Señor Sisig Hungry for Growth in Food Truck Industry Case Strategy Analysis

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You will be required to prepare written analyses of the Señor Sisig cases.No outside research on this company or its industry should be conducted as part of this assignment.Information taken from the case should be undertaken with enough interpretation & evaluation to develop a comprehensive analysis.

Outstanding papers will include the following characteristics:

1. exceptional coverage of case questions 2. clearly demonstrated logic and rationale, 3. discussion supported by appropriate analytical, self-developed, exhibits, 4. arguments that utilized quantitative analysis to support conclusions, 5. demonstrated understanding and appropriate application of strategic business frameworks & concepts, 6. clearly delineated decision criteria, 7. recommendations logically extrapolated from findings and 8. remarkably well organized and written.

Each of these written reports should be a maximum of 1800 words in length (use Times New Roman 12-point font, double-spaced, 1-inch margins) plus analytical exhibits.Note that analytical exhibits refer to support materials that you prepare (not exhibits from the case).

Exhibits should be numbered and titled.Exhibits should be referred to in numerical order. Exhibits should not be generic in nature.Please place your name and word count of the text portion in the upper left on the first page (no other cover page should be used).Writing mechanics and structure are expected to be at a high level. (Hints: Business writing tends toward short, precise sentences.Paragraphs are highly focused.)You should use a grammar and spell checker.This case analysis is worth 20% of your grade.Papers must be submitted on TurnItIn prior to class.Assignments noted as received after the beginning of class will be penalized.You should not attend class on the due date if you have not already submitted the assignment. Please have a paper or electronic copy available, if needed, for class discussion.There should be no collaboration or discussion of this assignment prior to class (other than that facilitated by the Professor).Further, be sure that your colleagues have completed these assignments before discussing the material with them.


CASE ATTACHED. Please add decision matrix, financial statements, and exhibits that show what strategies you took into consideration.

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For the exclusive use of F. GALVAO, 2019. NA0441 Señor Sisig: Hungry for Growth in the Food Truck Industry Evan Kidera, Señor Sisig Armand Gilinsky, Jr., Sonoma State University Jeffrey P. Shay, Washington & Lee University Sally Baack, San Francisco State University I feel like we have done a great job in establishing who we are in the San Francisco Bay Area food truck industry. I think we have built our brand, product, and customer loyalty to a level that would be hard for rivals to match, at least from a food truck standpoint. My biggest concern is competition from a bricks-and-mortar restaurant. We have seen other restaurants play around with our food concepts on their menu, but no one has directly imitated our whole concept yet and it’s only a matter of time before this happens. There is a definite opportunity to open a bricks-and-mortar with our concept and we would have a huge advantage if we could do it before someone else does. We have the brand and product already; we just need to find a location and the capital to make it happen. I don’t want to let this opportunity pass by and become a threat to our business. — Evan Kidera, founder, Co-owner, and CEO of Señor Sisig, in 2013.1 On a brisk evening in late September 2013, Señor Sisig’s founder, co-owner and chief executive officer (CEO) Evan Kidera arrived at a company “viewing party”, held at a popular food truck park in San Francisco. Hundreds of friends, family and followers gathered in a large barn in the middle of the park to watch Señor Sisig be featured on one of the Food Network’s top-rated television shows, Diners, Drive-ins, and Dives.2 Excitement was in the air as the group of people hurried to find their positions in front of one of the big screen televisions. As the TV show began, Kidera stepped out of the barn and took a moment to reflect on what his business had accomplished and what national media attention might mean for the Señor Sisig operation. He knew that he had some critical decisions to make in the near future about the direction of the company. ----------------------------Copyright © 2017 by Evan Kidera, Armand Gilinsky, Jr., Jeffrey P. Shay, Sally Baack, and the Case Research Journal. This case was prepared by Evan Kidera, Professor Armand Gilinsky, Jr., Sonoma State University, Professor Jeffrey P. Shay, Washington & Lee University, and Professor Sally Baack, San Francisco State University as a basis for class discussion, not to illustrate effective or ineffective handling of an administrative situation. The authors would like to thank John Lawrence and the anonymous reviewers of the Case Research Journal for their insightful comments on the drafts of this case. This case was originally presented at the 2014 North American Case Research Association conference in Austin, TX. Señor Sisig: Hungry for Growth in the Food Truck Industry 1 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Señor Sisig’s business produced and sold Filipino fusion food from a food truck. Since its conception in 2010, the business experienced rapid growth in sales and brand awareness. It won the “Best Food Truck” award three years in a row from SF Weekly, and was considered one of the most iconic food trucks in the Bay Area, with customers waiting in line for up to an hour to try its food.3 Despite this early success, Kidera believed the feature on the Food Network would raise the brand awareness of Señor Sisig to a new level and create pressure to take advantage of opportunities to grow in the near future. While he listened to the loud cheers and applause from the viewers in the barn, Kidera became anxious about the opportunities and challenges Señor Sisig faced moving forward. From the time of its founding, Señor Sisig grew from one food truck to three food trucks, however, the business infrastructure remained relatively the same. Over the past few months, Kidera had corresponded with a few commercial realtors about prospective locations to open a bricks-and-mortar restaurant. He’d also considered a proposal from a commercial food packager to package Señor Sisig’s product to sell in retail stores like Costco and Whole Foods. Kidera believed the timing was perfect to move forward with one or more of these opportunities, however, he was worried that Señor Sisig was growing too fast and might not retain its distinctiveness if more locations were added or new formats were developed. His partner and friend, Payumo, had said, “We don’t want to take too big of a step… we want to take a baby big step.” Mindful of the need for capital to bring any of these opportunities to fruition, Kidera did not want to lose control of his company, in which he owned a 70 percent stake. Kidera wondered aloud: “Should we pursue any of these opportunities to grow the business? What factors should be taken into account in choosing among these options? What internal changes might be needed to position us to take advantage of these opportunities?” THE FOOD TRUCK SEGMENT According to two food industry analysts for IBISWorld, the food truck segment not only grew in number from 2009 to 2014, representing a five-year sector revenue growth rate of 12.5 percent, but also became one of the best-performing segments in the broader food-service sector, reaching $803.8 million in revenues, $70.7 million in profits, and 3,915 enterprises by the end of 2014. Changes in consumer preferences to favor unique, gourmet cuisine at budget-conscious prices