Journal of Business Case Studies - Third Ouarter 2006 Volume 2, Number 3 Cafe BUoux: A Small Business Marketing Challenge Chong "Joanna" S.K. Lee, (E-mail: J..e@csueastbay.edu), California State University, East Bay INTRODUCTION t was five minutes to ten o'clock on Wednesday morning, April 7, 2004, and Jennifer Coleman was anxiously driving back and forth on B Street in Hayward, looking for a restaurant called Cafe Bijoux. Jennifer had a ten o'clock appointment with Julie Sanders and Mary Carter, the managers and co-owners of Caf6 Bijoux but there was no visible sign of the restaurant. After circling around several more times, Jennifer finally spotted a small sign in a window that said "Caf6 Bijoux." Jennifer Coleman was a university professor of marketing and a marketing consultant in the city of Hayward, California. The Small Business Development Center (SBDC) of the university invited Jennifer to help Cafe Bijoux's management as part of its cooperative effort with the city to provide assistance to small businesses in need of and interested in consulting services in the university's seryice area. The purpose of the Jennifer's meeting that morning was to go over the caf6's current business situation and to establish a mutual understanding about Jennifer's deliverables. At 10:05 am, Jennifer walked into Caf6 Bijoux and introduced herself to Julie and Mary. Jennifer apologized for being late and indicated that she had some difficulty in finding the restaurant. Julie said, o'Yes, I know that we really need a store sign but we did not have enough money to get one. It would cost at least $2000. We had some customers complaining about that but we just couidn't afford it. Our business has been terrible and we were hoping that you would be able to tell us how we can improve." Jennifer replied, "That's what I am here for. But first, I need to learn as much about the caf6's business from you as I can." Jennifer explained that the primary goals of the meeting were for her to learn about the caf6's current situation and to explore the next course of action. Both Julie and Mary agreed upon the plan. BACKGROUNI) Cafe Bijoux, located across the Hayward City Hall on B Street, is a restaurant that primarily serves lunch during weekdays, targeting City Hall employees as their predominant customer base. Julie and Mary were very concerned about the restaurant's low sales and negative profit since its opening in October 2001. They explained to Jennifer that they felt the disappointing performance was due not only to the limited financial and personnel resources but also to poor luck in timing. For example, due to the contractual agreement with the building owner, the restaurant had to open in October 200L, one month after the unexpected glll tragedy. While Jennifer did not think there was a direct causal relationship between glll and the low sales of the restaurant, both Julie and Mary believed that the overall depressed atmosphere had a negative impact on the restaurant's opening because it was so difficult to capture the public;s attention. At the same time, there had been a lot of construction around the cafe, limiting its ability to ayfiact customers during critical business hours. As soon as the financial situation improved, Julie and Mary had planned to put up a restaurant sign so that the cafe could be more easily seen by pedestrians; however, the situation never improved. The restaurant's sales have been discouraging from October 2001 through December 2003. For the period of the first three months in 2004, the restaurant generated approximately $175 in sales a day, but far less in the month of April, frequently less than $100 in sales a day. Julie noted that April had been a particularly slow month and that sales tended to reflect the pay day schedule with peaks and valleys every other Friday. According to Jennifer's quick analysis of the fixed and operating cost, the caf6 would need to reach a gross sales amount of $208 per day, without including the cost of labor, in order to break even. That meant that Julie and Mary had not been getting paid for their 39 Journal of Business Case Studies - Third Ouarter 2006 Volume 2, Number 3 work and furthermore that they had been losing money since the inception of the business. The management's goal was not only to break even but to increase the daily sales revenue to $500. After the initial fact-finding interview, Jennifer felt that she needed to gather more specific pieces of information before making recommendations to the management. She and the restaurant owners agreed to meet in two weeks, during which time Jennifer would analyze the business situation in detail in regards to the market, customers, and competitors. Caf6 Bijoux's Operation Due to limited resources, the caf6 had been operated by Julie and Mary with no other employees. The two women were long-time friends with a shared interest in cooking. Julie's specialty was soup and Mary's, sandwiches. Both Julie and Mary did the shopping, cooking, serving, cleaning, and every other task required to run the restaurant. Cafe Bijoux opened from 10 am to 3 p*, Monday through Friday and sold lunch specializing in homemade soup, fresh sandwiches, and salads. Julie and Mary also sold fresh baked pastries and dessert purchased from a local bakery. The restaurant was conveniently located next to a vast parking garage for City Hall employees and other public office employees in the surrounding arca. People arrived at the garuge between 7:30-8:30 am for work and left tetween 4:30-5:30 pm. The