For future growth, the company has three options.

The first option is to open company-owned

restaurant. The Pronto Restaurant will be franchised as the second option. The third option will be
based on syndication.

Alternative 1:  Stores directly managed by the company

Pros:
 Complete control over business operations
 Food and Service quality would not be compromised

Cons:

 Expansion would require greater amount of time as company would only be able to open outlets
per year

Initial Investment = $2.1 million

No of site = 2
Expected annual revenue = $2.4 million/ site
Profit Margin = 6%

Company owned
Revenues 2400000
Profit Margin 6%
Profit Per site 144000

Alternative 2:  Franchise Model

Pros:

 Franchising business is related to the parent company thus could derive benefits from an
established brand
 Will result in lower building costs and easier site acquisition.
 Less capital would be required to help the company grow
 Franchising would lead to more brand awareness and brand recognition of Pronto

Cons:

 Maintaining quality of goods and services would be difficult

 May affect brand reputation
 Parent company will lose the operational control
Initial Investment = $1 million
Expected annual revenue = $2.4 million/ site
Franchising fee = 5% of revenues
Profit Margin = 2%

Franchised
24000
Revenues 00
Profit Margin 2%
Profit Per site 48000

Alternative 3:  Syndicate Model

Pros:

 Parent Company will have full access to the business operations

 Capital outlay would be limited
 Prime locations could be acquired

Cons:

 Involvement of Investors would lead to transactional as well as closing costs

 Difficulty to find good investors

Initial Investment = $2.5 million

Expected annual revenue = $2.4 million/ site
Profit Margin = 4%

Syndicated
24000
Revenues 00
Profit Margin 4%
Profit Per site 96000

Conclusion:

  2011 2012 2013 2014 2015 2016 2017 2018

Company owned                
No of Sites 2   2 2 2 2 2 2
 Cumulative Sites 2 2 4 6 8 10 12 14
Investment(million) 2.1*2   4.2 4.2 4.2 4.2 4.2 4.2
Profit(Million) 0.29 0.29 0.58 0.87 1.16 1.45 1.74 2.03
Syndicated                
No of Sites     2 3 3 4 4 4
Cumulative Sites     2 5 8 12 16 20
Investment(million) 2.5              
Profit(Million)     0.19 0.48 0.77 1.15 1.54 1.92
Franchise                
No of Sites     4 4 4 5 5 6
Cumulative Sites     4 8 12 17 22 28
Investment(million) 1              
Profit(Million)     0.19 0.38 0.58 0.82 1.06 1.34

There will be 14 company owned stores, 20 syndication stores, and 28 franchising stores developed until
2018.

From the above financial analysis we could see that by the end of 2018, company owned stores would
be earning around $2 million profit with just 14 outlet whereas in the other alternatives the ownership
of the stores would not be with the parent company as well as the profit earned is also less than $2
million.

So our recommendation is to open company owned outlets