CASE 4 BEIJING SAMMIES
When Sam Goodman opened a new Sammies café in Beijing’s Motorola Building, he cut prices by 50 percent for the first three months in order to attract customers. The initial period was very successful, but when he returned prices to normal, sales dropped dramatically and fell short of targets. The local store manager, when presenting the figures, suggested that Goodman simply lower the sales targets. Goodman was frustrated; the manager had failed to address any of the issues that were keeping customers from returning. There were countless orders that went out with missing utensils, in the wrong bag, or (with items) simply left out. Delivery orders were being sent hours late or to the wrong location. This typified Goodman’s early experience; the market was showing interest in Beijing Sammies’s products but he knew that without exceptional service, good food would not be enough. Goodman questioned whether he could find employees who were thinkers and problem solvers and he wondered how to improve upon the business in order to turn Beijing Sammies into a sustainable and profitable enterprise.
According to Goodman, face and money were the two most important subjects. With experience as a student and businessman in China, he knew one must observe the cultural beliefs:
Face is a huge issue here, and as the economy develops, so is money. If one is not relevant, the other is. Once you recognize this is crucial, it was not hard to learn. The difficult part is incorporating it into the business. We need to offer a superior experience in order for customers to justify paying more. This means providing a quality product with excellent service. It sounds easy, but in China the concept of service is not the same as in the West. I just can’t seem to get my employees to understand that there is a way to serve the customer while also keeping the company’s interest at heart. It is an, “all for us” or “all for them” mentality here.
Page 455Throughout the company’s initial years, Goodman sought to teach a service-oriented approach to his employees. In doing so, he ironically learned that face was as much of an important issue for Beijing Sammies’s customers as it was for its employees.
BEIJING SAMMIES
Canadian native, Sam Goodman, started Beijing Sammies1 in 1997. Aside from producing food for the everyday, walk-in customer, Sammies provided fare for company meetings, presentations, picnics, and gifts. Sammies was open for breakfast, lunch, and dinner and delivered all products to its customers. The menu included a selection of sandwiches, salads, bagels, brownies, cookies, coffee, soda, and tea (Exhibit 1).
EXHIBIT 1
Goodman started the company with personal savings and money borrowed from family. He opened his first café at the Beijing Language and Culture University with the goal of providing people with a place to “hang out” and enjoy homemade western food.
By 2003, Beijing Sammies had five outlets (composed) of four “deli-style” cafés and one kiosk. The stores were traditional in terms of layout and size for fast food restaurants. Two Sammies cafés were 1,200 square feet, and the other two were roughly 800 square feet each, while the kiosk was a stand-alone structure with open seating inside the lobby of a corporate building. All of the café locations had enclosed seating that was maximized, as there was no need for self-contained kitchens.
The Central Kitchen
Goodman found that revenues of the first café were driven as much by corporate delivery orders as they were by the local walk-in customers. This motivated Goodman to open more cafés and a centralized kitchen in 1998. Located in Beijing’s Chao Yang District, the kitchen ran from 10 p.m. to 5:30 a.m. each day making the sandwiches and baked goods for all of Sammies’s locations. Between 5:30 and 6 a.m., trucks delivered the goods from the kitchen to each Sammies outlet. No cooking was done at any of the Sammies locations. Every sandwich, cookie, and muffin was prepared, baked, and packaged centrally. Only coffee and smoothies were prepared onsite at individual retail cafés.
While the central kitchen created a number of efficiencies for Beijing Sammies, what Goodman liked even more was the quality control that it provided:
It is much easier for me to teach the kitchen staff how to make the food correctly than it is to teach all of the employees at each location. At the kitchen I can make sure that the product going out to all of the stores is consistent. In the end that’s what I am striving for, to offer a consistently great product with superior service. Only having one kitchen to manage makes this task much easier.
The central kitchen not only provided Beijing Sammies with efficiencies with ingredients, machines, and manpower but also allowed for larger customer capacity at each café location and enabled the employees to uniquely focus on customer service.
THE SAMMIE
The idea behind Beijing Sammies originated from Goodman. Moving to Hong Kong after college and subsequently moving to Beijing to attend Beijing Language and Culture University, Goodman yearned for a place to hang out and eat a traditional sandwich or “sammie” that reminded him of home. Three years later, Beijing Sammies was named Beijing’s #1 western food delivery service by City Weekend magazine.
