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Jack Baker called the first official board meeting of Bearcat Foods Inc. to order and, glancing round the table, said, “Good afternoon, people. The first item on the agenda is the election of a Chairman, followed by the confirmation of the executive board members and the setup of the various necessary committees. I suggest that we get that business out of the way as quickly as possible, as we need to discuss how we are going to handle the rapid expansion that seems to be ahead of us. On the subject of Chairman, I would like to nominate Jinnie for that position; she is a board member without an executive position.”
Jinnie replied, saying, “Thank you, Jack. At the moment, I sit on several boards, as well as being MD of DKL, COO of Trattoria Trevi (Holdings), MD of TT SuperBurger (Group), I am a director of SuperBurger Limited, TT Events, Aunty JoJo’s, TT Continental, and TT Ennios, and I currently struggle to give my best to all these, as I am also retained as a Major in the Military Reserve. I can be called to arms at any time, as happened not long ago. I really don’t think I am the right person for this position. Instead, I would like to propose Brian. When I was initially thinking about the board, I had Brian pencilled in for Finance Director, but it was obvious that Molly should be FD; she lives here and Brian doesn’t. I think Brian would make a great Chairman.”
Jack said, “OK, I withdraw my first proposal and second Brian. Are there any other proposals, or shall we have an immediate show of hands?” As no one proposed anyone else, the vote was all in Brian’s favour, but with one abstention—Brian, who said he could hardly vote for himself. Jack and Brian swapped seats, so that Brian was at the head of the table, and he quickly disposed of setting up the management committees before moving on to reports. As MD, Jack gave the first report, handing out the printed reports and summarising by saying, “I am delighted to tell the board that the new company is off to a flying start, and we haven’t yet had to dip into our advertising pot for a single cent. The income generated by our initial 14 outlets is running at a higher level than when they were KFC franchises, and a quick survey showed very high customer satisfaction.”
Jack continued, “In addition, the franchise operation has taken off far more quickly than we anticipated, and we now have another 14 franchised outlets in the greater Ottawa area. We now have more outlets in Ottawa than KFC. We have been approached to let franchises in both Montreal and Toronto. Our production facility has had to be expanded to be able to cope with the increased demand far sooner than we expected, as has our chilled transport division, where we have had to hire extra drivers to ensure we can offer our customers a 7-day-a-week service. As you can see, we are now in our new offices, and the sale of our old offices is due to complete very soon. I don’t want to stray too far from my brief, as I’m sure that I have already mentioned something our other Directors will be saying.”
As Finance Director, Molly reported that the company was financially well ahead of its projected position. Every division was trading profitably, and some reserves were being built up. The Transport Director, one of the Bouchard brothers, explained that they were now utilising their two chilled trucks 16 hours a day, 7 days a week, delivering to the 28 Aunty JoJo’s outlets and 20 independents supplied by the company’s processing plant. Despite having to hire additional delivery drivers, they were making money and had plans to lease a further truck, as there was a slight worry that they were pushing the fleet very hard. The Production Director reported that the processing plant had already twice expanded its output, having first increased its usage of existing output and then brought in some more equipment to increase production even further. The plant now still only occupied a third of the floor space in the huge factory unit they had on a 100-year lease, so they were happy they could cope with further expansion.
The Sales Director, who had been the Baker Fried Chicken sales director, repeated some of Jack’s report, saying that after two months of trading, sales were well above the projected levels in all divisions. Sales of the slightly spicier-than-KFC Fried Chicken were the mainstay, but Jerk Chicken was proving more popular than expected. But the crispy Fried Shrimp had been a big success, and discussions were taking place over the introduction of other flavours like Coconut and Spicy. The introduction of longer opening hours and breakfast had been a huge success and was now available in all 28 restaurants. Its effects on a full month’s turnover were yet to be seen.
Finally, it was the turn of Brooke, the Development Director. She spoke about the two additional company-owned restaurants being built in Ontario Province outside of Ottawa. She explained they had been approached by the owners of four outlets in Montreal who wanted to become Aunty JoJo’s franchises. On a recent visit, they had agreed on terms, but nothing could happen until a supply line could be established. The current thought was delivering by road from the Ottawa processing plant to a local chilled store and distributing locally by a light truck or large van, and that was being costed. However, it was considered an opportunity to open some company-owned outlets, and two outlets had been identified.
Brooke continued, saying, “Yesterday we had talks with a small independent chain of six chicken restaurants in Toronto. As you know, Toronto is Canada’s biggest city, with over 5.5 million people, and if we want to tackle this market, we are going to need a lot more than six outlets. The man we talked with tells me if we can supply them, there are at least another 10 franchises and independents ready to join us. Of course, this deal is in very early days, but current thinking is that we could follow a similar plan to Montreal, delivering to a cold store by truck and local distribution. But again, this offers us the opportunity to build some company-owned outlets. In both Montreal and Toronto, we will have to eventually build production plants, as supplying in bulk from Ottawa will quickly become impractical.”
