EXECUTIVE SUMMARY

Porcini’s Inc, a full-service chain restaurants operated 23 locations, employed 954 people and
generated $94.3M revenues. It had begun in 1969 as a family-owned restaurant in Boston’s
North End. Tom Alessio, marketing vice-president came up with an idea of opening limited-
menu outlets, Pronto. Porcini’s Pronto concept was to target customers on interstate highway
exits with table served meals at the reasonable prices segment not saturated potential to grow
beyond industrial average. They had 3 options for growth: Franchising, Syndication and
company owned & operated. Pronto would open new avenue for growth but there were
uncertainities.

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SITUATIONAL ANALYSIS

Porcini's, Inc. was a family-owned restaurant in Boston's Italian-American neighbourhood that

opened in 1969. Porcini's stood out among its competitors because of its focus on quality.
Porcini's expanded to 23 sites by the end of 2010. When the domestic market for full-service-
chain restaurants was searching for development in January 2011, Porcini's vice president of
marketing, Mr. Tom Alessio, came up with a proposal for Porcini’s domestic expansion.
He urged the company's senior management to consider opening Porcini's "Pronto." Because the
majority of competitors in this sector were low-end or fast-food restaurants, Mr. Alessio
believed that Pronto would provide them an advantage in the competition, as there are numerous
eateries along the highway, but only a few that serve high-quality food and services. Mr.
Alessio, along with vice president of operations Kurt Jensen, chief chef Mariana Molise, and HR
director Wanda Halloran, laid forth plans for achieving Pronto's objectives and meeting or
exceeding the company's 6% hurdle rate.
Fast-food, single-location full-service restaurants, and full-service chain restaurants were the
three major divisions of the US restaurant industry. Porcini and Pronto are included in the last
division. In 2010, senior management considered a variety of options, including carryout stores
and catering, but were unable to pursue them due to their brand image or lack of expertise in
those segments. Mr. Alessio came up with Porcini's Pronto as an alternative after studying
market trends. It has crucial characteristics such as interstate highway exit locations, Porcini's
well-known quality food and service, and a limited choice of selected beer and wines.
Subsequently, Mr. Alessio was given permission to form a team, develop the concept further,
and was granted a budget to hire a real estate agent and a market researcher. The three-person
team proposed purchasing two existing restaurants in different locations as test beds for the
operational strategy and menu offerings. If it proves to be a success, they can move forward with
a more comprehensive strategy.
Furthermore, senior management intended to examine all conceivable alternative growth
opportunities before making a decision. They couldn't take massive risks in their primary
business, but they could take a calculated risk with Pronto. With them, they had three options:
"business own-and-operate," "franchise," and "syndication." Each of these options had
advantages and disadvantages, so Mr. Alessio had to choose a Pronto approach that was both in
line with the objective and provided potential for growth.

PROBLEM STATEMENT
To grow Porcini’s business at greater than 6% hurdle rate?

DECISION OBJECTIVES

1. Maintain Porcini’s food quality and service standards.

2. Pull Porcini out of a state of saturation.
3. Expand business and establish as a global brand.
4. Meet the organization’s limited access to capital criteria.

OPTIONS

1. Company owned and operated

2. Franchising
3. Syndication
4. Continue with the ongoing business model
EVALUATION OF OPTIONS

1. Company owned and operated

Porcini would be able to buy prime real estate, borrow the funds necessary to build and
equip each new Pronto, and then operate them.
Pros
 The business and operations of the firm will be completely under the control of
the company.
 It will assist the company in maximizing its vision statement as well as its
mission.

Cons

 In order to purchase property and construct facilities, the business will incur
significant transactional and investment costs.
 In the restaurant and fast food industries, the company must compete against
well-established giants.

2. Franchising
A franchise is a commercial arrangement in which an individual "franchisee" pays a fee
to the franchisor in exchange for the right to use a trade name.
Pros
 It will result in lower building costs as well as easier site acquisition.
 It will enable the company to grow faster while spending less money. It will also
assist Pronto in reaching out to different market segments, increasing brand
awareness.

Cons

 There is a danger of failure since sustaining the quality of goods and services will
be tough.
 The new business may have an impact on Porcini's already-established
reputation.
3. Syndication
The company finds and buys a number of locations, constructs and furnishes a facility on
each, and then sells the portfolio of properties to an investor group—or the original
landowners—to recuperate and recycle its cash into another syndication venture.
Pros
 The corporation will have full access to the business operations and will be able
to move property ownership to investors with minimal financial outlay.
 It will also assist the organisation in expanding its activities.

Cons

 Several transactional costs, such as investment bankers, lawyers, and closing

costs, must be borne by the company.
 The company would have a difficult time obtaining good investors due to its poor
brand image.
4. Continue with the ongoing business model

Porcini might use the same business model and extend their stores from 23 to a much
larger number, similar to how Olive Green did.

Pros

 They can expand more quickly because they already have experience with that
business model.

Cons

 Because the new outlets would be setup at prime locations, it would be an

expensive method of expansion.
DECISION

According to the options analysis and decision objective matrix, option 1 “Company owned and
operated” suits the best among the pool of options available as it supports all the decision
objectives. Porcini's will run and maintain food and service quality standards as all the control
remains with the. Porcini's preferred real-estate location will be chosen in order to strategize how
to reach the international market while avoiding saturation phase. Borrowed capital can be used
to circumvent the limited capital constraint without any outside involvements.

ACTION PLAN

STEP 1- Purchase prime real estate location

STEP 2- Borrow the capital needed.

STEP 3- Control the operations according to the quality required.

STEP 4- Once an outlet performs well, Porcini’s can go on to open new outlets in further prime
locations.

CONTINGENCY PLAN

In case of contingency, Porcinis can go ahead with option 2 i.e. franchising. This option fulfills
all the required goals of expansion and setting up of Pronto outlets. Even though, it requires a
higher amount of budget than the original action plan. It qualifies as the second best option. We
observe this from the option objective matrix shown in the Exhibits.
OBJECTIVE MATRIX

Objective 1 Objective 2 Objective 3 Objective 4

Option 1 Yes Yes Yes Yes
Option 2 No Yes Yes Yes
Option 3 Yes Yes Yes No