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Should Great Burger acquire Heavenly Donuts as part of its growth strategy?

Our client is Great Burger (GB) a fast food chain that competes head–to-head with McDonald's, Wendy's, Burger King, KFC, etc.

Description of Great Burger
GB is the fourth largest fast food chain worldwide, measured by the number of stores in operation. As most of its competitors do, GB offers food and "combos" for the three largest meal occasions: breakfast, lunch, and dinner.

Even though GB owns some of its stores, it operates under the franchising business model with 85 percent of its stores owned by franchisees (individuals own and manage stores, pay franchise fee to GB, but major business decisions (e.g., menu, look of store) controlled by GB).

McKinsey study
As part of its growth strategy GB has analyzed some potential acquisition targets including Heavenly Donuts (HD), a growing doughnut producer with both a U.S. and international store presence.

HD operates under the franchising business model too, though a little bit differently than GB. While GB franchises restaurants, HD franchises areas or regions in which the franchisee is required to open a certain number of stores.

GB's CEO has hired McKinsey to advise him on whether they should acquire HD or not.

1. What areas would you want to explore to determine whether GB should acquire HD?

The team started thinking about potential synergies that could be achieved by acquiring HD. Here are some key facts on GB and HD.

Exhibit 1

|Stores |GB |HD | |[pic]Total |5,000 |1,020 | |[pic][pic]North America |3,500 |1000 | |[pic][pic]Europe |1,000 |20 | |[pic][pic]Asia...
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