in cities such as Portland (OR), Los Angeles, and Austin, was said to be driving sector growth. IBISWorld estimated that the industry would continue to grow by 4.2 percent annually from 2014 to 2019. See Table 1 for IBISWorld’s forecasts for the food truck segment from 20142019. Table 1 — Food Truck Industry Forecast, 2014-20194 Revenue Growth # of Year $ millions rate, % Enterprises 2014 803.8 3,915 2015 856.7 3.5 4,042 2016 889.5 3.8 4,102 2017 926.9 4.2 4,207 2018 955.9 3.1 4,222 2019 975.7 2.1 4,139 2 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Most food trucks were owner-operated and did not employ any workers. The top four food truck companies were reported by IBISWorld to account for less than 5.0 percent of industry revenue in 2014. IBISWorld also forecasted that the average firm would earn a profit margin of 9.0 percent in 2015, an increase from 7.6 percent in 2010 and 8.8 percent in 2014. See Table 2 for IBISWorld’s comparisons of costs and profits in the food industry as a whole versus the food truck segment for the calendar year 2014. Table 2 — Cost and Profit Comparisons, 20145 Food Food Truck Industry Segment Wages 22.2 37.5 Purchases 39.1 36.0 Depreciation 4.2 1.8 Marketing 2.8 1.8 Rent & utilities 7.5 8.9 Other 17.1 5.6 Profit margin 7.1 8.8 In regards to segmentation within the food truck sector, the IBISWorld analysts estimated that 38.3 percent of all food trucks across the U.S. specialized in American cuisine, 24.6 percent Latin American, 18.1 percent Asian and Middle Eastern, 9.4 percent desserts, and 9.6 percent other items. By 2014, Hapa SF, a San Francisco-based food truck, had become a mainstay in the city with its organic Filipino offerings such as lumpia and adobo. Renée Frojo, a reporter for the San Francisco Business Times, observed the food truck scene in that city: Whatever the reason, a low barrier to entry has allowed hundreds of entrepreneurs to jump into the driver’s seat in the industry. But with long hours, steep competition, a long legislative process and unproven success rates, some are beginning to wonder if the payoff is worth the struggle. If done right, owning a food truck can be a fairly lucrative gig for some owners. According to Off the Grid’s Matthew Cohen, most trucks are making annual revenue of around $250,000 to $500,000, while the top 25 percent bring in upwards of $1 million. But at the end of a food truck’s very long day, Cohen said, making money isn’t the biggest reason people get into the industry. “It’s the passion for food.”6 Numerous challenges still lay ahead for the food truck segment. Despite strong industry-wide performance, food truck operators were restricted by municipal regulations, increased competition, and low profit margins. Laws governing food trucks differed between cities, with most specifying the hours during which food trucks could operate and the distance they needed to be from the nearest bricks-and-mortar restaurant. As food trucks competed directly with the broader food service sector, some bricks-and-mortar establishments lobbied against the entry of food truck operators. In some cities, particularly those located in the Southwestern states of the U.S., the food truck segment had begun to reach a saturation point, resulting in lower profit margins for some operators. Señor Sisig: Hungry for Growth in the Food Truck Industry 3 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. EVAN KIDERA Kidera founded Señor Sisig in 2010. Kidera, then 27, grew up in a family of entrepreneurs and chefs. His father had been a sushi chef working for other people, but he had always talked about opening his own restaurant – which he ultimately did. After graduating college with a B.A. in Entrepreneurial Small Business Management, he took an entry-level warehouse management position with the University of California San Francisco (UCSF). After three years with UCSF he was frustrated with the lack of opportunity to grow within the organization. He decided to pursue an MBA, with the intention of furthering his career as a business manager. He recalled: I wanted more responsibility and freedom to make important business decisions. Growing up, my father was a huge influence on me. I saw the respect people gave him as an entrepreneur and the freedom he had being his own boss…I wanted that. I was extremely motivated to make a difference somewhere or somehow and I believed obtaining a MBA would give me the best chance of obtaining a position where I could make that difference. After a year in the program, it became clear that my personality would always be frustrated as an employee; I had to be the boss. Kidera left his job at UCSF in June of 2008 to focus on school and travel. Some months later, while visiting a friend in Los Angeles, he drove past a taco truck called Kogi that sold “Korean barbecue tacos”, which was all the rage on Twitter and other social media. He immediately pulled over to take a closer look. He remembered: It blew my mind that there were 50 plus people standing in line for a “taco truck” at 5pm. I never had seen anything like it. In my mind “taco trucks” were a dirty after-hours food option for drunk people. I asked a lady in line what the big deal was, she told me “it’s the best thing I have ever ate, best invention ever”. All I could think about for the rest of my trip was if this concept was something that could work back home in San Francisco. Upon his return to San Francisco, Kidera immediately focused all his time and energy towards researching the mobile food facility (MFF) industry. He laughed: “the city of San Francisco knew very little about this industry and getting information and answers from them was like asking an old dog to do new tricks. It was frustrating, but I knew that if I could teach the old dog a new trick, everyone would want to see it.” A NEW CONCEPT In November 2009, Kidera decided to bring a partner into the business. Gil Payumo, a Filipino-American and long-time friend, was an experienced chef and interested in owning his own business. Payumo’s parents owned an Asian grocery store, and after school Payumo was often in the store helping out his family business. Payumo’s uncle owned a Filipino restaurant in San Francisco. Payumo had always been around that business as a child, helping out on weekends. Payumo eventually went to the Culinary Academy Cordon Bleu program for two years. He had established a stable, successful career moving up in his chef’s career working in various restaurants and hotels. Although he felt that was in a good position career-wise, he didn’t feel completely fulfilled working for others. 4 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. The two men found they had similar interests and complementary talents. Just as important, Kidera trusted Payumo and felt they shared the same vision. Kidera recalled: We both wanted to work for ourselves and we both shared a common respect for food. At the same time, I didn’t want to be a chef and Gil didn’t want to be a business manager, so together we would make one heck of a team. Gil would man the grill and I would steer the wheel. Kidera felt it was important to give Payumo ownership in the business to keep him motivated. They agreed to share ownership of the new company, with an ownership split of 70/30 for Kidera and Payumo, respectively. This split was based predominately on the start-up capital both men contributed. Kidera was not interested in dividing the business ownership 50/50. Kidera explained: Growing up, my father always told me to never go into business with someone else. He had a couple of bad experiences with partnerships and didn’t want me to follow the same mistakes. I remember one time as a kid, driving around the city looking for some guy because he owed my Dad money. Dad said never, ever, ever go into a partnership with someone. It was hard for me start a partnership because of this, but I felt that we had a better