Deluxe Chicken (DC) was established in 1989 by Sebastian Bony. It sells delicious rotisserie-cooked chicken with fresh vegetables
accounting
Description
II. Deluxe Chicken Inc. (INDIVIDUAL Report only, 50
points)
Deluxe Chicken
(DC) was established in 1989 by Sebastian Bony. It sells delicious
rotisserie-cooked chicken with fresh vegetables and other side dishes through
its own stores and franchisee stores, just like Kentucky Fried Chicken (KFC).
According to Seb, DC’s strategy is to be “a home meal replacement” in the New
England and Mid-Atlantic regions. DC went through an impressive expansion. At
the end of 1991, the firm operated only 34 stores, with no franchisee stores.
But by the end of 1994, the total of stores (company-owned stores and franchise
stores) had increased to 534 (491 were franchise stores). It was estimated that
DC’s franchise store can easily break even if its weekly average revenue per
store is higher than $23,000. According to Reuters, its stock price had risen
steadily from $8 in November 1993 to $23 in March 1997.
DC’s auditor is a
prestigious Big-8 accounting firm, Firehouse Young LLP. The 1994 and 1995
fiscal year financial statements below were all audited numbers, but the 1996
numbers were unaudited.
DC’s excellent
performance also impressed the Street.
Stock analyst Mike Foster of Silverman Sterling forecasted that
DC’s EPS would grow at an annual rate of around 35% between 1997 and 2001 and
gave a “strong buy” rating. It was rumored that the wealth management division
of Mohan Stanley took a passive 3%
stake in this firm. Many hedge funds followed the rumor and added DC’s shares
to their portfolios.
