Introduction:

Levendary Caf is an established soup, salad and sandwich restaurant. The former CEO oward
Leventhal, was very stron! in "eepin! and utili#in! Levendary$s vision of deli!htin! the
customer, the restaurant evolved into a multi%billion dollar firm comprised of over &,'(( cafs
nationwide. oward Leventhal stated that )It$s wholesome soups, salads, and sandwiches usin!
hi!h *uality in!redients, and a commitment to service in a comfortable, friendly, environment
distin!uished Levendary Caf from other *uic" casual restaurants.+
Levendary Caf falls into the so called *uic" casual ,ulti%unit -estaurant !roup and provides
more wholesome choices then its *uic" service counterparts and a more self%service dinin!
e.perience than its casual dinin! restaurants.+ The company$s shared commitment to healthful,
wholesome eatin! was embolden in the company$s culture and reflected in its successful
advertisin! slo!an )Tasty /resh 0oodness.+ This was supported by the company$s move to use
only or!anic !rains in its breads and hormone%free naturally raised meats in its sandwiches.
1lthou!h oward Leventhal had done well with Levendary$s domestic e.pansion, analysts were
concerned with the lac" of future domestic endeavors and sou!ht to e.pand on a !lobal level.
Levendary then identified China as a !reat mar"et to e.pand into the increase in urban
population. There is an affluent middle class and also a lar!e increase of women in the wor"force
which e*uate in a !rowin! population trend to eat out.
To ta"e the lead in the China initiative, oward Leventhal selected Louis Chen. e comes with a
wealth of "nowled!e of the culture, consumers, local atmosphere, and business connections to
support Levendary$s e.pansion. Louis be!an modifyin! Levendary$s si!nature menu items and
the overall caf environments without consultin! 2.3. mana!ement which created friction
between Louis and ,ia /oster. 1s the e.pansion into China !rows Levendary$s new CEO ,ia
/oster is faced with a number of pressin! matters ran!in! from how to !et Louis Chen and his
team on pa!e with those in corporate head*uarters and to standardi#ation future Levendary Caf
locations so they match the domestic locations.
This article Levendary Caf: The China Challen!e addresses one of the ma4or issues facin! lar!e
companies today5 ow to successfully enter new forei!n mar"ets. 0rowth is essential with any
company and when they feel as domestic !rowth has be!un to mature, international !rowth
becomes imminent. There are many e.ternal as well as internal forces that affect such !rowth
and development. The forces in the forei!n environment are the same as those in the domestic
environment e.cept they occur in forei!n nations.
Case 6uestions:
6.7. What is a Multi-unit Restaurant (MuR) Business? How big is it? Is it a consolidated or
fragmented industry? What are its economics (use the orter!s Model to e"aluate #rofitability
in addition to the data gi"en in the case)?
Q.1 Response:
1 ,ulti%2nit -estaurant 8usiness is a franchise operation associated with a sin!le brand. )In
9(7&, the 2.3. restaurant and contract food service industry is pro4ected to be a :;;(.' billion
industry with <=(,((( locations. ,ulti%unit restaurants only ma"e up a small percenta!e of the
overall industry. The rest of the industry is mostly made up of independent restaurant owners.
This case shows how Levendary Caf sou!ht after the multi%unit restaurant. The company had
over &,'(( stores in which appro.imately two%thirds were franchised.
The restaurant and foodservice industry is se!mented and competition is usually fierce. There are
many opportunities for businesses to fi!ht for mar"et positions in this industry. -estaurants need
to understand this competitive environment to become profitable in the industry. If there isn$t a
clear vision of this then they will find themselves at a lar!e disadvanta!e compared to its
competition. 1 tool to understand and assess the competitive forces in an industry and
determinin! industry profitability is >orter$s /ive /orces ,odel.
These five forces include threat of new entrants, rivalry amon! e.istin! firms, threat of substitute
products or services, buyer power, and supplier buyer. The more powerful these five forces are in
an industry, the lower its profit potential. The threat of new entrants is lower due to the industry
bein! ris"y to enter. The rivalry amon! restaurants is hi!h because all firms offer the same type
of items ?food@ that is only different throu!h *uality or the concept of the establishment. 1lso
there is a hi!h threat of substitute$s products or services, as there are many restaurants to choose
from. Levendary Cafe does however focus on industry trends and the health conscious consumer.
8uyers tend to be wea" when they are fra!mented and no buyer has any influence on a product
or price and suppliers then to be powerful in this industry.
6.9. Identify MuR critical success factors in the $% and then discuss #otential institutional
"oids in &hina.
Q.2 Response:
Aue to the nature of the ,ulti%2nit -estaurant industry bein! hi!hly competitive, there are
numerous critical success factors. These such factors include an appealin! menu, controllable
food costs, effective mar"etin!, and the ability to meet customer demands.
In the 2nited 3tates Levendary Caf provides its customers with innovative menu variations.
This has resulted in loyal middle%class customer base that ma"e repeat visits and pay for the
premium prices to eat at the cafs. In China, the operations operate much differently than in the
2.3, because the ma4ority of the population will not visit the upscale cafes on a repeat basis. This
causes potential institutional void in China because the fact that the cafs have to be developed to
meet the local mar"et needs, which may hurt the brand as bein! a )premium+ caf as it is viewed
in the 2.3.