Modeled after Goodman’s version of a New York deli, Beijing Sammies’s staple is the “sammie.” Each sammie started with homemade bread made every night at Sammies’s kitchen. Customers could order from a menu of standard sammies or could create their own. Goodman found the pre-set menu best for the local customers, while many foreigners frequently customized their sandwich:
Having a menu of pre-crafted sandwiches is a necessity. Many of the Chinese customers simply do not know how to order. They do not understand the notion of selecting different types of deli meats and condiments for a sandwich. I didn’t even think about this at first. Personally, I know exactly what goes with roast beef and what goes with turkey.
When we opened our first location many people came in and left without ordering. They didn’t know how, and did not want to look foolish ordering something inappropriate. Many times, and this still happens, people come in and just order whatever the person in front of them ordered. Putting complete sandwiches together allows the inexperienced customer to come in and feel more comfortable about ordering.
Creating pre-made selections of sandwiches worked so well for Sammies that Goodman put together an Page 458“Ordering Tips” section on the menu. The section not only suggested what types of products to order for breakfast and what products to buy for lunch but also provided a guide for corporate clients to ensure correct portions and variety for meetings. In addition, Sammies trained sales clerks act as customer service representatives who could assist both the walk-in client and a growing base of corporate delivery clients with their orders.
Corporate Clients and Sammies Rewards
As Beijing Sammies realized a growing corporate delivery base, Goodman adapted the model to provide the business client with as much flexibility and customization as possible. Sammies set up corporate accounts, online ordering, flexible payment options, and a rewards program.
Corporate customers who registered with Beijing Sammies could choose weekly or monthly payment Page 459terms whereby Beijing Sammies would send out itemized statements and invoices. Clients could choose to set up a debit account as well. Under the debit account, clients prepaid a certain amount (usually a minimum of RMB1000*) that was credited to an account and deducted each time an order was placed.
Along with the flexible payment options, corporate customers could become enrolled in the Bonus Points program, which offered credits based on the frequency and size of orders. Customers who spent between RMB500 and 750 received an RMB50 credit, orders between RMB750 and 1000 an RMB75 credit, and orders over RMB1000 are given an RMB100 credit. Furthermore, each time a client cumulatively spent over RMB5000, they were rewarded with an RMB500 credit. All of this could be done over the Beijing Sammies website, www.beijingsammies.com, where customers could log in and manage their account (Exhibit 2).
OUR NEW SILK ALLEY SAMMIES CAFÉ IS ALSO OPEN!
Drop on by to enjoy some of your Sammies favorites … and more!
Enjoy our wider breakfast selection
Choose from café beverages and goodies
Select from smoothies, espresso, cappuccinos, and our selection of baked goods
Warm, inviting café atmosphere—whether you’re networking, on a date, getting a meal-to-go or getting social, Sammies Xiu Shui Jie café is the place to be!
Located at the Silk Alley/Xiu Shui Jie south entrance on Chang An Jie, in the Chaoyang District; open every day from 07:30 to 24:00.
**WHERE EAST EATS WEST**
*THANKS FOR REGISTERING! NOW YOU CAN ORDER ALL YOUR SAMMIES FAVORITES THROUGH THE WEB!
Browse online and order our delicious Sammies sandwiches, salads, baked goods including muffins, cookies, brownies, biscotti, and bagels. Great for business meetings, social events, breakfast, lunch, or dinner! Registration allows you to enjoy the following:
***SAVE TIME***
One-time registration of delivery information—no need to re-explain your contact info at every order. Just log in, order, and then submit for successful delivery every time you come to the website.
***SAVE MONEY***
Bonus points for future discounts—sign up and receive bonus points based on every RMB you order, which you can redeem for future discounts and Sammies products.
***IMPROVED EFFICIENCY***
Online ordering and delivery—order directly from our website menu and we’ll deliver to you!
***CUSTOM-MADE ORDERS***
Customize your Sammies, and track your orders with our new menu and online ordering interface.
***RE-ORDER YOUR FAVORITES***
Quick ordering of your favorite Sammies items—registered users can re-order from a recorded list of past favorite orders.
***ORDER 24 HOURS A DAY***
Order hours or days in advance.Questions? Please e-mail our helpful customer service staff at beijingsammies@yahoo.com. Tell a friend to visit us at www.beijingsammies.com.
