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Spuyten Duyvil Turning Entrepreneurial Momentum into Future Growth Case Solution

Solution Id Length Case Author Case Publisher
1174 615 Words (3 Pages) Ming-Jer Chen, Brian Kolle, Stephen Barbour Darden School of Business : UVAS0124
This solution includes: A Word File A Word File and An Excel File An Excel File

Spuyten Duyvil is a beer specialty beer bar that focuses on a special type of customers, the ones with flair and taste for rare European breeds. In late 2002, two business partners opened this bar with a specific vision and strategy. It was opened in ‘Williamsburg’, and it had a well-defined market and business plan. The major revenue generation and the leading marketing strategy focused on the bear and the minor, sideways or the part-time focus was on the antique business. Now is the time for both partners to decide about the growth prospects of the business because it is running successfully and it demands extension both in terms of revenue and business diversification. The partners have five available options and they should select the appropriate one that suits them both financially and now- financially. Let’s examine all the options one by one and present appropriate recommendations as to what growth strategy or a combination is best for them.

Following questions are answered in this case study solution

  1. Introduction

  2. Growth Options

  • Retail Location

  • Another Duyvil

  • Franchising

  • Beer Book

  • Barbecue

  1. Recommendation


Case Analysis for Spuyten Duyvil Turning Entrepreneurial Momentum into Future Growth Case Solution

2. Growth Options

i. Retail Location

If you consider this growth option, the best thing that arises pertains to the fact that initial investment is real meager. On the other hand, the sales volume will be tripled as per assumptions, but the gross margin would be decreased by half of the current percentage. Also, let’s take 2004 as the base year and calculate the gross margin to the total cash flow ratio. The analyses of the first-year operations indicate that the return on initial investment will stand at 3.3X. However, the business risk will not be diversified, and legal issues can also play their part.

ii. Another Duyvil

This option pertains to the mere extension of business in another suitable location. A new location should be chosen to accommodate the whole customer base. The projections of these growth options are not very explicit except for the fact that if Manhattan is chosen as the potential location, the revenues will be doubled. However, there are legal issues pertaining to this option. The partners cannot sublease their current property. Additionally, there will be a significant operational risk accompanied with the high rent in the downtown area.

iii. Franchising

This option will provide the right to sell the relevant products and services of Spuyten Duyvil to another party that will, in turn, grant a royalty to the partners. If one assumes that the revenue growth rate and total revenue to the total cash flow ratio of 2003-2004 will remain the same for the next five years, then the projected cash flows are attractive and lucrative. But this is a risky option in the sense that the service quality and franchise success are not guaranteed.

iv. Beer Book

This option looks to be a very lucrative option because of zero real cash outflow. The payment schedule is also acceptable in the sense that, in fact, no money leaves the pocket. Let’s consider the original business investments the time zero cash outflow. In this case, the IRR of this option comes out as 13.3%.

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