A Feasibility Report About Csc's Development

REPORT ABSTRACT

This feasibility report addresses these questions, “How should management prepare for this possibility about takeover?” “Should the company bide its time and wait for a potential buyer?” Or, “Should the company become more aggressive by making additional acquisitions?” The CSC is in the midst of a massive consolidation. It has recently been named as a probable target for a takeover. To solve this problem, the CSC should become more aggressive by making additional acquisitions not bide its time and wait for a potential buyer.

INTRODUCTION

Question

This feasibility report addresses and answers these questions, “How should management prepare for this possibility about takeover?” “Should the company bide its time and wait for a potential buyer?” Or, “Should the company become more aggressive by making additional acquisitions?”

Purpose

The purpose of this report is analyzing what should the CSC do when it faces a possibility of takeover. And analyzing the company should bide its time and wait for a potential buyer or become more aggressive by making additional acquisitions.

PREPARARION OF TAKEOVER

Country style may conjure up images of gravy, grits, and collard greens in the US but in China, Country Style Cooking (CSC) means a fast-growing, quick service Chinese restaurant chain. The company owns and operates 100-plus restaurants found mostly in Chongqing and Sichuan (menus feature popular Sichuan style dishes). CSC was formed in 2007 and filed to go public in 2010.

With a 54% jump in year-over-year sales to $48.1 million for the six months ended June 30, Country Style Cooking has clearly benefited from positive trends driving the Chinese restaurant sector such as urbanization and rising disposable income. The country's quick service restaurant sector grew at a 13.1% five-year CAGR to reach $69.4 billion in 2009 and is expected to hit $113.1 billion by 2014 (10.3% CAGR). Country Style Cooking targets 130 restaurants by the end of 2010 and expects increases in comparable restaurant sales as it expands delivery services, introduces a breakfast menu and streamlines operating procedures.

Though the chain has reported impressive historical results, it has a relatively short operating history and its aggressive expansion strategy carries execution risk. Country Style Cooking will also have to invest in its supply chain and incur other overhead costs as it maneuvers its transition to a larger company; operating margin fell 120 basis points in the 1H10 due to higher marketing expenses, share-based compensation and depreciation. Additionally, rising food and labor costs could pressure long term margins, which could also be negatively affected by new market entrants given relatively