EXHIBIT 2Beijing Sammies Introductory E-mail
Table Summary: The table presents the introductory e-mail of Beijing Sammies. The e-mail begins with an introduction of Beijing Sammies followed by seven advantages that Beijing Sammies offers its customers.
The Bonus Points program was offered to the walk-in customer as well. Customers who registered with Beijing Sammies online could become enrolled in the program. Every registered customer received a point for each RMB they spent. Every 10 points could be redeemed for 1 RMB off the next order. Extra points could be received for filling out surveys, referring new customers, or attending selected special events. The point system was well received by Beijing Sammies’s customers and contributed to a solid base of returning foreign clients (Exhibit 3).
Nokia China Investment
U.S.A. Embassy
Canada Embassy
Intel PRC, Corp.
Boeing
AEA SOS
American Chamber of Commerce
Agilent
Andersen Consulting
Australia Embassy
APCO Associates Inc.
Benz
Ford Foundation
Henkel
Hewlett-Packard
IBM China Ltd.
Motorola China Electronics, Ltd.
Western Academy of Beijing
Reuters
EXHIBIT 3Corporate Clients
Table Summary: The table lists nineteen corporate clients of Beijing Sammies.
Charity Sponsorship
Beijing Sammies served large numbers of foreigners, and consequently, Goodman felt a strong responsibility to sponsor charity, youth, and community events focused around the ex-pat community in Beijing:
The Canadian community in Beijing and around China in general is pretty strong. As a foreign student here I really appreciated the sense of kinship that I felt even though I was far away from home. In addition, the foreign businesses and tourists have been very supporting of Beijing Sammies so I really enjoy and feel compelled to participate in the community’s events.
Along with providing snacks and food, Beijing Sammies helped certain organizations by allowing promotional and ticket sale efforts to be staged from Sammies’s locations. Sammies’s sponsorship events included:
Special Olympics
Canadian Day and Independence Day
Sporting and school events held by the Western Academy of Beijing and the International School of Beijing
Annual Terry Fox Run for Cancer
ACBC Baseball Events
SAMMIES’S EVOLUTION
Starting out with $25,000 borrowed from friends and family back in Canada, Goodman opened Beijing’s first sandwich shop. In order to more easily get past the bureaucracy involved with opening the café, Goodman located a Chinese partner. After an initial 4 months of business, Beijing Sammies was a hit. The store was so successful that the new partner attempted to strong-arm Goodman out of the company by locking him out. In response, Goodman rallied some friends and broke into the shop one night and removed the appliances and supplies. The partner agreed to be bought out.
Soon after Goodman regained control, his landlord disappeared. The government demanded the tenants cover his back taxes. When they could not, it demolished Page 461the whole row and left the tenants with the bricks. Goodman was able to sell them for $25.
Goodman responded by opening a café at the Beijing Language and Culture University. Again, Sammies opened to a steady stream of customers, particularly from foreign students and local corporations.
In 1998, after realizing success with the first café in its newfound location, Goodman found another business partner. Together they planned to invest $350,000 more into Beijing Sammies. The next step was to build a centralized kitchen and add more café locations. Soon after construction started, however, the funds supposedly coming from the newfound business partner quickly dried up and Goodman was left financing the new kitchen on his own.
At the end of 1998, Sammies had a central kitchen with great capacity but no new store locations to deliver to. Goodman was able to generate yet another round of financing. With some western investment and all of the profits from his previous 2 years in business, Goodman was able to put $150,000 together and open three new cafés.
In addition to the first café located at Beijing Language and Culture University, Sammies cafés were opened between 1998 and 2001 at the Silk Alley Market, 1/F Exchange Beijing, and the Motorola Building. A Sammies kiosk was also opened at the China Resource Building (Exhibit 4). The expansion allowed Goodman to more adequately serve the Beijing area while also firmly establishing Beijing Sammies in an increasingly competitive environment:
Overall, I see the expansion into multiple cafés as a success. Two of the cafés are doing well while the two others have not met sales targets yet. The kiosk, because of less rent, is doing moderately well but is still not as busy as I’d like it to be. 2002 looks to be our best year to date with a revenue increase of 54%, and an operating profit of $20,000. However, due to the fact that the central kitchen is its own cost center, we will record a $24,000 loss (including depreciation). 2003 should show our first profits.
EXHIBIT 4
By the end of 2001, Beijing Sammies was recording monthly revenues over RMB500,000 and by 2003, the company had recorded positive net income in certain months (Exhibit 5).