“Talking of impractical, we have been approached by several outlets in Vancouver, but that is much too far away to be supplied by road. So, development there is on hold until we can come up with a solution. I understand that Jinnie has a possible solution which she would like to pitch to the board for their thoughts. Personally, I rather like it.”
Jinnie looked up from her notes and said, “This is a touch complicated, so I hope you won’t mind if I occasionally refer to my notes, and please feel free to stop me and ask questions at any point if my ideas are not clear. When I flew in from London, I met Brooke and Jack at the airport in Montreal. They told me about their visit and plans for Montreal, which I thought was practical, provided we have the capacity in our Ottawa plant. Of course, in the long term, we will have to budget to acquire a regional processing plant there. Distances between population centres in Canada are so vast, regional centres are going to be essential. But in the meantime, we have a plant here in Ottawa that can be greatly expanded by more than most people think, but more of that later. I learned yesterday that we were in discussions to open up in Toronto and we had also been approached about Vancouver. As Brooke has already said, we have initial plans for Toronto and Montreal, but Vancouver is on hold as it will require a regional source of chicken pieces.”
“I did the grand tour of Bearcat Divisions yesterday,” continued Jinnie, “and was amazed at the size of the building the Chicken Processing Plant has. Then later, I learned that without further expansion, they had capacity to supply the two extra Ontario outlets and the Montreal outlets but not Toronto if we were to sign up all the 16 units that are being talked about. That got me thinking. Of course, we could, fairly quickly, put more equipment into the plant, but if we are to expand in this region, just how many restaurants would we be able to supply? The answer is about 225, and at the current rate of expansion, we will be there in a little over a year. So, I started thinking about what we could do. My first thought was the roof in the plant is very high. Could we put in a mezzanine floor and virtually double the floor area? Let’s say we must leave space for stairs, lifts, and chilled storage, so maybe we reduce capacity to 200 restaurants. Double that for two levels, and we have capacity for 400 restaurants. Now, that would mean we could carry on supplying expanded Montreal and Toronto for a couple of years, giving us time to build regional processing plants and set up a local delivery network.”
Jinnie looked around the table and saw several happy faces, so she continued, “So, my next step would be to look to Vancouver. It is a huge market which we are missing out on. I would look to invest there as soon as the Ottawa plant plan is underway. Once again, it’s looking for or building a processing plant and a distribution business. We have a number of outlets to base on, but I would look for some owned outlets to ‘seed’ the business.”
At that point, the Production Director spoke up, saying, “I’m not sure we could get permission to build a mezzanine over a working processing plant.” “I was coming on to that,” replied Jinnie. “You currently utilise just under a third of the floor space, so we build a temporary polyurethane wall and slightly pressurise it to keep the dust out. We then build over the unused space and install new production lines and cold rooms underneath. Let’s say we build two thirds of the proposed final mezzanine. Of course, we will need new ceilings for fire protection and hygiene, lighting, and power under the mezzanine, but that is normal. We move production to the new area and build the mezzanine over the now unused area. We then have space to expand on the ground floor and the mezzanine floor when it’s needed.”
Belinda then spoke up, saying, “I have had a quick look at the factory, and the ceiling height is perfect. I’m not familiar with mezzanine floor regulations in Canada, but in the UK, I would be confident of getting the building permits to proceed as Jinnie has suggested. I have a rule of thumb for quick costing a steel single-storey production mezzanine in the UK, and my initial guess is one of that large size would cost around £150,000 in the UK, but I would add 10% for the two-part build. My price includes a fire-rated mezzanine, access, one goods lift, ceiling, and power, but not for the production line equipment.”
Molly interjected, “But we don’t have that type of money.” Brooke replied, “But the Fastfood division does, and I’m pretty sure it will loan the necessary money to another part of the division. Especially as it is almost certainly going to generate a decent return on the loan. It is not as if it’s a huge amount of money by TT SuperBurger levels of investment. There, they talk about many millions for new hotels and restaurants.”Jinnie smiled and said, “I can confirm that. I’m inclined to agree that this might seem to be a big investment for Bearcat, and as a director of both the FastFood Division and the main board, I think I would be happy to say that one way or another, the money will be available.”
Brian then asked, “Do we need to put this to a formal vote, or can we simply instruct Brooke and Belinda to come up with a fully costed design for the project?” There being no dissenting voices, Brian said, “I think that has been passed. Now, we need to decide if we are to follow Dame Jinnie’s next suggestion that we investigate expanding into Vancouver and, with it, British Columbia, and investigate setting up a plant there.”Before Brian could speak further, Jack said, “As the person who has been leading the discussion with people in Vancouver, I would be delighted to take on this investigation. But can I point out one thing that I think we have overlooked? We have a million C$ in our advertising reserve. I would suggest that we transfer this into our development account, and it would mean less borrowing from our parent company.” Again, this was passed on the nod, and Brian closed the meeting.