chance to succeed together. Plus I had seen how Gil lived his life and had approached his career, and I knew he was reliable. I looked back at my father’s mistakes and believed that he failed to define the terms of ownership. I felt a 70/30 ownership split would give me more control over the vision and direction of the business. Our agreement defined how any situation that occurred would be handled to prevent any disagreements in the future. Payumo recalled telling Kidera, “Evan, you’re the guy with the MBA, you run the business side, you make the business decisions. I’m the chef, so I’ll run the kitchen and make the food decisions.” The founders incorporated their business in June 2010, selecting the name Señor Sisig. The name represented the Filipino-Mexican fusion concept of its food. Señor in Spanish means “sir”, and Sisig is a traditional Filipino dish that was used in most of its menu items (see Exhibit 1). Kidera explained the logic behind the concept: We felt that Filipino food was being neglected and saw it as an opportunity. When you think of Asian food, you think of Japanese, Chinese, Thai, Korean, Vietnamese, not Filipino. We felt that people in general were not fully comfortable with the idea of Filipino food yet and that they would be more interested and open to try Filipino food if it was in a familiar form…like a taco or burrito. We used Gil’s family secret Sisig recipe as our core ingredient. Primary ingredients (meats) were marinated for 48 hours and hand chopped before they were seasoned a second time to become extremely flavorful. We were confident that we could initially attract the large population of Filipinos in the Bay Area with this concept and hoped that the word would spread so that more Non-Filipinos would try our food as well. We wanted to be a pioneer of Filipino food and make it something new and fun for people to experience. Exhibit 2 shows the philosophy, history, and timeline of Señor Sisig’s growth as a MFF venture. Señor Sisig: Hungry for Growth in the Food Truck Industry 5 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. EARLY DAYS IN SAN FRANCISCO In May of 2010, Kidera met a man named Matthew Cohen. At the time, Cohen was in the process of starting a business called Off The Grid Services, LLC (OTG). The OTG concept provided food truck businesses, like Señor Sisig, a location to sell their food in San Francisco. Cohen realized that more individuals were looking to enter the industry, however, the laws in San Francisco drastically limited the opportunities for a MFF to sell. Cohen recalled: In 2008 we started to see innovative “gourmet” food truck concepts arrive in areas like Los Angeles. You can point to the recession as the reason for this. Gourmet chefs and business managers were losing their jobs and looking for opportunities to make money somehow. The start-up costs of a food truck are relatively low compared to that of a restaurant and the demand for good “gourmet” food at a reasonable price was high, because people couldn’t afford to go to the high-end sit down restaurants anymore. It made perfect sense. The same “gourmet” burger that cost $25 at a restaurant could now be purchased for $10 at a food truck. It was a win-win situation for business owners and consumers. 7 Prior to establishing OTG, Cohen envisioned opening his own food truck business but was turned away after he realized that the laws and regulations were out of date and that it would be extremely hard to enter the industry. In June of 2010, OTG opened its first market at the Fort Mason Center in San Francisco, which was where Señor Sisig made its grand opening. OTG made money by charging vendors a $50 base fee plus 10% of its gross sales during each service. According to Cohen, since its conception, OTG had grown to 36 markets around the Bay Area by 2013, OTG planned to have 60 markets opened by 2014. Other companies had also started similar “food truck markets” with similar pricing structures in San Francisco, but on a smaller scale compared with OTG. In 2011, San Francisco updated the laws and regulations for an MFF applying for a public permit to sell. The new ordinance allowed an MFF to apply for any location that was not within 300 feet of similar or “like” food.8 The application and processing fee depended on the location and ranged from $2,000 - $3,000. Señor Sisig took immediate advantage of the changes in the law and applied for permits in areas with high foot traffic in San Francisco. Kidera said emphatically: This was a game changer for us. Prior to the changes in the law, we were 100% dependent on OTG markets to operate. That limited our growth because there were only so many markets we could be a part of. It was also costly paying a 10 percent fee on everything we sold. The night before the law change went into effect, I slept outside the application office with 20 other business owners to assure we got the permits we were applying for. They were taking applications on a first-come first-serve basis, and we were approved for three permits in extremely profitable areas in San Francisco. This allowed us to buy our second food truck and expand the business. Owing to the growth of these “food truck markets” and the changes in MFF laws and regulations, the number of new food truck entrants grew exponentially. In 2009, there were approximately 10 to 15 food trucks permitted to operate in San Francisco, which increased to more than 80 in 2012.9 The majority of the growth in this industry 6 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. occurred between 2010 and 2012, and in 2013 the industry started to enter the mature stage with fewer food trucks entering the industry and some exiting the industry. In 2013, another change was made to the MFF laws and regulations to limit the number of permits granted going forward.10 This change was made so that there was not a food truck on every corner of the city. For Señor Sisig this meant that it possessed relatively exclusive rights to its already permitted locations because competitors were now blocked from or would find it very difficult to obtain permits for existing permitted locations. TARGET MARKET Señor Sisig’s offered innovative and quality “to-go” food with fast and friendly customer service at a price point that was at a slight premium compared with similar food truck offerings. Señor Sisig charged a premium for its product because it was the only restaurant in San Francisco that offered Filipino-Mexican fusion food. Its price points were $4 for a Sisig Taco and $8.75 for all other items on the menu. It also offered a fun option of adding an egg to any item on the menu, aka “silog it”, which was a popular option for its customer group. Señor Sisig was a mobile business. Its target market changed regularly, depending on the time and location. During weekly lunch hours of 11:00 am to 2:00 pm, it targeted areas with a dense working class population such as the South of Market (SoMA) district and Financial (FiDi) district in San Francisco. During weekly dinner hours of 5:00 pm to 9:00 pm, it targeted areas with families and mid-high income residents. Most weekly dinner services were in conjunction with OTG. On the weekends, it targeted areas with high foot traffic and complementary attractions like shopping malls or a special event. When Señor Sisig first started, it focused on the Filipino population as its primary customer group. As it grew in the number of locations and reputation, Señor Sisig expanded its target market to the working class, families, tourists, and local residents as well. Kidera explained: As the industry and the locations we can serve from have grown we have been able expand our target market dramatically. We now see people of all ages and ethnicities coming to try our food. Our prime permitted locations are a huge part of our success but I believe it’s our product that sets us apart from the competition. We have something