Beijing Sammies
Kitchen Office
Kitchen Production
Kitchen Delivery
Kitchen Café
BY Café
SA Café
CR Café
EB Café
2002YTD
RMB
USD
0.120479942
conversion factor
Revenue
2,007,921.19
1,562,707.90
2,413,590.26
253,667.83
308,161.39
6,546,048.56
788,667.55
Cost of goods sold
17,886.73
641,106.51
458,643.00
660,387.10
85,284.58
116,182.07
1,979,489.98
238,488.84
Gross profit
−17,886.73
1,366,814.68
1,104,064.90
1,753,203.15
168,383.25
191,979.32
4,566,558.58
550,178.71
Gross margin
68.07%
70.65%
72.64%
66.38%
62.30%
69.76%
69.76%
Taxes
8,983.00
99,884.24
26,129.18
126,258.34
8,716.06
15,408.20
285,379.02
34,382.45
Salary
583,260.12
308,911.56
267,225.53
295,125.60
280,945.80
43,670.25
90,302.94
1,869,441.80
225,230.24
Insurance
57,067.01
24,131.97
12,160.29
6,641.12
2,151.96
0.00
102,152.34
12,307.31
Rent related
185,246.10
102,917.10
82,331.60
41,165.80
104,000.00
585,000.00
28,199.80
85,322.84
1,214,183.23
146,284.73
Utilities
38,075.39
41,237.04
22,891.23
2,531.10
45,492.79
7,103.90
7,587.91
6,598.31
171,517.66
20,664.44
Office expenses
131,989.31
445.38
5,750.55
4,298.84
14,296.32
3,451.76
17,737.90
177,970.07
21,441.82
Marketing/advertising
29,687.74
25,129.00
18,306.60
41,151.07
17,203.88
43,155.50
174,633.78
21,039.87
Transportation
37,798.57
256.75
20,545.85
4,286.23
743.60
0.00
237.90
63,868.90
7,694.92
Maintenance
68,965.65
6,357.00
1,560.00
12,139.01
21,128.90
1,843.40
1,625.00
113,618.96
13,688.81
Entertainment
16,660.54
1,033.50
2,388.10
6,477.25
1,123.20
0.00
789.10
28,471.69
3,430.27
Law and other expenses
47,623.29
0.00
0.00
0.00
47,623.29
5,737.65
Bank charges
−91.60
−103.48
7.15
39.00
−148.93
−17.94
Others
1,238.08
5,987.22
10,414.69
6,236.88
4,112.19
250.76
43.63
28,283.44
3,407.59
HR
8,580.00
0.00
0.00
0.00
8,580.00
1,033.72
Legal/Gov’t charge
33,566.00
533.00
0.00
0.00
34,099.00
4,108.25
Low-cost and short-lived articles
14,581.58
21,594.56
4,869.28
5,411.90
2,859.58
0.00
13,277.94
62,594.84
7,541.42
CK service fee
−327,302.43
100,396.06
78,135.40
120,679.51
12,683.40
15,408.07
0.00
0.00
Total expenses
935,928.34
512,872.07
643,386.13
43,696.90
618,199.96
1,212,473.04
125,766.30
289,946.32
4,382,269.07
527,975.52
Gross income
−953,815.07
−512,872.07
723,428.55
−43,696.90
485,864.94
540,730.11
42,616.95
−97,967.00
184,289.51
22,203.19
Amortization pre-operating costs
154,683.52
15,468.34
154,683.36
18,636.24
Amortization-renovations
71,500.00
16,300.87
92,852.02
11,186.81
Depreciation expense
49,392.72
144,283.10
2,296.7
16,088.84
10,502.70
11,881.35
24,125.41
241,254.13
29,066.28
Total
275,576.24
144,283.10
2,296.71
0.00
16,088.84
10,502.70
11,881.35
55,894.62
488,789.51
58,889.33
Net income
−1,229,391.31
−657,155.17
721,131.84
−43,696.90
469,776.10
530,227.41
30,735.60
−153,861.62
−304,500.00
−36,686.14
Beijing Sammies
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
2002YTD
RMB
USD
0.120479942
conversion factor
Revenue
474,490.19
340,345.07
633,584.38
636,305.41
714,801.13
768,954.55
819,787.15
743,912.26
659,126.31
754,742.12
6,546,048.56
788,667.55
Cost of goods sold
116,310.43
112,891.03
209,662.56
221,218.57
185,420.17
221,374.62
271,224.40
216,298.58
210,682.54
214,407.10
1,979,489.98
238,488.84
Gross profit
358,179.76
227,454.05
423,921.82
415,086.84
529,380.96
547,579.93
548,562.76
527,613.68
448,443.78
540,335.02
4,566,558.58
550,178.71
Gross margin
75.49%
66.83%
66.91%
65.23%
74.06%
71.21%
66.92%
70.92%
68.04%
71.59%
69.76%
69.76%
Taxes
21,449.26
15,003.20
21,514.52
21,744.06
31,754.91
24,373.65
42,118.17
32,275.32
