The Greek Cosmobob
Executive Summary The Greek Cosmobob People from all over the world immigrate to places like Canada, not for a change of scenery but for the opportunity of a better life. Cosmo Panetta did just that in 1958, leaving his homeland of Greece. Since his move to Canada, Panetta has opened two successful businesses, a variety store and a drive-in/take-out restaurant. Panetta now has several business opportunities to take a popular menu item, the Cosmobob, to the mass-market. Panetta has some important decisions to make on the future of his family business.
His options are to grow his company by opening a third drive-in/take-out restaurant, manufacture and market the Cosmobob to the food service industry, manufacture and market the Cosmobob to the retail industry, or not grow at all. Panetta and his family settled in Niagara Falls, Canada in 1958. In 1968, Panetta seized the opportunity to own his own business and purchased a small variety store which was sold to a convenience chain in 1975. Panetta was them able to purchase a drive-in/take-out restaurant which he named Cosmo’s Drive-In.Cosmo’s Drive-In was located on Lundy’s Lane in Niagara Falls, just four miles from the Falls and the Clifton Hills area, which is where most of the tourist accommodations are located. In 1979, Panetta expanded his business with the purchase of a second drive-in restaurant on Thorold Stone Road, a main industrial thoroughfare in Niagara Falls. Niagara Falls area attracts over 13.
The Greek Cosmobob Essay Example
4 billion visitors each year adding to the customer base of an area with over 79,000 year round residents. Panetta credited his success to three things, a good location, high quality product, and a fair price.Cosmo’s Drive-In was incorporated in 1979. Cosmo’s Drive-In offered a limited menu selection to preserve efficiency and quality. Although other drive-in/take-out restaurants were diversifying their menu options with many specialty products, Panetta only added one, the Cosmobob. The Cosmobob is a pork-based souvlaki or shish kabob, which Panetta developed in 1979. Panetta’s Cosmobob was small cubes of seasoned pork mounted on a bamboo skewer and served with Cosmobob sauce.
Panetta wanted his product to stand apart from other lower quality souvlaki on the market and therefore named his product the Cosmobob.Panetta had two potential options for a new facility. One was an old mushroom factory located in Grimsby, Ontario that would require $100,000 to $120,000 in improvements to bring the facility up to provincial health standards. The second was an old dairy plant in Niagara Falls that would only require $30,000 to bring the facility up to provincial health standards. To bring either facility up to par to pass federal government inspections would cost an additional $30,000 to $40,000 along with an additional $80,000 for equipment.Total rent for the first three years for old mushroom factory would total $83,300 and for the old dairy plant would be $103,200 a significant difference of $19,900 more. However, due to the lower cost of upgrading needed at the old dairy plant made it a more feasible choice between the two.
Renting the old dairy plant, which is located in Niagara Falls, would also mean Panetta could maintain his current staff that were already trained and ready to go. In February 1999, Panetta was approached by a commercial developer looking for a fast food restaurant to locate into his new mall.Rent would be $1600 a month with an annual rent increase of inflation plus one percent. Rent for the first three years would total $59,384. Panetta would also need to spend approximately $60,000 for improvements and equipment. An average of 500 cars would visit the mall and Panetta felt that it would do about 60 percent of the Thorold Stone Road sales, matching it within two years. Panetta also consider entering the food service market on a provincial or national scale.
This would require him to employ a salesperson at $40,000 per year (salary plus expenses) or a food wholesaler, who would require a 20 percent margin on the purchase price.A salesperson would have to sell 2742 cases to match the breakeven point through a food wholesaler who sold the same amount of cases. For Panetta each case sold by the salesperson after the 2742 cases would provide a profit of $17. 76 per case but if sold by a food wholesaler would provide only a profit of $14. 59 per case. If Panetta could sell 600 cases per month in the local market, a salesperson should be able to sell much more than that if taken to the provincial or national market. The other option Panetta has to consider is the retail market.
The retail market is highly competitive industry and expensive to introduce a new product to the retail stores. With a typical retail store carrying about 15,000 items, shelf space is at a premium and the retail stores required $20,000 placement fee per supermarket chain. In addition, they would require price discounts, samples, free food allowances, and cooperative advertising just to get new product acceptance. Trade promotions could run as high as 15 percent of manufacturer’s selling price and consumer promotions could easily exceed $500,000 the first year.Along with good promotional support and guaranteed deliveries, supermarket chains would require a 25 percent margin on retail selling price. Panetta already has two successful restaurants being run by himself and his son Joe. Although the start-up cost and rent is a lot cheaper, an additional restaurant location would become a major burden on both Panetta and his son Joe to manage.
The retail market has the most potential for profit in the long run, however due to the high cost of start-up in major supermarket chains along with all the additional placement fees, promotional fees, etc.