1. Below is financial information for two restaurant retailers. Poppers Company operates an innovative retail bakery-cafe business and franchising business. At the end 2010, Poppers had 132 company-owned and 346 franchise-operated bakery-cafes. Poppers located most of their unique bakery-cafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Poppers and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Company-operated retail stores.

Selected Data for Poppers Company and Simmer Corporation

(amounts in millions)

	Simmer	Poppers
Sales	$4,076	$278
Cost of Goods Sold	1,686	97
Interest Expense	0	0
Net Income	268	22
Average Inventory	303	4
Average Fixed Assets	2,163	130
Average Total Assets	2,472	166

Required:

a.	Compute the rate of return on assets for each firm. Disaggregate the rate of return on assets into profit margin and assets turnover components. The income tax rate is 35%.

b.	Describe the likely reasons for the differences in the profit margins and assets turnovers of the two companies.