UCSD Case study questions
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You have just been hired as the CEO of a mid sized company called Delicious Kitchens that is operating in a new and exciting Ghost Kitchen industry. Delicious Kitchens sets up full service kitchens in run down sections of large cities and near universities for the sole purpose of leasing these kitchens to entrepreneurial Chef’s that want to cater to the food delivery market. The food delivery market is growing at 20 to 30% per annum and this growth is projected to continue for the next 3 to 5 years.
The industry is fast growing with a number of competitors such as Cloud Kitchens and United Kitchen and in fact Amazon has recently made a substantial investment in Deliveroo which operates some of these Ghost Kitchens in Europe. And Google is a part owner of United Kitchen.
Delicious Kitchens typically has ten to fifteen kitchen units per site that are leased to interested Chefs. DK determines the variety of the food items in each location, for example, you don’t want to have two Pizza Kitchens in the same location. The Chefs design, source and produce their own food concepts/brands for the ordering consumers. DK takes care of everything else for one monthly lease payment (a flat fee plus a percentage of sales). The lease payments chefs make to DK covers use of the kitchens, use of the Web sites you set up for them, the use of accounting and payment services/point of sales software and the cost of the delivery services you contract out usually to Doordash or another delivery app. These delivery aps usually take 25% of the cost of the food for their services. In addition you design and provide a comprehensive digital marketing plan for the chefs unique brands. It’s been shown that building and maintaining solid brands is critical to the success of the food delivery business.
Typically the chefs can open a kitchen in one of DK’s facilities for around $30,000 and under one month in elapsed time which compares favorable with the approximately $ 400,000 and over a year to set up an independent restaurant. Of course sales from a ghost kitchen are less than a full restaurant but the ongoing cost are much less than a full restaurant as there is no need for front of house staff (FHS) such as waiters, bus boys etc..
DK currently owns and operates 10 Ghost Kitchens/sites on the west coast of the US with each Kitchen having 10 to 15 operating Ghost Kitchens inside. These existing Kitchens each generate overall sales per annum of roughly $600,000.
The organization you’ve inherited is functionally organized and you have 7 direct reports, i.e., one for each function. The functions are as follows:
1- Site locations and kitchen buildout (operations)
2- Sales, Marketing and leasing (selling to Chefs and arranging contracts for leasing of the Kitchens)
3-Web Services (helping Chefs to set up their websites, process payments etc)
4- Digital Marketing and Brand Management (design, develop and execute a custom digital marketing plan for the Chefs and their brands)
5-Human Capital or Human Resources (hire, train and manage human resources/employees of DK, (the chefs staff their own kitchens)
6- Delivery management- contracting with delivery services on behalf of the Chefs.
7-Business Management (helping the Chefs to manage Quick Books and other Financial related matters).
The business plan you inherited from your predecessor calls for opening 10 new Delicious Kitchen sites each year for the next three years across the United States in or near large major metropolitan centers/cities and universities where demand for food delivery is expected to continue to grow. In order to accommodate your projected growth you will need to scale up some departments which means adding another 20 plus people per annum to the DK team.
After the first few weeks on the job (your honeymoon period) you are set to make a presentation to the board regarding your plans for the company. They are expecting answers to the following questions:
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