you can’t get anywhere else and have created a brand around it that people can relate to. It’s the full experience. COMPETITION Señor Sisig did not have any direct competitors in the Bay Area. However, Señor Sisig competed indirectly with other food truck operators in San Francisco and Los Angeles and a bricks-and-mortar restaurant in San Francisco. The first competitor was a food truck in San Francisco called Hapa SF. Hapa SF opened its business at the same time as Señor Sisig in 2010 and promoted its cuisine as “modern organic Filipino food.” When both businesses entered the market in 2010, both were primarily known as food trucks that sold Filipino food and competition was high. However, Señor Sisig’s offerings and brand soon became the more popular choice and the competition dwindled. Hapa SF later imitated items similar to those of Señor Sisig: Hungry for Growth in the Food Truck Industry 7 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Señor Sisig’s (e.g., sisig tacos and burritos) however; the effect on Señor Sisig’s business was minimal. The second competitor was a food truck in Los Angeles called White Rabbit, which offered the same concept of a Filipino fusion food truck. White Rabbit, like Señor Sisig, was a popular eatery among the food truck industry in Los Angeles. Although both companies targeted the same customers, White Rabbit targeted a different geographical location and did not have plans to open up for business in the San Francisco Bay Area. Another indirect competitor was a bricks-and-mortar restaurant in San Francisco called Papalote, a popular Mexican grill restaurant that was testing Filipino/Mexican fusion concepts on its menu by offering special one-day only items. Although the fusion items were not regular offerings, Papalote could potentially use its popularity to offer Filipino/Mexican fusion food under a different business name. In 2013, Señor Sisig acquired and opened its third food truck, and its demand continued to grow. Despite all signs pointing up for Señor Sisig, Kidera remained concerned about his competition. MARKETING Señor Sisig had established a brand name on an annual marketing budget of approximately $500. Instead of relying on high-priced print, radio, or television advertisements, the company leveraged social media to build brand awareness. Kidera explained: We found social media sites like Twitter and Facebook to be an extremely cost effective marketing tool that allows us to engage with our customers and build our brand image. Our mission is to give the customer a full experience and that starts and ends with social media. It starts by them taking the time to locate us through our website or a social media site that they follow us on. Once they find us and experience the tangible part of waiting in line and eating our food, it ends by them the telling all their friends by posting a picture on Instagram of their food from Señor Sisig. Señor Sisig used four main social media platforms, Twitter, Facebook, Instagram and Email. Its combined reach between these platforms was 17,646; broken down as follows:  Twitter: 7,879  Facebook: 5,012  Instagram: 3,590  Email: 1,165 In August of 2013, Señor Sisig invested $4,000 to build a new website for the business that was mobile friendly and visually appealing. As Kidera explained, this was very important for Señor Sisig: We were under the assumption that most people found us through social media. However, we did some analysis and found that our website was being visited extremely frequently. Most of the views were from mobile phones before and during our scheduled shifts. This meant people were trying to find us on the go. We decided that we had to make a mobile friendly website that was easy to navigate and visually appealing like a Facebook or Twitter, so that our customers could have access to all our information at their fingertips. 8 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. ORGANIZATIONAL MISSION, VALUES AND CULTURE Señor Sisig’s mission was “To be a pioneer of Filipino food by means of providing a unique and memorable customer experience through innovative and quality product offerings accompanied by excellent customer service”. Kidera explained: We want it to be an experience every time you come to our food truck, whether it’s you first time or you are a regular. It’s the fun part of finding where we are, the anticipation of waiting in line, the warm welcome you receive when you order and the unique blend of flavors you experience with your meal. It takes a total team effort to accomplish this and I think we do a pretty good job. From early on, the company highly valued the quality of its products and the customer experience. As shown in Exhibit 3, the company paid close attention to all customer feedback and relied heavily on public review sites like Yelp. 11 If there was a bad comment, for example, “the chips were stale” or “the cashier was rude”, Kidera would send an email out to all the staff with the review and ask them to remember to check the chips before each service or remember to welcome its customers with a smile and good attitude. He would also contact the customer directly and apologize for their unpleasant experience as well as offer them a free item the next time they visited. At times, working on the truck could become extremely stressful for the employees and keeping a good attitude was easier said than done. Its first two food trucks were made in the 1990’s and problems would frequently occur. Examples ranged from the time there was a flat tire on the freeway to the time a battery died after a 12-hour day. And, one time the deep fryer stopped working in the middle of a service and the water ran out. After the first year of dealing with these types of stressful situations, Kidera started using the saying, “truck life”, as a way to keep a positive attitude about the uncontrollable circumstances that happened at work and could potentially stress out him or employees of the business. Kidera remarked: It’s key for all of us to be having fun and to be happy while at work because that’s a huge part of the customer experience. If we are rude to a customer that has been waiting in line for an hour to order, it’s going to be really hard to make that customer experience a good one with just our food, no matter how good it is. I started using the saying “truck life” as a personal tool to brush off hard situations we would deal with and our staff just caught on, it’s a huge part of our culture now. It’s funny because I hear other food truck owners that heard it from us using it now. OPERATIONS Señor Sisig grew extremely rapidly over its first three years in business, and an ongoing challenge was to update its infrastructure to support that growth. Kidera explained: When we opened for business we didn’t think about the infrastructure much because we had one food truck with one employee. It was simple, Gil handled all the cooking and I handled all the business. As it grew, we just took on more responsibility and made it work. Now that we have three trucks and 13 employees, I feel like I’m always chasing my tail. Señor Sisig: Hungry for Growth in the Food Truck Industry 9 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Organizational Design Señor Sisig’s operation was separated into two main functions, the kitchen department and the truck department (see organization chart in Exhibit 4). The kitchen department, located in Daly City, California and also known as the commissary kitchen, was where all the food preparation took place. The truck department, located seven miles away in San Francisco and also known as the “parking lot,” was where the food trucks were stored overnight. The main office, which is where Kidera was most of the time, was five miles from the parking lot and 11 miles from the commissary kitchen. The kitchen was located in the back of a bar and lounge, which the owner was interested