25,169.18
49,976.76
285,379.02
34,382.45
Salary
195,127.49
200,044.95
179,709.69
197,527.25
172,055.86
208,886.93
151,037.11
172,597.30
181,573.80
210,881.44
1,869,441.80
225,230.24
Insurance
9,027.64
8,697.01
10,910.74
10,991.92
7,642.39
10,484.72
12,577.94
10,606.44
10,606.44
10,607.09
102,152.34
12,307.31
Rent related
118,045.59
118,045.53
118,045.66
118,045.92
118,046.11
112,665.80
99,665.80
124,581.20
142,870.82
144,170.82
1,214,183.23
146,284.73
Utilities
14,993.68
20,974.36
13,872.64
13,989.55
14,436.11
18,413.58
16,504.80
14,210.99
19,398.47
24,723.49
171,517.66
20,664.44
Office expenses
7,002.19
9,775.81
10,184.63
15,715.78
23,112.66
15,346.73
21,650.58
29,671.43
33,736.55
11,773.71
177,970.07
21,441.82
Marketing/advertising
2,080.00
8,476.00
5,473.00
7,670.00
17,500.60
24,986.00
23,403.09
33,382.75
24,166.45
27,495.88
174,633.78
21,039.87
Transportation
3,458.00
1,738.10
4,951.70
3,695.64
4,497.74
11,303.50
5,270.98
18,112.15
5,557.37
5,283.72
63,868.90
7,694.92
Maintenance
7,800.00
5,281.25
309.40
4,564.30
6,630.00
38,958.40
26,887.90
9,034.61
7,272.20
6,880.90
113,618.96
13,688.81
Entertainment
3,216.20
6,073.60
3,313.70
2,471.30
852.80
4,378.14
546.00
461.50
4,406.35
2,752.10
28,471.69
3,430.27
Law & other expenses
1,798.33
1,798.33
6,998.33
1,798.33
14,798.33
1,798.33
8,038.33
6,998.33
1,798.33
1,798.33
47,623.29
5,737.65
Bank charges
104.00
78.00
−379.54
−13.17
163.15
−425.63
176.80
117.00
9.36
21.10
−148.93
−17.94
Others
845.00
234.00
7,179.64
4,312.10
0.00
3,208.14
3,867.12
3,606.10
1,757.47
3,273.87
28,283.44
3,407.59
HR
650.00
975.00
4,615.00
0.00
975.00
0.00
0.00
0.00
0.00
1,365.00
8,580.00
1,033.72
Legal/Gov’t charge
1,950.00
1,950.00
16,016.00
1,950.00
1,950.00
2,483.00
1,950.00
1,950.00
1,950.00
1,950.00
34,099.00
4,108.25
Low-cost and short-lived
articles
2,171.00
1,295.84
3,055.00
10,031.27
10,522.07
5,995.31
3,622.32
20,954.62
3,919.89
1,027.00
62,594.32
7,541.36
Total expenses
389,718.38
400,440.96
405,770.11
414,494.24
424,937.72
482,856.60
417,316.94
478,559.73
464,192.68
503,981.21
4,382,268.55
527,975.46
Gross income
−31,538.62
−172,986.92
18,151.72
592.60
104,443.24
64,723.33
131,245.82
49,053.95
−15,748.90
36,353.61
184,290.03
22,203.25
Amortization
pre-operating costs
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
15,468.34
154,683.36
18,636.24
Amortization-
renovations
7,150.00
7,150.00
7,150.00
7,150.00
7,150.00
7,150.00
7,150.00
16,300.87
13,250.58
13,250.58
92,852.02
11,186.81
Depreciation expense
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
24,125.41
241,254.13
29,066.28
Total
46,743.75
46,743.75
46,743.75
46,743.75
46,743.75
46,743.75
46,743.75
55,894.62
52,844.32
52,844.32
488,789.51
58,889.33
Net income
−78,282.37
−219,730.67
−28,592.03
−46,151.14
57,699.49
17,979.58
84,502.07
−6,840.67
−68,593.23
−16,490.51
−304,499.48
−36,686.08
Cumulative net income
−78,282.37
−298,013.04
−326,605.07
−372,756.22
−315,056.73
−297,077.14
−212,575.08
−219,415.74
−288,008.97
−304,499.48
2001-2002 Comparison
Beijing Sammies
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
Average
Percentage
Total USD
Average USD
0.1 2048 conversion factor
Revenues-total
20022001
474,490195,360
340,345221,729
633,584273,194
636,305322,826
714,801360,585
768,955487,627
819,787485,567
743,912479,232
659,126495,706
754,742501,579
0565,923
0534,743
6,546,0494,924,071
654,605410,339
32.94
788,668593,252
78,86749,438
Revenues-CD
20022001
125,663118,331
101,290167,267
209,557157,382
173,213190,320
226,170164,654
269,890161,971