City Hall was within walking distance of the caf6, about a half block away. Due to the absence of a sign or other clear identification, the restaurant was not plainly visible from the street; however once inside, the caf6 had a clean and relatively sophisticated atmosphere with a touch of French Country style and an attractive and inviting street side patio. A cup of soup and a sandwich was priced at $5.95. According to Julie and Mary it was a good value considering the quality of food offered. The caf6 owners tried to offer services that gave a friendly neighborly impression. As a way to keep costs down, condiments, napkins and plastic utensils were not left out for self service but instead handed out as customers picked up their orders. Caf6 Bijoux had done very little promotion to generate awareness and to advertise its offerings to potential customers. Because each day's menu was decided the day before, depending on the availability of fresh low cost raw materials in the market, the menu was written on a chalkboard daily. While the daily menu was generally predictable and the owners could have easily printed a menu with the daily specials, they felt more comfortable with the flexibility of not being bound to a printed menu. Customer Perceptions Both Julie and Mary have always considered their primary customers to be City Hall employees, thus their strategy was to offer a tasty and healthy lunch to these workers. Jennifer decided to conduct a quick phone survey to understand the primary customers' perceptions about Caf6 Bijoux. Specifically, Jennifer sought to gather information on how City Hall employees took care of their lunch needs, their level of awareness of Cafe Bijoux, and their interest in other products/services. To Jennifer's surprise, an estimated 50 percent of City Hall employees brought lunch from home, going out for lunch once or twice toward the end of week. Some of the City Hall employees told Jennifer that they would have a more regular need for abagel and coffee operation in the morning, from 7:30 to 10:00 am. Approximately 70 percent of respondents did not even know about Caf6 Bijoux. 30 percent of people who were aware of the caf6 indicated that they would like to see a printed menu so they could make decisions about ordering food. It seemed that people decided on food before they decided on a restaurant, especially when in a group. They did not want to be surprised or to have to call the restaurant to find out about the day's menu. In addition to the telephone suryey, Jennifer conducted a small scale taste testing of the caf6's soups and sandwiches among other nearby office workers. The quality of food was rated very highly by people who experienced the food. The taste testers remarked that the food was fresh, lean, and delicious and they could tell they were eating 40 Journsl of Business Case Studies - Third Ouarter 2006 Volume 2, Number 3 homemade soups and sandwiches. When the price information was disclosed, they remarked that $5.95 for a cup of soup and sandwich was reasonable and that they would not mind eating it once or twice a week for lunch. Some of the office workers even expressed an interest in buying soup to take home after work once or twice a week. The Caf6 Bijoux management told Jennifer that customers often called for soup, indicating that they liked the authentically delicious home cooked quality. In a separate case of Jennifer's in-store observation, one of the customers rated the caf6's soup very highly and gave unsolicited praise to the owners. Customers also appreciated the lean and fat-free sandwiche.. th" caf6 was committed to delivering a healthy and delicious choice of food, and customers, once they tasted the cafe's food, seemed to appreciate the quality and value. About 70 percent of cafe's daily customers were regular Patrons. MARI(ET POTENTIAL At the time of the decision to open the restaurant, Julie and Mary estimated that the City Hall had a total of 500 employees whom they considered to be potential customers. They projected that with a good quality product and servicelhey could easily attract 100 customers a day and produce a daily gross sales revenue of $595. In order to verify the market potential of Cify Hall lunch customers, Jennifer called the City Hall Human Resource department and found that the number was actually far less than Julie and Mary had thought. Table I presents the estimated number of populations surrounding the cafe' Table 1: Surrounding Businesses and Potential Customer Populations The C ty Hall employees 200-250 The C ty of Hayward Police 100 emPloYeer The C tv of Hayward Utility 50 emPloYees The Post Office 20 emPloYees The Librarv 10 emPloYees The Bank of the West 30 emPloYees Other businesses within walking distance 100 employees Residential Population 1000 households As indicated in the table, there was a sizable residential population near and around the City HaIl. Though there was additional business potential in a residential market for take-out homemade soup or casseroles, due to limited human resources, the caf6's management did not want to extend the restaurant hours to include the dinner hour and weekends. Because the cafe's primary customers were thought to be City Hall employees during lunch hour, Caf6'Bijoux's business hours were accordingly set from 10:00 am to 3:00 pm Monday through Friday' In addition to making a call to the City Hall Human Resource departrnent, Jennifer observed the traffic in and out of the City Hall, other offices and the area surrounding the cafe during