never done. By 2008, annual revenue at Red Iguana had reached $3.8 million. The colorful restaurant, with its green and red walls, mismatched furniture, and plastic floral-print tablecloths, had a distinct family vibe and drew a wide variety of customers, ranging from skiers straight off the slopes and families to businesspeople and hipsters. In 2008, Guy Fiero featured Red Iguana on his Food Network television show, Diners, Drive-Ins, and Dives, and sales accelerated.
Crowds pushed the restaurant, with room to seat just 100 people, beyond its capacity. Even in the winter off-season during the middle of the week, customers often wait for more than an hour to get a table. On winter weekends, the wait stretches to two hours. During the busy summer months, wait times are even longer. On a typical day, about 700 customers eat lunch or dinner at Red Iguana. Longtime local customers began telling Coker that they had stopped coming to the restaurant because of the long wait times and large number of out-of-town diners. “My experience has taught me that that kind of popularity can flip and become a negative,” says Bill. Lucy and Bill soon learned about another complication for Red Iguana: The city would soon be starting construction on a light rail line, and the bridge on the street on which the restaurant was located that connected the west side of Salt Lake City with the downtown district would be closed for about four months. Because many of their customers, especially businesspeople at lunch, came from downtown and used that bridge to get to the Red Iguana, they estimated that they would lose between 10 and 20 percent of their sales during the construction.
To Lucy and Bill, the solution to their problem was to open a second Red Iguana location. “Anecdotal evidence was that we had gotten too busy, too crowded, and too successful and that [customers] would indeed fill a new restaurant,” says Bill. But where should the second Red Iguana be located? Conventional wisdom said that the couple should choose a site far enough away from the original Red Iguana so that the second location would not cannibalize sales at the original restaurant. That would be relatively easy to do because officials in several nearby towns had approached Lucy and Bill within the last several years about opening locations within their city limits. Several mall owners also had been trying to convince them to open locations in their shopping malls. However, the copreneurs lived only a few blocks from Red Iguana and saw that as a significant advantage. “I love being able to get to my business so fast,” says Lucy.
Opening a second location farther away meant giving up some control over its operations. While investigating potential sites for a second location, Lucy and Bill heard about an old warehouse located just two blocks away from the original Red Iguana that was for sale for $259,000. They saw a great deal of potential in the old barrel-roofed building, which had a large concrete pad that they could use for patio dining in the warmer months. Preliminary plans indicated that a restaurant in the renovated warehouse could seat 119 diners, slightly more than the original restaurant. However, to purchase the building and renovate it, they would have to convince the Salt Lake City Office of Economic Development and the loan officers at Zions Bank that opening a second location just two blocks from their original restaurant would work. In the initial meeting, the lenders were skeptical.