Ratification of Bakery Chain Expansion Plan
The client wanted to open 12 new points. After our analysis, we limited the plan to the 7 most profitable locations. We saved about 280k PLN from being invested in unprofitable places.
Piekarnie Rodzinne Zych planned a quick jump from 5 to 17 locations within one calendar year. The Institute for Market Reforms conducted a rigorous financial assessment of each point, rejecting loss-generating sites.
The challenge
The company's board acted under time and emotional pressure, wanting to take the market before the competition. Twelve locations were identified in Warsaw and surrounding towns like Pruszków and Piaseczno. The initial cost analysis was incomplete. Real pedestrian traffic before 7:00 AM and drastic energy price hikes for artisanal points were ignored.
There was a risk that 5 of these locations would not reach the break-even point even after 24 months. (By the way, the owners were almost certain about the Piaseczno point until we compared hard data on the competition within a 250-meter radius). Without intervention, the company would have signed long-term lease agreements that would have frozen capital and blocked the entire chain's development.
Our approach
We sent a 3-person analytical team to conduct field audits. For 4 business days, we measured traffic at 7:15 AM and 4:30 PM at each of the 12 points. Our method is the Profit Roadmap. We compared rental costs, which averaged 147 PLN per meter, with the real purchasing power of the residents in the given district.
The rules are clear: we only invest where the margin covers fixed costs starting from the 4th operational month. We also checked the efficiency of ovens in current locations to assess whether central production could handle such a scale without buying machines for 84k PLN.
The solution
We prepared a document called Plan Ratification, which became the foundation of the board's decision. We blocked entry to the 5 weakest locations. We focused resources on the 7 points with the highest potential. We implemented a rigorous bread loss control system, which allowed for recovering 12% of the margin on every loaf.
No more board vetoes – every new location must now pass through the filter of our 8 profitability criteria. We also introduced a new scheduling scheme for staff, which lowered overtime by 19% per month.
Results
By giving up risky locations, Piekarnie Rodzinne Zych maintained liquidity and opened 7 profitable points. Avoiding contractual penalties and rental losses allowed for investment in modernizing the main bakery.
Timeline
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August 2024Field audit of 12 locations and measurement of pedestrian traffic.
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August 2024Development of the Profit Roadmap report.
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September 2024Plan ratification by the board and withdrawal from 5 lease agreements.
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October 2024Launch of the first 3 modernized sales points.
"The Institute for Market Reforms brought us back to earth. Instead of opening stores just for the sake of the numbers, we focused on what stays in the cash register. Their rigorous analysis saved us from a serious debt."