in renting out because he was not using it. It was a 1,000 square foot space, for which Kidera negotiated a $2,000/month lease on a month-to-month basis with all utilities included, back in 2011. He recalled: When we first opened in 2010, we were sharing a small kitchen space in San Francisco with several other businesses and it was a nightmare, so when we found this place it was perfect. At the time, we only had the one truck and this was more than enough space to produce our product. We didn’t have to share the space with anybody else and the monthly rent was a steal for what it was. The kitchen department consisted of three full-time employees and two-part time employees. Both Kidera and Payumo oversaw the daily duties of the kitchen department. However, since Kidera worked most his hours from the main office or in the field and Payumo worked all his hours on the food trucks, both were able to spend only a few hours a week physically on site and managed the department predominately through phone calls and text messages. The use of the kitchen was close to capacity and the company was going to need more space in the near future. The truck department was a shared parking lot, in which Señor Sisig rented three parking spots and two shipping containers for storage. Each parking spot cost $450 a month and each storage container cost $500 a month for a total monthly rent of $2,350 a month. This included unlimited use of water and electricity. Señor Sisig paid for trash independently at a rate of $500 a month. Its main office cost was $500 a month. The truck department consisted of two full time truck managers, three full-time employees and three part-time employees. Positions included truck managers, cashiers, grill (lead) cooks and line cooks. With the addition of the third truck, the company was short-staffed and needed to hire another person for each of its positions. There was urgency to hire new employees because the business was spending $450 every month to store a truck that was not being used. However, Kidera felt uncomfortable about hiring new employees right away. He recalled: We continued to operate based on a lot of assumptions that we had made over the first three years. Based on those early assumptions, I wasn’t sure if we could continue to grow at this rapid rate. We needed to look at every aspect of our business and question if it could be improved before we brought new people in. Hiring employees was a challenge with no clear job descriptions or company hierarchy. Employees were often confused about whom to report to because both Kidera and Payumo were the owners of the business. Kidera admitted that he also struggled with delegating responsibility to others in the company (see job descriptions of staff in Exhibit 5). 10 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. The Marinating Process Señor Sisig’s marinating and preparation process was extremely labor intensive. Kidera explained: We marinate the meat for 48 hours in a blend of soy sauce, vinegar, lemon juice and other spices. We then charbroil it to add a smoky flavor to the meat. We hand chop the cooked meat into bite size pieces and then mix in a final seasoning for enhanced flavor. It takes a lot more time and money to make our Sisig than it does to sprinkle salt and pepper on a piece of beef, but that’s the value in our product. What we failed to account for in the beginning was how much extra time and energy it would take to produce our Sisig in bulk once we grew. When Señor Sisig opened for business in 2010, on average it marinated 200 – 300 pounds of meat per week. By 2013, meat purchases averaged 2,000 – 2,500 pounds per week. In 2011, when business started to pick up, both owners realized that it couldn’t produce that type of volume from its kitchen anymore. Luckily, a friend who owned another food truck introduced them to a company called Wycen Foods, which was a USDA certified food-processing and packaging company that had commercial equipment to produce Señor Sisig’s product in bulk. Kidera recalls: At the time, we were struggling to meet the demand for our product, it was perfect timing. The commercial marinating machines they use added more flavor to the meat than it had when we did it ourselves, and the flavor was the same every time, which was something we were struggling with before as well. By outsourcing this process, we cut our production responsibility in half and created a more quality and consistent product. Wycen charged approximately $1 extra on the price of meat per pound to provide this service for Señor Sisig. The marinating machine that they used to produce the product cost approximately $15,000 - $20,000. After a year using this service Kidera considered purchasing a commercial marinating machine for the business and bringing the process in house. He explained: I started to do the math; if we bought a commercial marinating machine for $20K, we could save more than $100,000 annually. Then I started to think about the space, the ingredients, the employees, the insurance, the maintenance and the systems we would have to purchase and manage to make this work efficiently. We might end up saving a little money annually but it wasn’t worth the time, energy and liability. It’s still a long-term option but why fix something that’s not broken. Supply Chain Compared to other businesses in its industry, Kidera believed that Señor Sisig had built what it believed was an effective supply chain (see diagram of the supply chain in Exhibit 6). Suppliers delivered all materials to either the commissary kitchen or the parking lot, both of which had dry and cold storage. Each day, the inventory manager picked up the production from the commissary and transported it to the parking lot storage site. Employees of the truck department met at the parking lot and loaded the trucks before they drove to a particular location to serve customers. Yet Kidera was frustrated with this aspect of the process, “because it was not efficient enough and the inefficiencies restricted the company’s growth potential.” He explained: Señor Sisig: Hungry for Growth in the Food Truck Industry 11 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. We need to have everything in one location. The kitchen, our trucks, our storage and our offices, it needs to be centralized. The problem is that we can’t find a location built for what we need. We would have to find a parking lot with a building that we could build a kitchen and offices in. We estimate that would cost $300 – $500K depending on the location and infrastructure already in place. There is so much opportunity for us to make more money but we need more space and for everything to be centralized. We have a longterm vision and this is a critical part of it. Kidera was willing to explore making this large investment for a number of reasons:  To allow for expansion of the company’s catering business, potentially adding $500K in catering revenues the first year.  To realize economy of scale benefits.  To cross-train employees in the kitchen and truck departments and allow managers to manage more effectively.  To reduce costs by situating everything needed for production in one place.  To eliminate transportation cost between departments.  To allow for the purchase and operation of more trucks.  To create a satellite kitchen for a possible bricks-and-mortar restaurant.  