Business Failure

“Eat Here No More”

Is Going Overseas!
What is “Eat Here No More” ?

Eat Here No More is a food chain in the USA

specializing in American burgers and steaks.
The chain is well known with its logo of a
smiling cow under the slogan of "Pure Beef
We Serve, Pure Beef You Eat".
Financial Arrangement
Interest rate on the US dollar and the
Japanese Yen were relatively low at that
time. The CFO took two loans to fund the
projects, one in Japanese yen and one in US
dollars. The Yen loan was in amount of
¥3,175,000,000 at a fixed interest rate of
1.5%, and the amount of Dollar loan was
$15,000,000 at LIBOR plus 2%. The dollar/yen
exchange rate was ¥127 to 1$ and the LIBOR
was 3%.
The Financial Failure

 The Japanese Yen Loan

 The American Dollar Loan

The Japanese Yen Loan

Given:

1. Loan value: ¥ 3,175,000,000

2. Interest rate: 1.5%
3. Exchange rate at Jan 2007: 127 ¥/$
4. Exchange rate at Jan 2008: 120 ¥/$
The Japanese Yen Loan

Expected loan settlement after a year:

 Interest Rate:

1.5 % X ¥ 3,175,000,000 = ¥ 47,625,000

 Value of Loan in Yen:

¥ 3,175,000,000 + ¥ 47,625,000 = ¥ 3,222,625,000

 Value of Loan in Dollar:

¥ 3,222,625,000 / 127 ¥/$ = $ 25,375,000

The Japanese Yen Loan

Actual loan settlement after a year:

 Interest Rate:

1.5 % X ¥ 3,175,000,000 = ¥ 47,625,000

 Value of Loan in Yen:

¥ 3,175,000,000 + ¥ 47,625,000 = ¥ 3,222,625,000

 Value of Loan in Dollar:

¥ 3,222,625,000 / 120 ¥/$ = $ 26,855,208

The Japanese Yen Loan

The Result:

 The loss due to changing Exchange Rate:

$ 25,375,000 - $ 26,855,208 = $ (1,480,208)

The American Dollar Loan

Given:

1. Loan value: $ 15,000,000

2. Interest rate: LIBOR + 2%
3. LIBOR at Jan 2007: 3%
4. LIBOR at Jan 2008: 6%
The American Dollar Loan

Expected loan settlement after a year:

 Interest Rate:

5 % X $15,000,000 = $ 750,000

 Value of Loan in Dollar:

$ 15,000,000 + $ 750,000 = $ 15,750,000

The American Dollar Loan

Actual loan settlement after a year:

 Interest Rate:

8 % X $ 15,000,000 = $ 1,200,000

 Value of Loan in Dollar:

$ 15,000,000 + $ 1,200,000 = $ 16,200,000

The American Dollar Loan

The Result:

 The loss due to changing LIBOR rate:

$ 15,750,000 - $ 16,200,000 = $ (450,000)

Culture Mistakes

• Selecting markets with high culture differences

than home market with no plan to minimize
culture risk.
• Providing the same menu in the two countries
ignoring the target market demand and food
acceptance in the target market.
• Using the Smiling Cow logo in India, ignoring that
India worship Cows
• Opening in low business season.
• Weather challenges were not studied(monsoon )
Business Mistakes

Location study:
Accepting first 20 locations offered.

Manpower quality:
Hiring first applicants not the selective and
qualified workers

Market Demand:
No study for target market demand based on the
idea that success business at home can succeed
Team Members
Mahmoud El Badry
Tamer El Gohary
Dina Maher
Tarek Saad
Mohamed El Sheik