360,783153,994
338,797142,709
92,303136,926
110,257111,007
0146,241
0131,628
2,007,9231,784,429
200,792148,702
12.52
241,914214,988
24,19117,916
Revenues-BY
20022001
150,80077,029
55,37554,462
173,870115,812
202,190132,506
213,181122,457
245,040161,166
86,393130,244
20,944112,095
191,542136,210
223,374155,964
0173,991
0172,487
1,562,7081,544,423
156,271128,702
1.18
188,275186,072
18,82715,506
Revenues-SA
20022001
171,3060
166,7330
221,3910
231,7740
255,84073,473
229,739164,492
286,696172,101
260,326197,597
273,640197,532
316,147216,702
0221,035
0205,347
2,413,5921,448,279
241,359193,104
66.65
290,789174,489
29,07923,265
Revenues-CR
20022001
26,7220
16,9490
28,7680
29,1280
19,6120
24,2870
28,86029,229
26,35426,832
27,41423,036
25,5791 7,908
024,656
025,284
253,672146,944
25,36724,491
72.63
30,56217,704
3,0562,951
Gross profit
20022001
358,180136,161
227,454155,046
423,922181,279
415,087216,507
529,381243,420
547,580334,135
548,563340,288
527,614353,393
448,444340,074
540,335360,762
0406,459
0354,387
4,566,5593,421,909
456,656285,159
33.45
550,179412,271
55,01834,356
Total expenses
20022001
389,718199,170
400,442212,702
405,770203,262
414,495204,741
424,938292,468
482,856293,136
415,874271,625
478,560318,711
439,563367,199
503,981358,769
0367,961
0383,097
4,356,1963,472,840
435,620289,403
25.44
524,834418,408
52,48334,567
Salary
20022001
195,127130,803
200,045135,100
179,710123,547
197,527123,572
172,056136,526
208,887141,993
151,037143,111
172,597165,208
181,574161,795
210,881163,081
0169,485
0174,984
1,869,4421,769,204
186,944147,434
5.67
225,230213,154
22,52317,763
Rent related
20022001
118,04636,833
118,04636,833
118,04636,833
118,04636,833
118,04693,180
112,66693,180
99,66671,500
124,58171,500
142,871112,666
144,171118,045
0118,048
0118,047
1,214,183943,497
121,41878,625
28.69
146,285113,672
14,6289,473
Insurance
20022001
9,0280
8,6970
10,9110
10,992260
7,6420
10,4853,894
12,5785,203
10,6066,003
10,6064,694
10,5076,516
05,049
05,589
102,15237,207
10,2153,101
174.55
12,3074,483
1,231374
Utilities
20022001
14,99411,239
20,97413,459
13,8737,232
13,9908,932
14,43611,063
18,41411,041
16,50513,607
14,21116,717
19,39824,505
24,72318,764
017,195
017,936
171,518171,690
17,15214,307
−0.10
20,66420,685
2,0661,724
Office axpenses
20022001
7,0025,437
9,7764,486
10,1855,652
15,7167,899
23,1139,877
15,3479,994
21,6518,281
29,67112,463
33,7379,611
11,77410,245
010,773
014,229
177,9701 08,948
17,7979,079
63.35
21,44213,126
2,1441,094
Marketing/advertising
20022001
2,0801,950
8,4767,150
5,4732,842
7,6703,900
17,50119,682
24,98617,508
23,4036,838
33,38314,598
24,1669,460
27,4969,494
017,076
011,736
174,634122,234
17,46310,186
42.87
21,04014,727
2,1041,227
Transportation
20022001
3,4581,158
1,7381,131
4,9522,298
3,6962,662
4,4982,989
11,3041,219
5,2712,428
18,1122,522
5,5572,510
5,2842,626
01,651
02,439
63,86925,635
6,3872,136
149.15
7,6953,088
769257
Maintenance
20022001
7,800735
5,281371
3093,785
4,5641,707
6,63098
38,9581,110
26,8881,365
9,0351,754
7,2721,252
6,8811,273
0681
02,366
113,61916,498
11,3621,375
588.67
13,6891,988
1,369166
Entertainment
20022001
3,2160
6,074520
3,3144,976
2,4715,881
8532,896
4,3780
5461,123
462255
4,40612,332
2,752372
0759
03,738
28,47232,852
2,8472,738
−13.33
3,4303,958
343330
Law & other expenses
20022001
3,7483,613
3,7486,500
23,0146,500
3,7482,665
16,7483,848
4,2810
9,988867
8,9484,767
3,7486,136
3,748867
0867
00
81,71836,630
8,1723,053
123.09
9,8454,413
985368
Taxes
20022001
21,3846,871
15,0035,950
21,5158,639
21,7448,813
31,7556,360