weekday lunch hours. Despite the fact that there was a sizable number of people working during and around the caf6, Jennifer found that foot traffic was extremely light from 11:30 am to 2:00 pm and that pedestrian traffic around the general area was limited. According to Jennifer's week-long observation during lunch hours, very few people went in and out of the City Hall--certainly not generating enough foot traffic to satisfy the sales needs of the many restaurants competing for a limited number of potential customers. The following section presents a summary of observations about area restaurants. THE COMPETITIVE ENVIRONMENT Morelia on B Street Morelia was a full service Mexican and Italian Restaurant, iocated two doors down from Cafe Bijoux. Jennifer visited the restaurant on Saturday, April 10th and had lunch between 1pm and 2pm. The restaurant was very clean and had a pleasant atmosphere. The interior was decorated with simple, inexpensive Mexican art and figures in 4l navy blue and orange. The tables were covered with white tablecloths and set with navy blue cloth napkins. The customer-only restroom was kept clean' Jennifer ordered a cup of soup and a soft taco (priced at $1.99). The order came with water, chips, salsa, and pleasant fu1l service. The total amouni .u-. to $5.35 including tax, which Jennifer judged to be a good value for the money. The menu showed a great deal of choices, including vegetarian and Italian foods. Their butternut squash soup *u, h.rry but delicio,r, uriguve the impression of being cooked from scratch. The presentation of food was also very pleasant. For the soft taco, the restaurant used transparent white paper as lining and a piece of lime as garnish. In terms of service, both of the restaurant's waiters seemed to have limited fluency in English but were very courteous. The order and the manner in which they served customers showed that they were new but properly trained. As Jennifer was there on a Saturday, there were only three other groups of customers in the restaurant, all of whom were Hispanic. Jennifer had a chance to talk briefly about a catering menu with the owRer of the restaurant. The owner seemed to be very enthusiastic about the business. They served breakfast, lunch, and dinner 7 days a week. The owner appeared to be managing the restaurant with professionalism. They had a printed menu for customers to take and were in it . process of pro-du.ing a printed catering menu. The owner assured Jennifer that they could be very flexible and accommodating in terms of food. For an office party, the price was roughly $8-10 per person. In summary, Jennifer judged Morelia to be a strong competitor of Cafe Bijoux in terms of customer share. Morelia gave visitors the impiession of getting excellent overall value: a clean and cozy atmosphere; courteous service; iexible menu; good food and a good price. Although there were many dishes that were over $8.00, the flexibility (e.g., a la carti choices) gave customers more control and opportunity to manage within a tight budget. In general, ihe restaurant seemed likely to attract repeat business with visitors, perhaps even coming back with friends. La Salsa Fresh Mexican Grill La Salsa Fresh Mexican Grill was a franchise Mexican fast food restaurant located right in front of the City Hall. The available menu included tacos, salsa platters, burritos, and salads. Prices ranged from $3.69 to $7.50. Drinks were sold separately at $1.29 to $1.49. La Salsa also had a Kids platter for $3.39 including a small drink. With respect to d6cor, the restaurant was relatively new and projected a clean, neat, simple, yet inviting atmosphere. Jennifer felt that she would not mind eating in the restaurant but the interior was a bit hard and cold inside' It appeared to be a typical fast food restaurant chain. The restaurant was a self-service, efficiency-oriented operation. Jennifer visited the restaurant betwee n l2:30pm and l:00 pm, on Saturday, April 10th. As she expected, the customers were families that appeared most likely to be residents of the area (non-Hispanic families with children). Jennifer visited La Salsa again-on Monday April 12th, where she found quite a few customers that seemed to be City Hall employees and visitors. Jennifer assessed La Salsa as another strong competitor. Silver Spoon Silver Spoon was a full menu buffet restaurant located right across from Caf6 Bijoux. Its hours of operation were Monday through Friday, 7 amto 7 pm and Saturday 7 am to 3 pm. It featured fresh cooked meat. Lunch was priced at $g.95 and dinner, $14.95. The interior looked somewhat disorganized and unappealing and there was no discernible theme. There were only a handful of people eating during lunch hours on weekdays but Jennifer considered the restaur ant a direct competitor for the reason that it was located so close to the caf6 and that it may appeal to customers who prefer a variety of choice. Bst Restaurant Bst Restaurant was a few blocks away from Cafe Bijoux on B Street. It served a wide variety of Chinese cuisine for a very good price. The lunch speciai was $4.95. Bst Restaurant seemed to be very popular with customers 42 who might have large or special occasion parties. On Saturday afternoon, this was the only restaurant filled with people. its busines, hor., were Sunday through Thursday from l1 am to 9 p-, and Friday and Saturday from 11 am io 9:30 pm. It was a full service restaurant with a modest interior decorated with Chinese paintings and objects. Jennifer noted that this was yet another significant