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Our client, CaféNova, is a European specialty coffee chain that entered the U.S. market five years ago. Despite strong brand recognition in Europe, CaféNova has failed to achieve profitability in the U.S. The company currently operates a mix of urban flagship cafés and suburban mall locations but continues to post operating losses. They’ve hired our firm to understand why the U.S. operations are underperforming and to recommend how they can either turn the business around or decide whether to exit the market.
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Sample answer from an expert consultant
1. Market & Customer Fit
- Market Attractiveness: U.S. coffee market size, saturation, and local competition (Starbucks, boutique chains).
- Customer Preferences: Are products, pricing, and format aligned with U.S. consumer expectations (on-the-go culture, large portions, iced drinks)?
- Brand Positioning: Does the “European premium” image resonate, or does it limit reach?
2. Store Economics & Operations
- Revenue: Foot traffic by store type (flagship vs. suburban), pricing, and average ticket size.
- Costs:
- Labor — high wages, overtime, and turnover.
- Rent — expensive flagship leases.
- COGS — imported ingredients vs. local sourcing.
- Utilization: Are stores and employees fully productive, or are we overstaffed/underutilized?
3. Strategic Options
- Fix:
- Shift to smaller suburban format with lower rent and lean staffing.
- Localize menu and pricing.
- Introduce tech and automation to cut labor needs.
- Exit:
- Assess closure costs, reputational risk, and redeploy capital to stronger European markets.
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