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CREPES & WAFFLES CASE STUDY Raul Garcia Gustavo Victoria Julieta Castaneda BACKGROUND INFORMATION Crepes & Waffles a chain of restaurants born of the idea of two young business administration university students, Beatriz Fernandez and Eduardo Macia, who had the vision to create a business in which they only believed. “We are not in the food business but rather in the business of art. Our job is to interpret our client’s dreams and make them come true” 1 Mission Be an admired company for serving healthy art with love and joy at reasonable prices. Vision

Be the leader in its industry promoting a sense of ownership among its customers, employees, and the community in general Crepes & Waffles was born as a business idea aiming to generate revenue and profits and later on incorporated the concept of social responsibility related to hiring unwed mothers thus contributing to advancing society. C&W believes in the responsibility that women hold for the wellbeing of their families thus society in general. 1. http://www. youtube. com/watch? v=MK6-o0LpzM “Colombia has the face of a woman, and that I see reflected in each of the approximately 3. 00 women that come in to work to our restaurants early every morning giving their full selves in order to be able to raise their children and their families. Many of these women are head of households raising children by themselves as a result of the violence that has plagued Colombia in the past decades as well as due to personal situations”2 BRIEF HISTORY The idea to open a restaurant was born while Beatriz and Eduardo took a six month trip as back-packers to Europe while they were in their third year of college.

In 1980, they opened their first restaurant in Bogota, Colombia in a small rustic French-style creperie, with a wooden bar and a young, fresh and informal environment. It was as simple and attractive as its menu. The menu was made of a piece of wood that contained the different types of crepes, waffles and ice creams. Two years later, in 1982, they opened a second restaurant in Bogota? s International center. As the target customers in this location were executives, C&W produced their first formal menu which started to evolve as the customers? needs required.

A time line of opening restaurants: Year Opened| City| Number of Restaurants | 1980| Bogota, Colombia| 35 restaurants, 35 ice cream parlors| | Medellin, Colombia| 13 restaurants, 6 ice cream parlors| 1992| Cali, Colombia| 6 restaurants, 4 ice cream parlors| | Barranquilla, Colombia| 3 restaurants, 3 ice cream parlors| | Pereira, Colombia| 2 restaurants, 2 ice cream parlors| | Bucaramanga, Colombia| 2 restaurants, 3 ice cream parlors| | Panama City, Panama| 3 restaurants| | Mexico City| 5 restaurants| | Caracas, Venezuela| 1 restaurants| . http://www. larepublica. co/archivos/RESPONSABILIDADSOCIAL/2010-11-04/la-rse-de-crepes– waffles-tiene-rostro-de-mujer_114384. php 1995| Quito, Ecuador| 5 restaurants, 4 ice cream parlors| | Lima, Peru| 4 restaurants, 1 ice cream parlor| 2001| Madrid, Spain| 2 restaurants| 2009| Sao Paulo, Brazil| 2 restaurants, 2 ice cream parlors| As a result of McDonald? s entering Colombia in 1995, C&W reassessed its strategy and decided to take further distance from the fast food segment by position itself as a more upscale restaurant.

THE INDUSTRY C&W has a unique value proposition based on a holistic customer experience including a differentiated menu, a pleasant ambiance, superior quality and service at reasonable prices. C&W targets the mid price segment. Competitors| Ambience| Differentiated Menu| Quality| Price| Service| Total| C&W| 5| 5| 4| 4| 4| 22| Archies| 5| 4| 4| 4| 4| 21| El Corral| 3| 3| 4| 4| 5| 19| Karens| 4| 4| 4| 4| 5| 21| Kokoriko| 3| 3| 3| 3| 4| 18| 1. Ambience (1 not very pleasant, 5 very pleasant) 2. Differentiated menu (1 not differentiated vs. ther competitors, 5 differentiated) 3. Quality (1 avg quality, 5 highest quality) 4. Price (1 lowest priced, 5 highest price) 5. Service (1 avg, 5 highest level) Despite the fact that the closer competitors, Archies and Karen? s present attractive propositions and successful stories, both compete in the pizza business while C&W serves a unique menu not addressed by any other relevant competitor. Local companies still dominate the foodservice industry in Colombia. All of the above mentioned competitors are of local nature. MENU AND PRICES:

Crepes & Waffles offers a low to medium budget menu with a lot of variety, including, crepes, salads, pitas ( a type of pizza like bread with toping on top), soups, and the all famous “Pane Cook” (which is a large round bread without the inner dough, and filled with your choice of meal and sauce, for example curry calamari). C&W also offers an extensive dessert menu, including, crepes, waffles, ice creams, mini waffles, and even special ice creams for children (shaped like mickey mouse and the sort). The menu which appears simple has been well thought out to appeal to local tastes.

