[Café

Kenya
Case
Analysis]

ENTR 5211- SPRING ‘22

DR. ASHRAF SHETA

By
[Mona AbdelMonsef]
[900072602]
Table of Contents
Table of Contents ........................................................................................................................................... 2
Gaining Familiarity ......................................................................................................................................... 3
Key players ..................................................................................................................................................... 3
Timeline of Events ......................................................................................................................................... 4
SWOT Analysis ............................................................................................................................................... 5
Available Alternatives .................................................................................................................................... 6
Pros and Cons for Each Solution .................................................................................................................... 6
Final Decision ................................................................................................................................................. 8
Action Plan ..................................................................................................................................................... 8
Gaining Familiarity

Cafe Kenya was founded in 2011 in central Nairobi near the central business district by Nekesa
Kuria. Café Kenya concept was to offer quick food that is local, healthy and Kenyan combining
this with authentic Kenyan teas and coffees that mainly serves young urban professionals. What
is unique about the chain was their constant innovation to their menu, which also changed
seasonally, and always using the freshest local ingredients. With a special focus on customer
experience, the first Café Kenya that opened focused on breakfast and lunch for office workers,
however, in order to serve customers while they are commuting back home from their work they
provided a convenient smart phone app for ordering pick-up-to-go service. Café Kenya also
focused on customer retention by launching a loyalty program, promotions, and customer
persona-specific deals,

Café Kenya had been organically growing without raising any financing except the $100,000
secured from a Goldman Sachs ‘10,000 Women’ investment fund, besides $80,000 by founder. It
had 28 outlets in Kenya’s largest cities, 21 of them franchised. As shown from its statements, the
company had the cash flow, profit and the capable management team to accelerate this growth
within Kenya and even further to larger cities in adjacent countries. Kuria in 2019 faced a not so
easy dilemma of choosing between 3 options as a strategy for her brand’s growth.

Key players
Nekesa Kuria- Founder and sole owner.
Her drive and competency were pivotal in Café Kenya’s success. With an academic background
that not all girls get the privilege to have in Kenya, she paved the way for her entrepreneurial
journey by learning both marketing and finance. Her corporate experience in Nestle just after she
graduated built her business acumen and allowed her to have a well-rounded approach in
managing in business from Finance, to Marketing, to Operations, to HR and leadership. Also, her
exposure to the tea industry through her family business was a strength point in the industry she
started operating in.

Kuria’s Father- Mawangi

As an owner of a tea processing facility, he was Kuria’s first inspiration to have something of her
own. His connections with suppliers helped Kuria to secure the freshest local ingredients and to
have an overview of this industry's dynamics. He would indirectly influence Kuria’s decisions as
he raised her and supported her to be the leader that she is today.
Kuria’s Brother- Joseph
Originally a chef at a better Nairobi Restaurant and moved to operate Kuria’s business
overseeing the food contracts and the purchasing activities. An essential part of Café Kenya’s
success was the innovative menu and the fresh ingredients which Joseph was responsible for. He
also worked with all franchises and suppliers to ensure the unique experience Kuria always
wanted for her brand. With an appetite for growth and expansion, and confidence in the
operations he oversees, Joseph would endorse rapid expansion plans to Kuria.

Lydia Massai- Early Franchisee and Trustee

She worked under Kuria at Nestle and always wanted to be an entrepreneur. No doubt that
Kuria's drive inspired her to open her own first franchise of Café Kenya and continued to have 2
more stores. Kuria depended on Lydia to run her franchising model and to start such an
important part of Café Kenya’s journey. Lydia might not influence Kuria’s decision, but her
presence with her in whichever alternative certainly makes her more confident and enhances the
feeling that she can depend on her managers to pursue the successful implementation of her
visions.

Timeline of Events
Main Challenges Faced
As a fast-growing food chain, Kuria faced many challenges during her successful journey, to
mention some:

1. Managing her costs very wisely by having control over her operations and purchasing.
All of this without compromising quality, which is a pivotal competitive advantage for
her brand.

2. On the side on HR and talent management, Café Kenya faced a big challenge both in
finding talent and retaining them. Entry-level jobs in restaurants usually have a very high
turnover, which wouldn’t serve Kuria’s vision in creating a friendly and warm customer
experience to the extent that her personnel know customers by name and know their
preferences. Also, maintaining her operations with no drawbacks or downtimes was
essential in building the trust of her customers who are professionals and depend on her
brand to fulfil their needs.

