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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A recent school graduate, Shelby Givens started rescuing her family’s outdated and under-performing cowling alley, just after returning to hometown in Raleigh, North Carolina. Despite of turning out the near-bankruptcy business into profitable business within just nine months and resolving high costs and operational inefficiencies related issues, the long term viability of the business got affected by the shifting industry patterns. As a result of which, Givens turnedout the family’s traditional business into different and modern youth oriented concept and am urban setting lounge, known as Sugar Bowl. Given expected to generate handsome revenue s from its 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 driven, which motivated Givens in formulating and implementing the Sugar Bowl’s business plan(Zalosh, 2012).

Problem Statement

As the industry patterns and customer preference were changing due to emergence of different entertainment activities and youth based bowling setups, Shelby Givens turnout the tradition bowling business from his ancestor i.e. West-lake Lanes into a youth oriented concept and am urban setting lounge, known as Sugar Bowl. The initial setup led to huge costs but Givens was in hope 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 employee morale, demotion, productivity, high costs and the financing issues. Due to its popularity, Shelby Givens was presented with a proposal of purchase of 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 out 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 has 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 is increased by 67.8% in the third quarter and even the fourth quarter. Similarly, improvements have been observed in revenue from the food and the liquor sale (See Appendix 1). The business turnaround results could be observed with the growth ratios calculated for the Sugar Bowl in 2011 by taking the West Lake 2010 results as base year. The results show that the sale increased by 307.5% after the business transformation.

Moreover, in order to assess the financial performance the profitability ratio analysis has been conducted (See Appendix 2). The results reveal that West Lake earlier 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 was greater than the initial days of 8.9% and 3% respectively. For future, the average growth rate of last two quarter of fiscal year 2010 has been taken to forecast the sales through the years 2012, and it is assumed that the sales for each segment will grow by 2% from 2013-2015………………………..

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