source of competition for Caf6 Bijoux. Customers may be attracted by the value of a good Chinese meal fully served for under $5, all within walking distance of area offices. Patisserie Francaise Chocolaterie patisserie Francaise Chocolaterie specialized in fresh croissants and various gounnet pastries such as homemade French cookies, as well as providing lunch service. It was located one and a half blocks away from Caf6 Bijoux. The restaurant hours were Monday through Friday, 7 amto 4 pt , and Saturday,T amto 2 pm. The patisserie offered a variety of croissant sandwiches on their les-butter, oven-fresh croissant including crab, chicken, fried egg, ham and cheese, roastbeef, vegetaian, avocado and cream cheese at$4.75 each. They also offered homemade so-rip at $2.60, fresh quiche at $3.50, and salad. In addition, there was a showcase full of baked goods and desserts. According to the owner, they did a lot of catering and would offer a special discount for large occasions. Surprisingly, the interior did not seem particularly clean and the restaurant appeared to be primarily a takeout place, alihough there were several tables against the wall. When Jennifer visited the self-service restaurant on Saturday during lirnchtime she saw a few people eating inside who seemed to be either pedestrians or visitors of the Farmers, Market that opened occasionally on Saturdays. It was clear, though, that the restaurant could not accommodate alargenumber of customers who might wish to eat on the premises. On one hand, Caf6 Bijoux clearly had a.more inviting and comfortable atmosphere than the Patisserie. In addition, it was more conveniently located to the City Hall and other office buildings. However, the Patisserie offered similar products at somewhat lower prices and for this reason Jennifer considered it to be a direct competitor. Sapporo Sapporo was a full service Japanese restaurant, located a couple of blocks away from Cafe Bijoux. The restaurant served good quality lunch and dinner 7 days a week, with a lunch special priced at $9.95. Service was acceptable and the restaurant had a clean atmosphere decorated with artwork fypical of most Japanese restaurants. Jennifer assessed the restaurant as a strong secondary competitor Buon Appetito Buon Appetito was a full service restaurant that served Italian food for lunch and dinner with prices ranging from $g.95 to $l+-gS. The restaurant was located somewhat inconveniently, away from the main street, and was rather small with eight tables set in an unappealing interior. Moreover, the exterior appeared in need of new paint. Jennifer had lunch with a guest and both of Gm ordered a chef salad, which came to a total of about $24 including tip. The salad was fresh and well portioned, and the service was average. On a weekday lunch hour, Jennifer spotted two other groups of customers eating lunch. Jennifer did not think that this was a strong direct competitor to Caf6 Bijoux due to its location, poor d6cor, and exterior appearance. Rue de Main Rue de Main was a Chinese dim sum restaurant located about two blocks from Caf6 Bijoux. The restaurant was open Tuesday through Sunday from 11 am to 9:30 pm. It served a Chinese lunch special for $6.95 including an entr6e, soup, spring roll, fried rice- or steamed rice. The interior was clean and spacious. Around 1 pm on a weekday, Jennifer saw a .o.r[1. oi gro,rp, of Asian customers eating inside. The restaurant looked empty and cold and Jennifer 43 thought the restaurant did not have an inviting atmosphere, therefore she did not consider it a strong competitor to Caf6 Bijoux. Other Restaurants In addition to the aforementioned restaurants, there were other restaurants within a few blocks' distance of Caf6 Bijoux. They included Bistro, Japanese Restaurant on C Street, Subway, Panda Express, and Albertson's Sandwich Bar. Most of these establishments offered reasonable quality food at competitive prices. For example, Subway sandwiches started at$2.69 and Panda Express, a Chinese fast-food eatery sold meals from $3.29 to $6.29. Assessing the competitive environme nt, Caf6 Bijoux had been contending for a limited number of customers during comparatiiely limited business hours, with limited product offerings, and in a location suffounded by many competitive- restaurants. It appeared that the caf6 had been generating less than acceptable sales result for these reasons. At the end of Jennifer's report, both Julie and Mary looked dismayed and asked "So what do you recommend that we do? Is it even possible for tire cafe to be profitable?" Julie, one of the owners, asked Jennifer, "Are you by any chance interested in buying or becoming a partner of this restaurant?" Jennifer responded with a smile. Both Julie and Mary were anxious to hear what Jennifer had to say next, so she promised to present the final report, oral and written, including a summary of her analysis, alternative strategies, and recommended actions at their next meeting. They agreed tJ meet the following Wednesday, April 28th at 4:00 pm'

31.Describe the four P's for Caf Bijoux.Suggest improvements to each and provide a rationale.

32.What is Caf Bijoux point of differentiation with respect to its competitors with reference to case material?Develop a "Positioning statement" for the caf.

33. What is Caf Bijoux target market segment?How effective are they in engaging this segment?What improvements can you suggest?

34. Argue for and suggest an improved positioning strategy for the Caf in consideration of case material and unique to Caf Bijoux.