To enable the purchase of a commercial marinating machine with which we could produce our recipes in-house. Kidera reflected that the business did not have the necessary $300 - $500K in capital on hand to invest in this project, which meant that he would eventually need to secure and service a loan. That was a risk Kidera “was willing to take”, yet he wanted to remain patient for as long as possible, just in case another funding opportunity presented itself. In January of 2013, Wycen Foods, the company that marinated and supplied the meat for Señor Sisig, requested a meeting with Kidera. They owned a vacant lot in San Francisco and were interested in building a kitchen with dry and cold storage, parking and offices for Señor Sisig. They proposed a 10-year lease at approximately $5,000$6,000 a month. Kidera was extremely interested in Wycen Foods’ proposal. It would eliminate the risk of taking out a loan. It could also minimize the amount of his time spent on planning and development of the business. Kidera told Wycen Foods that he was 100% committed and to begin the planning process. However, in August 2013, Kidera met with Wycen Foods again. Little progress had been made on the proposal. Kidera recalled his frustration: I was hoping that they were going to show me a blueprint and that they would be ready to start building. They couldn’t give me a realistic timeline because it was in the City’s hands at that point. I just didn’t feel like they had the same sense of urgency as I did and I had to start re-thinking our direction. Should we just wait for them to complete this project? Should I write a business plan to get a loan and then build the kitchen commissary by ourselves? I wasn’t sure. 12 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Food Trucks Señor Sisig only purchased food trucks manufactured by AA Cater Truck, a company in Los Angeles. Señor Sisig operated three trucks manufactured in 1990, 1992 and 2004. Older-used AA trucks between the years or 1990 to 1998 could be purchased for $20,000 - $45,000, however, models from these years were not readily available and varied in the amount of wear and tear. Newerused AA trucks between the years or 1999 to 2009 could be purchased for $50,000 - $100,000 and were available directly from AA Cater Truck. They also sold brand new AA trucks for $125,000 or more. Señor Sisig only purchased this model food truck for a number of reasons. First, the kitchen layout and mechanical hardware was the same on every truck (see schematic in Exhibit 7). This was important so that employees would feel like they were in the same kitchen every time, regardless of the truck they happened to be using on a particular day. This was intended to make all the service operations and food quality consistent and save time and energy for training new employees. Second, Señor Sisig wanted all of its trucks to look the same on the outside so that the customer couldn’t tell the difference. The company desired to give its customers the same experience every time. In addition, parts and service for these trucks were readily available, which minimized downtime when the trucks needed repairs. The company had purchased its first two trucks for $30,000 and $40,000. It chose to purchase older used trucks because of the lower initial investment. During 2013, both of these trucks experienced a fair amount of mechanical problems with engine and kitchen equipment. Repairs on both trucks surpassed $20,000, along with more than a month of downtime and an estimated $100,000 in lost gross sales. Kidera explained his disappointment and possible solution: It was a hard year for us. Our trucks started to fall apart because of their age and the extreme wear and tear we put on them over the first few years. It’s hard to run a business when you can’t rely on the heart of it. We have to seriously think about replacing our older trucks with newer ones. We don’t have the capital to buy them outright so we would have to lease them. Leasing a newer-used truck would cost approximately $1,500 - $2,000 a month each. Señor Sisig could sell its older trucks for at least $20,000 each. FUTURE OPPORTUNITIES Kidera and Payumo evaluated several potential opportunities to grow the business. They considered opening a bricks-and-mortar restaurant, producing and packaging products in a commercial kitchen for resale to food retailers, replacing the aging food truck fleet with newer vehicles, and possibly adding more trucks to cover a wider territory than downtown San Francisco. Bricks-and-Mortar Restaurant Kidera had a vision of opening a bricks-and-mortar “Filipino taqueria” with a twist, and he believed that the timing was perfect to start pursuing this vision. He explained: Señor Sisig: Hungry for Growth in the Food Truck Industry 13 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. We had an advantage starting off with food trucks. If we started with a bricksand-mortar I don’t think we would have made it. We were able to move around and test different areas, if one location didn’t work, we moved to the next location. You can’t do that with a bricks-and-mortar. Now that we have built a following and our brand, it’s less risky because they are looking for us rather than us looking for them. We know the areas where our product is in higher demand and we need to target those areas. The time is now because if we don’t do it, someone else will. Kidera was in contact with commercial realtors and waiting for the right location to present itself. He was also communicating with a bank, which was ready to finance the business after he presented them with a business plan. Packaging Product In August 2013, when Kidera met with Wycen Foods to talk about the progress on the building of a commercial kitchen for Señor Sisig, Wycen also presented Kidera with a proposal to start packing its product. Kidera recalled: They ask me if I had put any thought in to packaging our meat for resale. They were interested in working with us. They had over 20 years of experience in the industry and believed that our product would do well in retail. They had close networks with Costco and Whole Foods and were confident that they could secure us purchase orders (PO) with those retailers and others as well. We didn’t talk about any numbers but they expressed the need to move fast because our brand is in demand right now. They already marinate our meat so all we would have to do is create the packaging and managed the POs. Although Kidera thought that the capital investment needed to pursue this opportunity would be relatively low, he felt that would have to commit a great amount of time to the research and development of any new product packaging concept. Replacing and Adding Food Trucks Due to all the mechanical issues Señor Sisig had dealt with in 2013, replacing its trucks in the near future was an opportunity that Kidera had to consider as a priority. Doing so would add to his monthly fixed expenses, but it would eliminate most repair expenses and loss of sales due to downtime. It would take Kidera approximately a month to purchase each truck, brand it, and permit it. Another opportunity was to continue its growth by adding food trucks to its fleet. Cohen, the founder of OTG, was continually expressing interest in having Señor Sisig serve in more of its markets. Señor Sisig was one of OTG’s top grossing trucks and the door was open for it to participate in as many markets as it desired. Cohen also offered to finance more food trucks for Señor Sisig if it were willing to expand with OTG. DECISION TIME After the Diners, Drive-Ins & Dives show ended, Kidera walked back into the barn. Immediately surrounded by friends and family, each extending congratulatory hugs and handshakes, Kidera was proud of what he had accomplished to date. Payumo was also pleased they had achieved what had originally fueled their interest: to have something 14 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. to be proud of and to have their own business. Señor Sisig’s operating and financial history from inception in 2010 through September 2013 is shown in Exhibit 8. To help in choosing among future options for Señor Sisig, Kidera considered three-year projected profit and loss statements under four scenarios: stable state, continued rapid growth, diversification into packaged foods, and development of a stand-alone Sisig restaurant. Exhibit 9 shows a “stable state” scenario, consisting of projected revenues, costs, and