3. Worth mentioning that the nature of Franchises business is not very easy. To have
launched 28 locations and to keep the operations and experience on point with such a
profitable performance was definitely a challenge on Kuria’s plate.

SWOT Analysis
Weaknesses
Strengths
1. Young workforce is the majority if
1. Successful Operations Model.
staff.
2. Unclouded vision that directs the 2. High turnover among entry level.
company and encourages employees.
3. One owned store to serve the nearby
3. Management focuses on Human franchise is not sustainably efficient.
Resources by training and
4. Weak senior management line
compensation.
resulting in CEO involved in all
4. Great focus on customer experience. details.
 Threats
Opportunities
1. Big Fast-food brand entering the
1. Partnership with corporations to
market with a faster growth speed and
provide catering inside companies.
ability impacting market share.
2. Create a Co-working space inside
2. Economic conditions that impact
Café Kenya to serve SMEs and
suppliers pricing or quantity would hit
Freelancers.
a competitive edge to the brand.

Available Alternatives
Café Kenya had 3 alternatives to pursue their growth journey:

1. The franchise strategy already adopted could succeed in expanding into additional 20
stores (5 owned and 15 franchised) in the coming 5 years.
2. A private investment firm urging to expand more quickly and widely into metropolitan
areas in nearby countries in exchange for ownership.
3. A major fast-food company for 100% outright purchase of her company at a price of over
7 times her EBIDTA.

Pros and Cons for Each Solution

Continue with current Franchise Strategy for growth
1. A Steady growth that Kuria already
masters.
2. Allowing Kuria to continue
1. Could lose a significant market share
empowering women by giving
that a big brand can acquire if it
franchise management to them.
entered the market before the 5 years
3. Ensuring Kuria to be on top of full
end.
operations and focusing on details
2. Losing a good financing opportunity.
which she prefers and also gives a
competitive edge to Café Kenya.
 Private firm financing rapid growth in exchange for equity
1. Opening 80 more franchises and 20
more company-owned stores in 5
1. Kuria would lose her involvement in
years.
the details as the enterprise will be too
2. Visibility to Kuria which will allow
large.
her to inspire more women.
2. $3 Million for 30% ownership is low
3. Kuria’s annual salary would be
looking at the promising financial
$200,000.
statements of Café Kenya: Current
4. Growth rate in EBIDTA is 24% more
EBIDTA is $1M. And while $2M out
than continuing with current model.
of $3M will be invested by the firm in
5. Private firm is owned by women
stores (which the firm will still own
believing in her vision which is
30% of) only $1M of cash will go to
promising for good agreement in
Kuria for selling the shares.
managing the brand between them and
Kuria.
Selling company to fast-food brand at a huge price
1. Current Sales are around $11M yearly
and expected to increase in the
upcoming 5 years. 0.1% flat rate of
1. More than $7M in cash.
royalty on sales is dependent on how
2. Expanding to 1000 stores and total
the new company will run the chain
revenue to increase to 500M.
and is also low in comparison to the
3. $300,000 as salary to Kuria for 5
cash given in return to selling the
years.
whole brand.
4. Kuria will have the chance to start a
2. Kuria would be the company face
new business to continue her life
despite having to input in the decision
vision of empowering local women.
making or the company strategies
anymore. This can jeopardize her
goodwill and will affect any other
brand that she intends to start.
Final Decision
I would advise Kuria to reject the 2 offers. The current strategy for Franchise that she is adopting
is going very well despite all the challenges. Growth is certain, maybe not at the same rates
offered but this gigantic quick expansion wasn’t part of Kuria’s dream to start with. She is
currently leading a very profitable business that allows her to fulfil her life mission and also
grow financially to the extent of actually attracting big investors to give her the other two offers.
However, the consequences that come with both offers are going against Kuria as a person and
against Café Kenaya’s benefit.

Action Plan
1. Create a 5-year plan for the growth of café Kenya.
2. Set a financial goal for Cash liquidity in the upcoming 3 years.
3. Optimize operations to further cost reduction.
4. Launch “Cafe Kenya Academy” as a retention tool for employees especially in young
age. This will provide a solution to the turnover challenge and also help developing the
talents from within Café Kenya.
5. Within the academy, design a program for senior managers so Kuria can have the trust to
gradually lose the intervention in small details and depend more on her senior
management staff.
6. Set a strategy for financing options to support growth, exploring loans and bonds as
options.