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Sugar Bowl Case Solution & Answer

Sugar Bowl Case Solution

Introduction

A recent school graduate, Shelby Givens started rescuing her family’s outdated and under-performing cowling alley, just after returning to her hometown: Raleigh, North Carolina. Despite of turning out the nearly-bankrupt business into a profitable business within just nine months through resolving high costs and operational inefficiencies related issues; the long term viability of the business got affected by the shifting the industry patterns. As a result of which, Givens transitioned the family’s traditional business into an advanced business by introducing a different and modern youth oriented concept and an urban setting lounge, known as Sugar Bowl. Given expected to generate handsome revenues from her food and beverage business in the West lake Lanes. The case demonstrates the whole turnaround process followed by Givens in turning around the falling business through shrewd financial decisions, operational and marketing efforts while dealing with different disappointments and challenges. Overall, the case describes the entrepreneurial drives, which motivated Givens in formulating and implementing the Sugar Bowl’s business plan.(Zalosh, 2012).

Problem Statement

As the industry’s patterns and customers’ preference were rapidly changing due to an emergence of different entertainment activities and youth based bowling setups, Shelby Givens turned  the traditional bowling business from her ancestor i.e. West-lake Lanes into a youth oriented concept and an urban setting lounge, known as Sugar Bowl. The initial setup led to huge costs but Givens was hopeful that the revenues would cover the increased rent and costs. However, after the launch of Sugar Bowl; the company had to deal with different challenges and disappointments, including unanticipated staffing issues, availability of product substitutes, low employees’ morale, demotion, less productivity, high costs and the financing issues. Due to the business’s popularity, Shelby Givens was presented with a proposal of purchasing Sugar Bowl by a local investor, who claimed to start the company’s negotiations from $1 million, which would require her to sell her 25% stake and pay off her student loans. The other offer, received by Givens was to lead a group at a consultancy firm, which would offer a double salary to Givens. She needed to determine whether to continue the family’s legacy or should it be sold, as Givens was pondering over the hectic routine at Sugar Bowl.

Question (a)

The performance of the Sugar Bowl remained exceptionally well, which could be seen through the profit and loss statement of the fiscal year 2011, just after turning around the West Lake business. For instance: the revenue from the lane rental decreased by 9.8% in Q2 of 2011, but it increased by 67.8% in the third quarter and even in the fourth quarter. Similarly, improvements have been observed in revenues from the food and the liquor sales (See Appendix 1). The business’ turnaround results can be observed through the growth ratios calculated for the Sugar Bowl in 2011 by taking the West Lake 2010’s results as base year. The results show that the sales had increased by 307.5% after the business’s transformation.

Moreover, in order to assess the financial performance; the profitability ratio analysis has been conducted (See Appendix 2). The results reveal that earlier West Lake had a higher gross profit margin of 91.7% in 2010, but the Sugar Bowl resulted in lower gross profit margin, but the operating and the net profit margin of Sugar Bowl were greater than the initial days of the business, i.e. 8.9% and 3% respectively. For future, the average growth rate of last two quarters of the fiscal year 2010 have been taken to forecast the sales through the year 2012, and it is assumed that the sales for each segment will grow by 2% from 2013-2015……………………..

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