operating profit for fiscal years 2014 to 2016, assuming stable food truck segment growth of 4.2 percent, stable costs and margins, and no new trucks purchased nor locations developed. Exhibit 10 shows a “continued rapid growth” scenario, consisting of projected revenues, costs, and operating profit for fiscal years 2014 to 2016, assuming a continuation of recent food truck segment growth of 12.5 percent, stable costs and margins, and one new food truck purchased and one new location developed each fiscal year. Exhibit 11 shows a “diversification into packaged foods” scenario, consisting of projected revenues, costs, and operating profit for fiscal years 2014 to 2016, assuming a nearly one-year development cycle that would result in packaged foods sales to supermarket distributors and wholesalers equivalent to initial (2010) Sisig food truck sales of about $20,000 in fiscal 2014, growing by 10x in fiscal 2015, and growing by 8x in fiscal 2016, and using 2014 food industry-wide margins as a proxy for cost structure. The development of a stand-alone Sisig restaurant, assuming a location could be found that required minor retrofits, would probably take at least one year, Kidera figured. Projections for the restaurant for fiscal years 2015 and 2016 are shown in Exhibit 12. Owing to the anticipated growth in brand awareness Señor Sisig expected from that feature on Diners, Drive-Ins & Dives, as well as all the opportunities and challenges, Kidera knew that he was facing some hard choices about the future of his food truck venture. As he walked around the room with a huge smile on his face, thanking each person for their support, all he could think about was “What’s next”? Señor Sisig: Hungry for Growth in the Food Truck Industry 15 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 1 — Señor Sisig’s Sample Menu 16 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 2 — Señor Sisig’s History and Philosophy If anyone has redefined contemporary street food in San Francisco, it’s longtime pals Evan Kidera and Gil Payumo’s Señor Sisig fusion food truck. With their special twist on a Filipino happy hour dish sisig, Señor Sisig took the portability of their favorite Mexican taqueria dishes and melded the two together to reflect their diverse palette and down-home appeal. Though sisig is traditionally made from parts of the pig’s head bought from the butcher to make use of the entire pig, Señor Sisig’s more palatable version uses the meatier pork shoulder. Taken from his father’s family’s recipe in Pampanga, a region renowned as the “breadbasket” of the Philippines for its legacy in culinary traditions, Chef Gil marinates the pork shoulder for over 24 hours in a special blend of spices and charbroils the meat until it is packed with succulent juicy flavor. He then uses it as the base for most of the dishes. Not a pork lover? They also have an outstanding version with chicken and tofu, every bit as filling as its porky counterpart. But how did this culinary crossover happen? Though they both met in high school in Daly City, California, and followed their own respective paths, Evan receiving his MBA at San Francisco State and Gil graduating from Le Cordon Bleu Culinary Academy, entrepreneurship and food runs deep in both of their family’s bloodline and it was only a matter of time that their shared love of Filipino food would turn into a fusion rolling restaurant, with Chef Gil at the grill and Evan at the wheel. Try it once and you’ll be hooked! As Senor Sisig continues to expand, you won’t have to wait too long to experience a truly unique take on a traditional Filipino delicacy. It’s fast, it's fun, it’s flavorful, and best of all, it’s truly San Franciscan. Source: Company website (http://www.senorsisig.com/#about) used with permission Señor Sisig: Hungry for Growth in the Food Truck Industry 17 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 3 — Rating Señor Sisig on Yelp! 18 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 4 — Señor Sisig’s Organization Chart as of 2013 Exhibit 5 — Job Descriptions for Señor Sisig Staff Señor Sisig: Hungry for Growth in the Food Truck Industry 19 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 6 — Señor Sisig’s Supply Chain 20 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 7—Schematic Diagram of Señor Sisig’s Typical Food Truck Layout Señor Sisig: Hungry for Growth in the Food Truck Industry 21 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 8 — Señor Sisig’s Operating History, 2010–2013 (to September) PROFIT AND LOSS STATEMENTS FYE 12/31 2010 $20,966 11,384 9,582 5,670 26,362 (22,451) (90) ($22,541) FYE 12/31 2011 $277,310 76,069 201,241 41,159 128,581 31,501 (52) $31,449 FYE 12/31 2012 $684,930 264,696 420,234 72,160 258,589 89,485 (3,589) $85,896 9 mos. to 9/30 2013 $849,190 346,406 502,784 70,430 291,275 141,078 (956) $140,123 At 12/31 At 12/31 At 12/31 At 9/30 2010 2011 2012 2013 $2,654 $31,540 $93,722 $150,791 28,000 2,001 50,635 1,634 81,481 1,234 79,996 834 $32,655 $83,809 $176,436 $231,621 $20,429 $39,164 $12,121 $0 $20,429 $39,164 $12,121 47,773 (12,477) 20,000 (100) (22,540) 20,768 (124) 11,487 (200) 31,449 34,466 (449) 17,359 85,896 78,960 (24,057) 36,428 (11,953) 140,122 Stockholders' Equity $32,655 $63,380 $137,272 $219,500 Total Liabilities & Stockholders' Equity $32,655 $83,809 $176,436 $231,621 Sales Cost of Goods Sold Gross profit Operating expenses - Wages Operating expenses - General O/H Operating profit Other income (expense) Pre-tax Income BALANCE SHEETS Assets Current Assets Cash Fixed Assets, net of depreciation Other Total Assets Liabilities & Owners' Equity Liabilities Current Liabilities Long-Term Debt Total Liabilities Owners' Equity Paid-in capital: Evan Kidera Less: Owner's draw, Kidera Gilster Payumo Less: Owner's draw, Payumo Retained Earnings (deficit) Source: Company internal documents, used with permission. 22 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Señor Sisig: Hungry for Growth in the Food Truck Industry 23 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 10 Three-Year Projections for Señor Sisig, 2013-2016 Scenario 2 – Continue Rapid Growth at the Historic Rate of 12.5% via the addition of one new food truck and one new location per year % of sales (note 3) $1,132,253 1,273,785 1,433,008 1,612,134 100.00% 461,875 458,563 515,883 580,368 36.00% 2013 2014 Gross profit 670,379 815,222 917,125 1,031,766 64.00% Operating expenses Wages (note 4) General O/H (note 5) 93,907 388,367 105,724 436,908 118,940 491,522 133,807 552,962 8.30% 34.30% Operating profit (Loss) 188,104 272,590 306,664 344,997 7.90% Sales (note 2) COGS (note 3) 2015 2016 Notes (1) Full-year sales for 2013 estimated at 133% (or 4/3) of 9-month sales, with margins unchanged from Sept. 2013 actuals. (2) Sales growth rates based on IBISWorld estimates of historic food truck industry growth of 12.5 percent per year for 2009-2013. Kidera felt that this was not an unreasonable growth rate assumption. He calculated average sales per truck and came up with the following table, showing that sales per truck would probably peak after the Food Network publicity and begin to trend downward in the following years: # Food Sales revenue Year Trucks per truck Total sales 9 months, 2013 3 $283,063 $849,190 2013 (full year estimate) 3 377,418 1,132,253 2014 4 318,446 1,273,785 2015 5 286,602 1,433,008 2016 6 268,689 1,612,134 (3) Assumes cost of goods sold and operating O/H approach food truck industry margins as estimated by IBISWorld. (4) Assumes no change in San Francisco minimum wage, and staffing growing at a consistent rate as a percentage of sales. (5) Assumes growth in General O/H will be proportional to growth in sales. Source: Company internal documents, used with permission 24 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 11 Three-Year Projections for Señor Sisig, 2013-2016 Scenario 3 – Incremental revenues and profits (losses) from