Lady m world trade center

Discuss industry background and Lady M’s product market strategy: a. What are important to succeed in the foodservice industry? b. How is Lady M unique? c. What are the barriers to entry? Could their model be easily replicated? d. What are the challenges going forward? What is the limit on growth? For the exclusive use of j. kallu, 2019. 9 -2 1 5 -0 4 7 JUNE 18, 2015 MIHIR A. DESAI ELIZABETH A. MEYER The Valuation and Financing of Lady M Confections The phone rang at the office of Lady M, a specialty cake bakery run by Ken Romaniszyn (GMP 2012). May 2014 had been quite a month for them; their phone had been ringing off the hook with potential investors. Ever since opening their second bakery in 2012 in The Plaza Food Hall in New York City, things seemed to be happening so quickly: Lady M opened a third shop in New York City, one in Los Angeles, and had licensed in both Singapore and South Korea. People couldn’t stop talking about this cake ‘boutique’—from its delicate, aesthetically-pleasing goods to its sleek, understated décor. Lady M had been featured in Oprah Magazine twice in one year and attracted the attention of many celebrities. Investors had been calling daily, hoping to expand the Lady M brand to Asia and the Middle East. This particular investor, from China, had offered ten million dollars and a line of credit in exchange for an equity stake in the company along with exclusive franchising rights in China. This line of credit was especially alluring to Romaniszyn, as he had been considering opening a new boutique in the new World Trade Center in New York City. This was quite a risk, however, since the annual rent alone for that location was $310,600. Romaniszyn and Daisy Tom, the company’s newly appointed CFO, had two things on their mind: the World Trade Center location and the Chinese investor’s offer. Was the World Trade Center location worth the high cost? How many cakes would they have to sell to make the location viable and get their initial investment back in a reasonable amount of time? If they chose to open the World Trade Center location, how should they fund the construction costs? Should they take the ten-million dollar offer from the Chinese investor? How much of an equity stake would the investor get for that amount? Was this money and line of credit worth forfeiting an entire market? With all of the investors calling, Romaniszyn and Tom began to wonder exactly how much their quickly-growing company was worth. A History of Lady M Lady M Confections was founded in May 2001 as a cake wholesale business. In the beginning, it sold cakes to upscale restaurants and luxury hotels in New York City. In December 2004, Lady M opened its first boutique in the Upper East Side of New York. This boutique, with its sleek white and silver appearance, won a design award in the May 2006 issue of Interior Design Magazine. Lady M was Professor Mihir A. Desai and Research Associate Elizabeth A. Meyer prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2015 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by john kallu in BUS173B taught by XIAOYAN XU, San Jose State University from Aug 2019 to Dec 2019. For the exclusive use of j. kallu, 2019. 215-047 The Valuation and Financing of Lady M Confections different than its competitor bakeries; rather than serving the traditional, sugar-laden cakes that Americans are used to, Romaniszyn instead looked to emulate the bakeries of Japan. While influenced by the French, the Japanese bakeries focused on a delicate, less sweet taste and a careful attention to aesthetics. Lady M’s signature dessert was their Mille Crêpe, a minimum of 20 layers of French crêpes layered with pastry cream (see Exhibit 1 for photographs of Lady M’s Mille Crêpe). On the opening day of their first boutique, Lady M’s entire collection of Mille Crêpe cakes sold out within hours. Critics raved about the new bakery. Amanda Hesser from New York Times Magazine proclaimed: Since it’s impossible and foolish to claim that something is the best of anything in New York, I’ll hedge my bets and say that the Mille Crêpes at Lady M Cake Boutique, just off Madison Avenue on the Upper East Side, is at least the second-best cake in the city. It succeeds so splendidly not just because it’s wildly delicious but also because it’s a clever design. Any number of decent pastry chefs could have come up with it. But they didn’t.1 After the success of the first Lady M boutique, Romaniszyn opened two more in New York City: one in The Plaza Food Hall in June 2012, and one in Bryant Park in July 2013. One was also opened in Los Angeles in August 2013. In April 2014, Lady M employed approximately 120 total workers in their domestic operations: around one-third in the kitchen, 10 in corporate, and the rest working in retail. The kitchen workers churn out approximately 7,000 crêpes per day and go through one imported crêpe pan approximately every four weeks. Romaniszyn understood the importance of keeping the kitchen staff happy, since it could take three to six months to find and train a new pastry chef. Since 2010, Lady M had experienced considerable growth, with sales growing at a high of 81% in 2013 (see Exhibit 2 for annual financial statements.) In addition, Lady M had seen net margins atypical of the restaurant industry; typically they run in the single digits but in 2013, Lady M had a profit margin of 11.4%. Lady M had been featured in many magazines, including Oprah Magazine, Harper’s Bazaar, and Vogue,