24,3746,163
42,11913,657
32,27515,219
25,16916,592
49,97725,346
016,892
025,046
285,315155,546
28,53112,962
83.43
34,37518,740
3,4371,562
EXHIBIT 5Income Statement
Table Summary: a.The table presents a portion of the income statement of Beijing Sammies. Column 1 lists the various items in the income statement. Column 2 lists the amounts specific to the kitchen office. Column 3 lists the amounts specific to kitchen production. Column 4 lists the amounts specific to kitchen delivery. Column 5 lists the amounts specific to the kitchen café. b.The table presents a portion of the income statement of Beijing Sammies. Column 1 lists the amounts corresponding to income statement items specific to B Y café. Column 2 lists the amounts specific to S A café. Column 3 lists the amounts specific to C R café. Column 4 lists the amounts specific to E B café. Column 5 lists the amounts specific to 2002 Y T D in renminbi, and column 6 lists the amounts in U S dollars along with the conversion factor. c.The table presents a portion of the income statement of Beijing Sammies. Column 1 lists the various items in the income statement. Column 2 lists the amounts specific to January 2002. Column 3 lists the amounts specific to February 2002. Column 4 lists the amounts specific to March 2002. Column 5 lists the amounts specific to April 2002. Column 6 lists the amounts specific to May 2002. Column 7 lists the amounts specific to June 2002. d.The table presents a portion of the income statement of Beijing Sammies. Column 1 lists the amounts corresponding to income statement items specific to July 2002. Column 2 lists the amounts specific to August 2002. Column 3 lists the amounts specific to September 2002. Column 4 lists the amounts specific to October 2002. Column 5 lists the amounts specific to 2002 Y T D in renminbi, and column 6 lists the amounts in U S dollars along with the conversion factor. e.The table presents a portion of the comparative income statement of Beijing Sammies for the years 2001 and 2002. Column 1 lists the various items in the income statement. Labels for years 2002 and 2001 are listed against each income statement item in column 2. Column 3 lists the amounts specific to January 2002 and 2001. Column 4 lists the amounts specific to February 2002 and 2001. Column 5 lists the amounts specific to March 2002 and 2001. Column 6 lists the amounts specific to April 2002 and 2001. Column 7 lists the amounts specific to May 2002 and 2001. Column 8 lists the amounts specific to June 2002 and 2001. Column 9 lists the amounts specific to July 2002 and 2001. Column 10 lists the amounts specific to August 2002 and 2001. Column 11 lists the amounts specific to September 2002 and 2001. f.The table presents a portion of the comparative income statement of Beijing Sammies for the years 2001 and 2002. Column 1 lists the amounts specific to October 2002 and 2001. Column 2 lists the amounts specific to November 2002 and 2001. Column 3 lists the amounts specific to December 2002 and 2001. Column 4 lists the total amounts for each income statement item specific to the years 2002 and 2001. Column 5 lists the average amounts for each income statement item specific to the years 2002 and 2001. Column 6 lists the percentage values for each income statement item. Column 7 lists the total U S D amounts for each income statement item specific to the years 2002 and 2001. Column 8 lists the average U S D amounts for each income statement item specific to the years 2002 and 2001. g.