diversification into packaged foods to be sold at supermarkets Forecast P&L Sales (note 1) COGS (note 2) Gross profit Operating expenses Wages (note 3) General O/H (note 4) Operating profit (Loss) FYE 12/31 2014 2015 2016 $20,966 8,198 $209,660 81,977 $1,677,280 655,816 % of sales 100.0% 39.1% 12,768 127,683 1,021,464 60.9% 4,193 6,625 41,932 66,253 335,456 530,020 20.0% 31.6% $1,950 $19,498 $155,987 9.3% Notes (1) Full-year sales of packaged foods for 2014 estimated to be equivalent of 2010 sales, growing by 10x year-on-year for 2015 and by 8x in 2016. (2) COGS based on IBISWorld food industry estimates for Food Purchases. Actual markup to supermarket distributors and wholesalers may be closer to 100%. (3) Assumes operating margins are roughly equivalent to rest of food industry, as estimated by IBISWorld. (4) Assumes no change in San Francisco minimum wage, but costs to hire new food production, packaging, and delivery staff will rise from 8.3 percent to 20 percent of sales. (5) Assumes growth in General O/H will be proportional to growth in sales. Source: Company internal documents. Señor Sisig: Hungry for Growth in the Food Truck Industry 25 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. Exhibit 12 Three-Year Projections for Señor Sisig, 2015 and 2016 Scenario 4 – Incremental revenues and profits (losses) from diversification into a stand-alone restaurant. Forecast P&L FYE 12/31 2015 $684,930 267,808 2016 $712,327 278,520 % of sales 100.00% 39.10% Gross profit 417,122 433,807 60.90% Operating expenses Wages (note 3) General O/H (note 4) 136,986 273,972 142,465 284,931 20.00% 40.00% Operating profit (Loss) $6,164 $6,411 Sales (note 1) COGS (note 2) Notes (1) Restaurant operations do not commence until 2015 due to time required for leasehold acquisition and retrofitting. First year sales estimated at equivalent of FY 2012 sales, growing by 4% per year in 2016. (2) COGS similar to IBISWorld food industry estimates for Food Purchases, but Gross Profit may need to be adjusted upwards because of higher margins on soft drinks and alcoholic beverages. (3) Assumes no change in San Francisco minimum wage, but staffing costs to hire new chefs, kitchen staff, wait staff, and maître d’ will rise from 8.3 percent to 20 percent of sales. (4) Assumes that General O/H as a % of sales will be higher than rest of food industry estimates by IBISWorld, due to higher leasehold costs in San Francisco than in most urban areas. Source: Company internal documents. 26 Case Research Journal  Volume 37  Issue 1  Winter 2017 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019. For the exclusive use of F. GALVAO, 2019. NOTES 1 All quotes in this case except where noted are based on field interviews with Kidera and Payumo in 2013 and 2014. 2 Food Network, (2013). Señor Sisig Fusion Street Food. [3:18 video on “Diners, Drive-Ins, and Dives”]Retrieved from http://www.foodnetwork.com/videos/senor-sisig-fusion-street-food0225665.html, October 4, 2016, 3 Anon. (2013) Food & Drink 2013 Readers’ poll winners. SF Weekly online. Retrieved from: http://archives.sfweekly.com/sanfrancisco/readers-pollwinners/BestOf?oid=2829550, October 4, 2016. 4 Data Sources for Table: Brennan, A. (2014, February), “Food Trucks in the US,” IBISWorld Industry Report 044322; Alvarez, A. (2015, September), “Food Trucks in the US,” IBISWorld Industry Report 044322. 5 Ibid. 6 Frojo, R. (2013). Are Food Trucks Profitable? San Francisco Business Times, 27(48), June 21, p. 4. 7 Interview of Matthew Cohen, MFF Industry, by Evan Kidera on November 9, 2013. 8 Sibilla, N. (2012) New ordinance would force San Francisco food trucks on the road to serfdom. Institute for Justice blog post. (November 20) Retrieved from: http://ij.org/action-post/new-ordinance-would-force-san-francisco-food-truckson-the-road-to-serfdom/, October 4, 2016. 9 Interview by Evan Kidera of I. Reyes in 2012. 10 BOMA San Francisco. (2013). Update: San Francisco Mobile Food Facilities Permits. (July 7) Retrieved from http://bomasanfrancisco.blogspot.com/2013/06/update-san-francisco-mobilefood.html, October 4, 2016. 11 Yelp, (2013). Señor Sisig,(December 15).Retrieved from http://www.yelp.com/biz/senor-sisig-sanfrancisco?start=0&sort_by=date_desc&nb=1, October 4, 2016. Señor Sisig: Hungry for Growth in the Food Truck Industry 27 This document is authorized for use only by FELIPE GALVAO in Strategy in Action Summer 2019-1 taught by WILLIAM CRITTENDEN, Northeastern University from May 2019 to Nov 2019.
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Running head: SENOR SISIG CASE STRATEGY ANALYSIS

Senor Sisig: Hungry for Growth in the Food Truck Industry
Case Strategy Analysis
Name
Institution
Instructor

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SENOR SISIG CASE STRATEGY ANALYSIS

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Background
Founded in 2010 by Evan Kidera and Gil Payumo, Senor Sisig is a food service company
that operates in the food truck segment of the food industry. Based in the San Francisco Bay
Area, Senor Sisig produces and offers Filipino fusion food to customers from a food truck. For
the three years, the company has been in business, Senor Sisig has managed to create an easily
recognizable brand and product for its customers. Owing to the success of the company in
achieving rapid growth in sales and brand awareness, Senor Sisig has been awarded three times
in a row the “Best Food Truck” prize by the SF Weekly. With customers often waiting for up to
an hour to be served, Senor Sisig is considered the most iconic food trucks in the Bay Area.
While business has been good, the company grow sales from $20,966 to $849,190 and pre-tax
income jumping from negative figures to $140,123 by the third quarter of the fourth year; Evan
Kidera, CEO and co-founder of the company is unsure how the company should approach the
available opportunities and the threat facing the business.
Problem Statement
Though Senor Sisig has not encountered a major challenge in the three and nine months
the company has been in business, recent movements in the food industry have been a source of
concern for the company's CEO. Moving towards the future, Kidera was concerned that
competition is likely to catch up with the company in the coming years. In particular, Kidera is
concerned that is only a matter of time before brick and mortar foodservice operators imitated
the Senor Sisig food concepts and perhaps business model. Besides the direct threat brick and
mortar restaurants are likely to offer the food truck company, Kidera was concerned about the
ability of Sisig retaining its distinctiveness if more locations were added or if a new format were
developed. Other issues raising concerning include different set of municipal regulations. In

SENOR SISIG CASE STRATEGY ANALYSIS

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addition, Kidera was afraid of losing his 70% share control of the company in the event the
company was to grow rapidly fast.
In view of the opportunities for growth available in the food service industry and the
rapid growth in sales, brand awareness and emergence of Senor Sisig marinated meat as one of
the most iconic products, this analysis provides deeper insight on the opportunities the company
should pursue.
External Environment Analysis
Industry Prospects
Report on the current status of the food industry by IBISWorld indicated that the food
truck segment registered a 12.5% annual growth in revenues for the years 2009 to 2014. As of
the year 2014, total revenues grew to $803.8 million with the segment returning profits of $70.7
million with represents close to 8.7% net profit margin. Changes in customer tastes and
preferences for a unique flavor and budget-conscious attitude are key factors driving the high
rate of growth in the segment. The growth rate is expected to drop to a modest 4.2% for the next
five years ...

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