Circle R. And Fikes Products Case Studies Essay

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Circle R. And Fikes Products Case Studies

Circle R. Ranch is located about 10 miles north of Dallas, Texas. It specializes in hosting conventions, corporate meetings, and other events with an authentic Western-style theme including BBQ food, hayrides, country music, and other specialized services as needed. It is known for its exemplary customer service. The recent recession, however, showed a decline in annual sales of almost 40%, from $4 million to $2.5 million. In addition, the add on items that are higher in margin (ice sculptures, rodeos, fireworks, staged gunfights, etc.) are being ordered less and less due to the declining budgets of companies themselves. Circle R. is debt free, but the owners are seeing their margins reduce drastically.

Financial Analysis -- A typical year for Circle R. grosses about $4 million. The organization has no debt, so its expenses are related solely to staffing, utilities and particular food and supplies ordered for particular events. The recession resulted in a 38% decline in annual sales and a reduction in ordering of high-profit add ons. We can assume that this 38% decline was over at least 4 years, or about 9.5% per year. If we project this out, we find that there will be a point of diminishing return for the owners, who already work at least 50 hours a week each. Let us assume that the FT staff of 12 employees makes a living wage, which including payroll taxes equals a bit over 1/2 million ($532.896,000); utilities and insurance are likely about 20% of gross, or $400,000,000. Thus, we have current costs of approximately $933,000. These costs are likely to increase annually by at least 5%, not to decline. This results in at least an additional 1.2% margin reduction after utilities for projections.

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Identification of the Issues -- There are several issues Circle R. faces: 1) Declining sales due to recessionary times; 2) Internal cannibalization of sales from higher-priced, more profitable add-ons to basic, lower end offerings; 3) Increased costs for employees, food and equipment; 4) Loss of sales due to inadequate web presence; 4) Lack of aggressive strategic or tactical marketing program.

Recommendations -- We know that the ranch can handle at least $4M in sales with the current staff and part time employees. At present, Circle R. has not branched out into the Wedding and Wedding reception venue, largely because the margin is lower than corporate parties. However, due to corporate spending trends, Circle R. needs to increase revenue.

The following are recommendations for Circle R: 1) Instead of investing $20,000 into the upgraded website, invest $40,000 -- reserving $15-20K for aggressive online marketing and pay-per-click advertising. 2) Ensure that the web presence is viable, active, and fun -- use as many videos of past events, animation, etc. 3) Expand into wedding business, but slowly -- begin with certain Dallas suburbs to get the feel for the events/staffing, etc., perhaps book at booth at the Dallas/Ft. Worth wedding show (can be very selective or have minimums to make up for the different in margins; for instance, if receptions under $5,000 are not profitable, then set a limit of x$/person, y/person minimum); 4) Spend some marketing dollars to create an introductory video that can be mailed to HR departments on CD with a brochure and some sort of a small themed gift (boot pencil, etc.) to get their name in front of the decision maker; 5) Work with a local school district to provide interns.....

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