Exploring the Potential of Western Casual Dining Concepts in China
Services Provided: Due Diligence
The Challenge
A prominent Chinese financial institution was considering a private equity investment in an Asian-based Western casual dining concept in China. Despite the disappointing results so far, the client believed there was enough potential to move forward with a due diligence exercise.
Our Solution
Our restaurant consultants were retained as expert advisors to a Private Equity client and worked closely with a global consulting organization to complete a large due diligence exercise in both China and South Korea within a 45 day time constraint. We offered foundational analytical guidance tailored to the restaurant industry, enabling reliable benchmarking against both local and global competitors.
We evaluated the opportunity within a three week window through three distinct approaches:
Ability of the current management team in China to execute the business plan
The overall concept acceptance with local consumers in selected Tier 1 and Tier 2 cities
The store-level economics
Results
We found many red flags during the analysis and evaluated the investment to be very high risk closer to a venture capital deal than a private equity investment. Consequently, we recommended the client proceed with caution by making small investments to verify the overall concept's economics before committing significant funds.
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