Note: Exhibit 5 amounts are in Chinese Renminbi.
EXHIBIT 5Income Statement(Continued)
COMPETITION
The economic expansion of the late 1990s dramatically changed dining in Beijing. Private establishments that catered to China’s emerging middle class replaced old state-run restaurants. Most traditional meals were under $5 per person. Peking duck and other local specialties were the most popular, but new restaurants opened that offered regional tastes from all around Asia. Additionally, the number of western-style restaurants targeting tourists, expatriates, and younger, trendy Chinese customers increased.
Sam Goodman viewed all restaurants physically close to Sammies as competitors:
As far as I’m concerned, everyone in Beijing who orders lunch is a potential customer and every restaurant serving it is a competitor. There are those who stick to the traditional Chinese meal, but who is to say that they will never try Sammies?
I do not want to restrict Sammies to serving just western businesses or students. We are delivering not only to western businesses but to traditional Chinese companies as well. While we rely on western students for our walk-in business, we do have Chinese customers who come to Sammies every day. There are others who only come once in a while. These people go to the Chinese restaurants when they don’t come here, so I must think broadly in terms of who are my customers and who is my competition. Of course the western restaurants like McDonald’s, Subway, Schlotzskys, and Starbucks are the most obvious competitors. Competition in this business is day-to-day as people rarely eat lunch at the same location each afternoon.
Like most major cities, Beijing had an array of restaurant choices ranging from traditional Chinese to Mexican, German, Scandinavian, Italian, Swiss, and English Continental.
THE GREAT WALL OF CHINA
As Beijing Sammies adapted to the competitive environment, Goodman increasingly turned to the delivery business for revenue. But the model did not work as planned, due to the lack of experience Goodman had in delivery logistics. Corporate clients were more demanding and lunch delivery complicated. Goodman states:
We started out delivering from a central source. At first, things did not go as planned. Quite frankly, I was an inexperienced manager and made quite a few mistakes. The delivery model here in China is very different from the West. Clients have no understanding of what goes on behind the scenes, and they do not understand that it is nearly impossible for us to take a large delivery order for a corporate luncheon and bring it to them ten minutes later. I didn’t plan for all of the possible problems Page 462that a different culture would bring. I should have put more effort and time into educating the customer about the product. This definitely had a negative impact on the business at first.
In addition to overcoming the existing perceptions and expectations of the customer, Goodman learned about the prevailing attitude of the employees. One of his biggest challenges was not securing the hard-to-come-by ingredients, dealing with the local government, or raising capital, but rather teaching his employees the concept of service. For many of Beijing Sammies’s employees, service was little more than opening the store in the morning and closing it at night. To Goodman, service was much more. It was Page 463what he believed would differentiate Beijing Sammies from the other western food establishments, and what would cause the traditional Chinese consumer to pay more money for lunch. Service was not only delivering the product on time, with the correct number of forks and knives, but was also helping the customer to understand the product. According to Goodman:
For most of my employees it doesn’t matter “how” you get things done—it just matters that you get the end result. The concept of face for them manifests itself with the feeling that appearance is much more important than the service or quality of the product. While for the customer, the service provided by us is part of the final product.
Page 468Just as the client base did not understand the wait for a delivery, the employee did not understand the product that Beijing Sammies was trying to sell:
The staff does not understand the urgency needed in running a service-oriented business. The whole concept of service is new in China. The business traditions are not very strong here. I don’t know if it’s because of the issue of face and pride, the political history, or something else, but our employees have a very difficult time understanding how we need to deliver service as much as we need to deliver a sandwich.
For Sam Goodman, the initial years of operation proved that Beijing Sammies could hold a niche. While he was pleased to see Beijing Sammies growing toward profitability, he was concerned about whether it could ever become cash-flow positive, and if so, whether he could sustain it. In addition, Goodman was no closer to finding the type of employee who would adopt his concept of service than he was when he started and wondered if the answer lay in increased automation, training, or somewhere else.
END NOTES
Beijing Sammies is the name of the entire company, while “a Sammies” is a particular café.
Source: This case was prepared by Christopher Ferrarone under the supervision of Boston College Professor Gregory L. Stoller as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright ©2003, Gregory L. Stoller. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the author.
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