Innovation in introducing new varieties of crepes, waffles and desserts is always relevant while maintaining the highest cost/benefit equation. The quality of raw materials and standards of preparation are also key to their successful menu. From the development of a new product, the control over the entire supply chain to the final food preparation at the different restaurants, the highest standards of quality and cleanliness are met in compliance with all food regulation standards of quality. See appendix for menu. AMBIENCE

Crepes & Waffles offers a pleasant ambience with a young and informal look and feel. It can appeal to families for a Sunday outing, a group of friends who haven? t met in a while and want to catch up over a cup of coffee and dessert as well as young college students out on a date. MARKETING AND PROMOTION C&W builds its brand mostly through its unique value proposition and its continued pursue of differentiation…great menu, quality and ambiance at reasonable prices, all with a social responsibility mindset in a restaurant/food segment with low competition.

Its marketing and promotion efforts have been driven mostly by word of mouth, generating pleasant experiences that can then be told to others who become new customers. Newspapers advertisements are mainly focused on their operating philosophy reinforcing their social responsibility efforts. C&W does not do regular advertising through TV thus not spending a lot of money on traditional channels but rather investing significant resources in continued innovation and experience enhancement. As an example, ten years ago C&W changed 100% of its dinnerware at an approx. ost of USD1MM with a purpose of enhancing the dining experience regardless of the very high associated cost. Its webpage is consistent with the image of its restaurants and menu, young and artsy with an emphasis on their vision, mission and values as well as a lot of detail on their history, operating philosophy, quality standards etc. SERVICE Crepes & Wafles employees mostly females (92%) who are heads of households. They work throughout the whole operation performing functions in customer service, production and management. All customer facing positions are held by women mostly in their middle ages.

Their operating principle at their restaurants includes a high level of detail not only in their menus but also as part of their service which becomes a relevant differentiating factor versus fast food restaurants. Despite a high elaborated and diverse menu, service is fairly quick, given the fact that most foods and specially sauces are pre-cooked/prepared. It is also worth noting that investment in technology has also been important in what relates to state of the art kitchen equipment and ordering & check out software, enabling highest quality and fairly fast service.

As C&W has grown to become a high traffic restaurant, service at times can become slow. Customer comments: “Although my title might give the impression that the food here is really bad, actually it isn’t. We use it as a joke amongst our friends here. One needs to know what one is ordering and then actually the food is quite nice. Some of the salads they serve are a really nice change, because most restaurants in Colombia don’t focus too much on the green side of a meal. The salads are big and tasty.

Also, a number of crepes is very tasty and has ingredients which are not too common in the basic restaurants, things such as blue cheese, feta cheese, sun dried tomatoes”. One of the best restaurants in Bogota, Colombia” “Not only the food, but the desserts like the arequipe ice cream, also very well known for the amazing exotic juices. Incredible prices for what they offer, friendly people, incredible atmosphere, where you can just sit and drink a coffee or two for hours , being it just you, with your friends or with your entire family.

It is just an amazing place to try out, different flavors, different spices, different colours, incredible music and an amazing touch of art while you enjoy your meal” “awesome crepes, both sweet and savory; plenty of vegetarian options (ex: “gandhi” crepe – politically incorrect, but delicious); between $5-$15, depending on if you get ice cream. dessert menu one of the best i’ve ever seen and experienced; everything looks and tastes fantastic. Wait-staff is cordial and will provide a menu in english upon request. nice ambience for brunch/lunch/casual dinner. he ciy’s young and hip throng the place and there is usually a short wait to get a table. Highly, highly recommended” Recruitment and Training C&W focuses on recruiting women who are heads of households and aims to improve their living conditions. 10% of their workforce is composed of individuals who lack aptitudes and experience thus not attractive to other companies but who have the right attitudes to work for C&W. Operating procedures are not formally documented but rather employees are required to learn procedures by memory through intensive personalized and video training.

Crepes & Waffles abides by all local labor regulations in terms of salaries, fringes and benefits. Additionally, C&W constantly develops plans for their employees to buy their homes and improve their general well being through health, family planning, recreation and educational programs. As a more specific example, in order to improve the quality of time at home, C&W facilitates the purchase of home appliances for their employees. Informal and direct daily messages from the owners promote open communication and maintain employees engagement.

Challenges Faced by Owners Employee turn over is low as operating philosophy engages employees to stay with the company for a long time. International expansion has brought some challenges related to different cultures and their perspective on women i. e. in Mexico men are still the main bread winners and women are supposed to stay home looking after the children. Expanding the operating philosophy of focusing their recruiting on unwed mothers, head of households has brought some challenges in certain countries where this target pool is not as relevant as it is in Colombia. Employing women will continue to be part of our strategy despite the fact that the excess of hormones can sometimes become a challenge” commented Eduardo Macia, one of the owners. As mentioned before, the entrance of McDonald? s in 1995 also presented a challenge; C&W decision at that point was to hold off on expansion while their strategy was being reassessed in order to differentiate themselves from the fast food market. One of the key challenges that management has faced related to their aggressive international expansion has been the different labor laws, diverse end employees motivations.