6.&. Why did 'e"endary decide to enter &hina Mar(et? How did its $% foundation match
against &hina mar(et needs? (com#are $% )s &hina mar(et in terms of customers and
o#erations)
Q.3 Response:
Aue to Levendary Caf$s domestic !rowth slowin!, the company sou!ht overseas e.pansion.
)Bith a population of 7.C billion people and annual 0A> !rowth of 7C.'D over the past decade,
China was ripe for investment+ accordin! to the article. The mar"et for fast%food and casual
dinin! rose 7;D from 9((< to 9(7( alone and reach :&C( billion, accordin! to consultin! firm
1li.>artners, of 3outhfield, ,ich. That compares with 7D !rowth for the 2.3. industry, where
sales reached :'E( billion in 9(7(.
Levendary established a clear priority and successfully pursued it by accommodatin! customer
re*uests. In the 2.3. mar"et, customer focus was on the affluent and mother. This caused
declined !rowth due to the ,idwest and 3outh not supportin! the demo!raphic that the
restaurant is tar!etin!. In China however, the population in the urban areas is risin! and a stron!
middle class. 1lso with the affluent and wor"in! middle class they are eatin! out more and more.
Levendary$s foundation was based on the principles that the caf would only use hi!h *uality
or!anic in!redients in its products, which were to be served in a comfortable, friendly,
environment. In the 2.3., the tur"ey sandwich and cheese soup were bi!!est sellers. Bhile these
items were meetin! the needs of consumers in the 2.3. mar"et, the same could not be said for the
Chinese mar"et.
Bhile only a select few of the 9& locations in China were developed to be li"e the 2.3. menus,
service standards and ambience of their 2.3. counterparts, Chen pursued hi!h levels of
customi#ation in others. /or instance, in the 9nd established China location in the Fu 0arden
area of 3han!hai, Chen opted for a ta"eaway counter rather than Levendary$s customary
comfortable seatin! areas found in the 2.3. locations. In the Cth caf located near the /orbidden
City in 8ei4in!, seatin! was offered to customers5 however, Chen fitted the establishment with
plastic framed chairs produced by a local furniture supplier as opposed to the classic wooden
framed upholstered chairs used in the 2.3.
Chen not only customi#ed the environment of the caf$s but also their menus. In the Cth caf,
Levendary$s si!nature salads were not offered and in the 9&rd location in a suburb of 3han!hai,
only one sandwich was offered in addition to a variety of local dumplin!s. Overall, Levendary
China had ta"en a far different, more tailored approach to servin! the local consumer when
compared to the cafs in the 2.3. operatin! under the !uidance of corporate head*uarters.
6.C. What are the (ey issues facing Mia *oster and what would you recommend her to
address these issues?
Q.4 Response:
Levendary Caf$s Aenver, CO head*uarters was established to support common operatin!
practices throu!hout the &,'(( !eo!raphically dispersed 2.3. cafs and ensure that customers
were served in similar ways while presentin! a uniform ima!e. 8efore ,ia /oster 4oined the
company, the former CEO mana!ed with a more hands%off approach to the Chinese operations
and he didn$t reinforce the need to ali!n with such 2.3. operations. 8ecause of this Louis Chen
used his own authority to develop the Chinese e.pansion of Levendary Caf. e used this
freedom to ma"e critical decisions without discussin! with 2.3. mana!ement or head*uarters.
This has made the Chinese operations not have the same uniform ima!e and potentially hurt the
company$s brand ima!e.
2nderstandin! that Chen has already adapted the Chinese based caf$s to conform to the tastes
and li"es of the local consumers, /oster should remind Chen of the firms promise to customers
that they will encounter the )same brand e.perience everywhere+. Aue to the fact Chen is the
only individual who maintains a close understandin! of the Chinese operations, ,ia should
strive to present a balanced plan in handlin! the Chinese operations !oin! forward. ,ia should
focus on efforts to enforce the 2.3. standard operation model and both ,ia and Louis should
a!ree to focus on ali!nin! the company$s core values and vision with the Chinese operations so
there can be a uniform ima!e for its customers.
,ia should have more fre*uent and periodic reviews of the Chinese operations. This will help
mana!ement to become familiar with the Chinese practices and cultures and help them develop
practices and procedures that can be implemented to establish consistency throu!h China.
1nother decision that ,ia will have to ma"e is the different ways accountin! is done by
Levendary Caf outlets in the 2.3 and the Chinese cafes. There is substantial and repetitive costs
associated with convertin! the Chinese accounts based on 2.3. accountin! standards. ,ia should
consider different methods li"e trainin! the Chinese based accountants with 2.3. 011>.
Conclusion:
/or Levendary Caf to succeed in China both ,ia and Louis have to find common !round to
benefit the company as a whole. /indin! a balance in "eepin! the brand ima!ine while also
findin! a way to incorporate the local mar"et into its menu and restaurant is critical for it to
succeed in China. There are challen!es ahead of the company but with the current mana!ement
the company is bound to succeed in China and !row throu!hout the re!ion.