***
Jack and Molly had booked to take Jinnie, Brooke, Brian and Belinda out to what they said was one of Ottawa’s best restaurants, Nineteen. Molly warned that although it was a lovely place to eat, it wasn’t a patch on The Continental in Barbados. The British foursome took a taxi from their hotel to the restaurant and met the Bakers in the restaurant’s bar. On entering the restaurant, Jinnie’s first impression was nice but not wonderful. The party were shown to a table and the staff fussed over them. In her mind, Jinnie likened it to the Main Dining Room on the Britannia, good but not like dining in the Epicurean. After studying the menu, she chose an Argentinian Pink Shrimp Cocktail as a starter, followed by Rack of Lamb and Seasonal Vegetables.
Jinnie admitted the food was good, but just as Molly had said, it didn’t match the standard of The Continental in Barbados, either for quality or for price. But it was the standard of service that shocked Jinnie; it came nowhere near that of The Continental. Jinnie enjoyed her meal but realised there was a gap in the market for a really high-class restaurant, whether a Continental or a Trattoria Trevi. Trattoria Trevi was currently a U.K. and Ireland brand with a high reputation in the country, while Continental was based in the Caribbean. While consuming her coffee, Jinnie realised that the Continental name might be known to Canadian visitors to the Caribbean, while the Trattoria Trevi was less likely to be familiar.
In the taxi on the way back to the hotel, Jinnie floated her thoughts to her companions and fellow Continental directors, who listened with interest. Arriving back at the hotel, Brian suggested a nightcap in the hotel bar as he wanted to carry on the discussion. Settled with their drinks, Brian said, “Well, my first thoughts are if that is the best Ottawa has to offer, then I am certain there is a gap in the market. Brooke and I have been over here several times and have eaten in several of the recommended restaurants, and I think she will agree with me that the best Canadian restaurants are not of the same standard as their European equivalents.”
Brooke nodded her agreement and added, “The problem, as I see it, is that the Canadians fall between several stools. They are very much influenced by the United States and have things like posh burgers on too many menus, and the service is nowhere near European standard. I think Alberto would have hated that restaurant tonight and would have had his pad out making copious notes.” Jinnie picked up the conversation, saying, “When I first met Jack and Molly in Barbados, they had wanted to try The Continental but had been disappointed to learn the restaurant was booked for two months in advance. I organised for them to eat there and the following morning they raved about the experience. Molly said how they had eaten in every top restaurant in Ottawa and none compared.”
“OK,” said Brian, “how do we play this? Do we pitch it to the Continental board immediately or do a bit of investigating first? Do we look at buying an existing business and changing it to a Continental, or do we start from scratch and buy an empty building and create something?” “I favour telling the rest of the board first, so as to investigate the idea and cost it openly,” replied Jinnie. “I think the four of us can swing the board. As for the second question, my worry about buying an existing restaurant is that you are inheriting an ingrained culture. Starting afresh would mean we could immediately impose our ideas and service culture on the staff. I would hate to have to retrain the staff at that restaurant we ate at tonight; I just don’t know where you would start.”
Belinda had been quiet but suddenly said, “I have been thinking about whether Wright Refurbishment should make an offer for the fit-out business that Jack has been using for the Aunty JoJo’s restaurants and the offices. They do a decent job, but we have only used them for a limited amount of work. With what we have been discussing today—a huge mezzanine, new production lines, dozens of restaurants, two chilled stores, a Vancouver production plant, and now a full fit-out of a Continental restaurant—I have decided that I want to try to bring them in-house. Like with Keith in Barbados, they are not the biggest contractors in town, and I’m certain there are plenty of biggish jobs about they could bid for and win, with the backing of a bigger company. We have plenty of cash in reserve in the division, but I doubt ‘Ontario Design Contractors’ would be terribly expensive to buy.”
Jinnie thought for a moment before replying, “I can see the benefit of bringing the work in-house. It’s the same argument we had over both Wright and Keith’s; we are effectively keeping the cost of the contracts in-house. By using a sub-contractor, real money goes out of the group. I suggest you have a chat with them while you are here and maybe Brian can get a look at their books. As a Wright and DKL director, I’m perfectly happy to go in that direction.”
Brian spoke up, saying, “Well, that has been a most productive nightcap. I think we have decided to investigate opening a new Continental restaurant and to buy ‘Ontario Design Contractors,’ all in the time it has taken to drink a G&T. But one small thing—should we be thinking about a new name for them if we do buy the fit-out contractors? Being named after one Canadian province might put off customers in another one.” “Quite possibly,” replied Belinda, “but we haven’t even spoken to them yet; there is plenty of time to think about a new name. I think I will visit them tomorrow, on the pretext of discussing that massive mezzanine and new production lines after a measure-up at the processing plant. Maybe I’ll probe a bit on what other jobs they have on and if they are open to a friendly buyout offer. And with that, I’m off to bed. I’m going to have a busy day tomorrow when I thought I was going to have a relaxing day before flying home.”
In Chapter 3 – Plans develop
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