Maintaining the same operating philosophy of recruiting unwed women may not be relevant/engaging in other countries. EMPLOYEE OPINIONS Given the high unemployment rate and the level of labor informality in Colombia and most of the countries in Latin America, employment with C&W results quite attractive. Crepes & Waffles offers formal employment observing all local statutory wages, fringes and benefits in addition to special support programs in health, education, re creation and housing for their employees and their families. Employees are satisfied working for C&W and that is reflected in their low turn over ratio.

CUSTOMER OPINIONS Customers go to C&W to have breakfast, lunch or dinner attracted by their diverse menu, quality, ambiance and reasonable prices. Customers dislike the fact that service can be slow during rush hours. Waiting lines are long. Despite the fact that company? s philosophy is probably not explicitly known by customers as it is not hung on the walls not broadly exposed/publicized, it is evident when dining at one of the restaurants that customer facing jobs are all held by women of the same characteristics, middle aged and low socio economic class.

The owners entrepreneurial spirit as well as their social responsibility efforts have been the case of study of local universities. Fecha de la critica: 4 ene 2011 “Es el lugar perfecto para almorzar cerca de la oficina, para comer con los ninos despues del cine, para un brunch de domingo. La relacion de costo beneficio es muy buena, aunque la atencion es regular” “ It is the perfect to have lunch near the office, to have dinner with the kids after the movies, to go to brunch on Sundays. The cost benefit relationship is very good, though the service is not that great” De los postres tendria que escribir un libro, porque hay una gran variedad de platos combinados que son una delicia. ” “ They could write a book about desserts because there is a great variety of them…they are delicious” http://www. tripadvisor. es/Restaurant_Review-g294074-d785852-Reviews-Crepes_and_Waffles-Bogota. html GROWTH OF C&Ws As per data from local Commerce Chamber, Crepes & Waffles S. A. has reported double digit sales growth in the past years but most importantly its profit margins make it the most profitable company in the restaurant business. ttp://www. supersociedades. gov. co/ss/drvisapi. dll? MIval=ppal&dir=104&nitso=860076919&tipo=1 OPPORTUNITIES AND CHALLENGES AS SEEN BY THE OWNERS (Based upon Interviews) Their expansion strategy is based on finding Colombia partners abroad due to the passion that they may feel for their country and heritage thus a greater connection to the business, its vision, mission and purpose. The only exception to this rule has been the opening of a restaurant in Spain which was driven by the fact that one of the daughters of the owners was living there.

The challenge with international expansion becomes the different cultures, motivators and various labor laws. The fairly international menu coupled with the ambience of the restaurants the quality and pricing have been key success factors for international expansion thus far. Companies flexibility and its innovation mindset has enabled some menu customization in order to serve local tastes. Expanding in developed markets is not within their growth plan as C&Ws consider these fairly saturated.

Additionally, recent experiences in Spain and Brazil have presented some challenges in term of real estate prices which have eroded the economics of the business. C&W? s operating philosophy on social responsibility is not as easily transferred to other countries and it may not have the same impact. The ambience, menu, quality, pricing and social responsibility concept are all factors that can enable success in developing countries. From an employee? s point of view, given high unemployment rates and low education levels, C&Ws offers results in an attractive proposition.

From a customers perspective, the diverse menu which incorporates varied and international ingredients at reasonable prices attract an emerging and growing middle class looking for good value in terms of quality, service, ambience and price. CONCLUDING REMARKS Strategically C&Ws has had a clear roadmap for growth and expansion identifying a market opportunity appealing to the mid-segment with a broad menu at affordable prices. C&Ws have been consistent in their approach despite the entrance of new players in the industry always striving to maintain their differentiation and value proposition.

Innovation and flexibility to adapt to local tastes have played a key role in their strategy. Investment in state of the art technology has been an enabler of quality, service and rapid growth. Financially C&Ws has been very successful growing sales and profits by double digits and maintaining above average profit margins. Financial strength has enabled them to grow internally and abroad with full and partial ownership. From a human talent perspective, their operating philosophy of contributing to the betterment of society through the hiring of women head of households, has also being a key success factor of their model.

A very important asset is their human capital, the high levels of engagement reflected in their low turn over reflect the success of this operating principle. Further international expansion will present many challenges and opportunities. The opportunity to continue growing but at the same time the challenges of managing a family business internationally. Expanding internationally will likely require a more robust central structure in order to support and ensure compliance with the Corporate operating principles.

Before exploring developed markets, there is plenty of opportunity to further expand in developing countries within Latin America. Expansion strategy should be accompanied by a more robust assessment on the optimal entry mode whether through franchising, alliances etc. ensuring adequate support from the Corporate office. Additional niche opportunities can be assessed in developed markets where Colombian and Hispanic population is relevant. A test market could be chosen as a pilot for this niche entry strategy which could later expand to other targets. APPENDIX #1 MENU

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