International Business – 200

3 February 2020

Levendary Café

Levendary café is an American fast-food chain with various stores in the United

Sates. It started off as a small food outlet in one of the streets of the U.S and soon grew

into a chain of outlets all over the country. Under the clear instructions of Howard

Leventhal, founder of Levendary Café, the company stuck to the policy ‘Satisfy the

customer and let the profits flow’. Its employees would go out of their way attract the

customers and ensure that they would come back. Working closely with the chief

operating officer Nick White, Howard was able to witness the growth of a single store to

a chain of outlets across the United States competing against giants like McDonalds

and Wendy’s.

The company was generating good profits, but it had almost exploited the local

market and had little room left to grow. The management started looking around to

increase the growth of the company. After considering several possibilities, it was

decided by the board to enter into the Chinese Market.

Before being replaced by Mia Foster as the CEO of the company, Howard

assigned the China project to Louis Chen who had some experience in the Chinese

Market. The first store opened in Shanghai, in a high traffic business area. However, the

company overall suffered a net loss in the first year. Soon, with the help of his

knowledge of the Chinese market, Chen was able to open 22 additional stores across

China.
 In the process of this rapid expansion, Levendary café lost its true identity. In

almost all of the stores in China, it no longer served the same soups or salads and did

not even offer any of the trademark recipes. Rather, the menu was similar to a

traditional Chinese restaurant with dumplings and Thai soups. Most companies have a

unique setup or layout of their stores all over the world. These new stores in China were

just some Chinese restaurants under the name of Levendary Café. The quality of the

food was not up to any standards nor was the furniture around the store any good.

Chen was running the business all on his own and was not providing any conclusive

reports to the headquarters in Denver. There was absolutely no standardization. The

stores were customized to an extent where they became just another Chinese

restaurant. Chen did have experience in the Chinese market but in the real estate

department. Due to that, he was able to get prime location for the stores but did not

have the skills to run them according to the standards.

At last, Chen was also not careful about the finances which put the whole

company at risk. He was not clinging to GAAP and it was possible that his reports were

not precise. They were not comparable to the operations in the US. Resistance to

GAAP would result in administrative issues which could largely impact the share-value

of the company.

By an outside view of the situation of Levendary Cafe, it is clear that the project

of the expansion in China was initiated without any prior knowledge of the market or a

strategy. Chen was handed the responsibility along with the independence of entering

into the Chinese market. The management in the US did not have any experience of

international market while Chen lacked experience in the food business. This led to a
troublesome start of Levendary Café in China. To bring things back on track, instead of

keeping all the stores under himself, Chen should start franchising Chinese stores as is

the case in US where almost two thirds of the stores are franchised.

It is true that the Chinese culture is different from the US, so some customization

is necessary to adapt to the market. However, company executives should approve of

any customization in order to maintain the brand image of wholesomeness. Moreover,

the layout of the cafes should be standardized throughout which would be under the

control of the management in America. This would work best as the tastes are different

in China but the appeal for American brand is high and the uniformity of the store

appearance could provide the American brand image.

There is also a need for change in organizational structure to ensure that large

and rapid changes are not brought without any approval from the board and to make

sure that the franchises and company owned stores in China are operated under the

policies laid out by the management. This would be like a fresh start for Levendary café

in China and it might take some time to generate profits. However, feedback from the

mangers of each store would be very important as there would be a lot to change even

after careful planning. As no one has complete experience of the market, the

management will have to learn from their mistakes in order to grow. Chen and Mia have

to find a common goal and work together towards achieving it.

Chen’s idea of growth into the Chinese market has not been in line with the

company policy. Instead of taking drastic measures, the company should start off with

trying to change a couple stores at a time and receive feedback on the changes. First

off, they should renovate the appearance of the store in order to make it look appealing
and a true representation of the company’s brand. Then there should be some

customization in the menu where the store’s trademark recipes should be added along

with the local taste. The response to these changes is very important as this would be

the bases of further growth and would help the company in reshaping the other 20

stores throughout China. The growth objective should also be set up where the

management should decide on further expansion in the Chinese market. The company

should also focus on the financials in China and implement standard reporting of

Chinese operations to the US headquarters. This would include GAAP financial, audits,

budgets and other strategic plans. As mentioned before, it would be a fresh start and in

a short time, it would show positive results.

Works Cited:

“Levendary Cafe in the USA.” Acasestudy.com, 3 Jan. 2019,

acasestudy.com/levendary-cafe-case-study/.
Harvard Business Publishing, hbsp.harvard.edu/product/4357-PDF-ENG?
itemFindingMethod=Collections.
“Levendary Café: The China Challenge.” Prezi.com,
prezi.com/xpbnwyikgbzf/levendary-cafe-the-china-challenge/.