Posted: May 25th, 2022
Bagel Express Case Study
The Case study focuses on presenting the milestones that Bagel Express dealt with since its establishment, and on presenting the firm’s performances and opportunities that came along its history.
Bagel Express was established in 1991 by a young student whose passion for bagels exceeded normal standards. David Sinclair’s business plan slightly failed to forecast initial financial coordinates, since Bagel Express had been trading profitability by the second month since it was established. Also, start up costs exceeded the initial forecast by 60%.
Sinclair estimated that his bagel bar would buy daily fresh baked bagels that would be accompanied by a range of fillings, desserts, fruit drinks, and fresh coffee. Bagel Express’ differentiation would also be based on interior design.
The location of the business was an important matter for its owner. Sinclair had to make do with a space half of what he had imagined in his initial forecast. Such a space could not support the work schedule desired by Sinclair.
Bagel Express’ customers were also a part of the initial plan that could not be able to be applied. The targeted customer segment began to be represented by office workers, mostly secretaries and typists. As a consequence, Sinclair had to reduce the price of his bagels, in order to suit the new type of clientele.
Bagel Express’ financial figures in the first operational year were: turnover
178,766, cost of goods sold
65,336, operating costs
38,594 general and
40,000 labor, retained profit
34,836 representing 19%.
Any business requires a SWOT analysis that allows for further interpretations on the opportunities of the business, and possible risks that might emerge in the future. In bagel Express’ case, the SWOT analysis revealed following aspects:
In any kind of business the most important asset pis represented by its human resources, which exceeds the importance of technical and financial resources. In this case, David Sinclair’s passion for baked bagels has significantly influenced the development of Bagel Express through the dedication proved by Sinclair.
Another strong point is based on the fact that Bagel Express provides its customers fresh baked products. There are no competitors on this market segment in the areas where Bagel Express intends to activate. This would allow the business to gain sufficient market share that would further support a possible expansion of the business.
Also, Bagel Express is able to attract an increasing number of customers due to the extended range of products it provides. The bagel bar’s numerous filling types and diverse desserts are able to basically satisfy each customer’s tastes. The speed of service has always been a quality that Bagel Express has exploited.
The initial financial prospects could not be met. The reason behind this situation relies on the fact that Sinclair was forced to reduce the prices of his bagels because of a change in the targeted segment of customers. As a consequence, revenues were lower than expected.
The selected location of the business was not how the business owner had imagined, which practically changed a series of details that interconnected with the location issue. Also, this situation required extra costs, like those required for the interior design specialist.
Also, the opening hours detailed in the initial business plan could not be respected. They had to be modified in order to suit the selected location of the business and the new customer segment that Bagel Express addresses.
The financial figures presented in the case study reveal the fact that Bagel Express is a successful business. However, after including extra depreciation, interest charges, and taking into consideration the fact that the business was financed by overdraft borrowings, one may observe that the business lost money in its first year of activity.
The most important opportunity is represented by the fact that property boom in London is no longer a problem and premises reach available prices.
Bagel Express is a successful business and this is probably quite clear to the bagel bar’s competitors. Sinclair’s idea could be put into practice by new or existing competitors with higher financial strength. Given the Bagel Express’ current situation, such increased competition could severely affect the bagel bar’s future activity.
Given the circumstances presented by the SWOT analysis above, Bagel Express’ owner has two options:
Consolidating the business
Expanding the business
Consolidating the business is a more financially secure option for Bagel Express. It would also require less effort from the owner of the business. Given the fact that the business seems to have lost money in its first year of activity, consolidating the business seems a more logical decision in this situation. However, the business could lose ground in the favor of other competitors that would take advantage by the opportunities that the market provides.
Expanding the business is a riskier option, but it would also account for increased revenues, on medium and long-term especially. The market is in full development process and Bagel Express should take advantage of this growth opportunity. If Bagel Express tries to expand when the market is already saturated, the business would not be able to reach the potential its owner has in mind.
Although it is considered a riskier option, it is recommended that Bagel Express implements the variant that consists in expanding the business. The market conditions are optimal, given the market growth process mentioned above.
Also, the prices for premises in London are decreasing, which will make it easier for the business’ owner to find suitable and affordable locations for possible bagel bar outlets. It is clearly stated in the case study that the business owner and his associates have the financial possibility of continuing to support the business. Therefore, it is recommended to take advantage of this possibility and take the risks involved by expanding the business. Bagel Express cannot afford for other competitors to gain ground by taking advantage of the above presented market conditions.
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