Case Study: Scenario

As part of their overall strategy in the Australian beverage market, MacVille Pty Ltd has developed a

chain of cafes in the Central Business District (CBD) of Brisbane, Queensland and the CBD of Sydney,

NSW. The board of directors has made the decision to expand their operations in Queensland with the

purchase and re-branding of the existing Hurley’s cafe in Toowoomba on the darling downs 130km west of Brisbane.

You are currently the Risk Manager of their flagship Brisbane Queen Street store, and have been given

the opportunity to manage the new store in Toowoomba. The CEO for MacVille’s cafes in Queensland

is Paula Kinski. She has assigned you the task of managing the risks involved with the operational aspects of this take-over. A copy of her email is attached.

Email from CEO – Paula Kinski

From: CEO-P.Kinski

To: Risk Manager – Queen Street

Re: New Toowoomba store

Prior to taking up your position as manager of our Toowoomba store located in Ruthven Street, the

board has asked that the risks in this project be appropriately managed.

I would like you to approach this task in three stages and meet with me at the end of each phase to

review your work and discuss your plans for the subsequent phases. The three stages in this risk

management task will include:

1. Review.
2. Analyse and plan. 3. Monitor.

Your primary risk management focus is directed to the ongoing operations of the Toowoomba cafe.

The strategic and investment risks of this project are being managed by the board. To this end, you are to consider any risks that could impact on human resources management, financial operations,

OHS, our supply chain and the local governance and overall compliance issues. By way of

background, MacVille has agreed to employ all existing staff on three months’ probation. The current supervisor James Mansfield, has been offered the position of 2nd in charge and he has accepted.

While settlement on the purchase of the business is not for another few weeks, the seller has agreed

to grant us full access to the store’s operational processes and store information. You should liaise

weekly with the Queensland management team here at head office concerning the marketing,

finance and store management functions that you are investigating; I will set up a regular meeting for you.

Head office has a report on a similar expansion conducted by the NSW team that may help you in

your research. You may need to review other statistical information and engage specialists to help you with your investigation. The legal firm Goldsmith Partners is advising MacVille on the Hurley cafe acquisition and would be available to help you with legal or any compliance issues.

The landlord of the shop in Toowoomba, Ron Langford, is also a local councilor and has offered

his assistance in getting established in Toowoomba. He has offered his email address for correspondence ([email protected]).

Regards – CEO MacVille Cafes (Qld)

Site visit – Toowoomba

You arrived at the cafe and noted the two hours of drive time that it took to get to the cafe from the CBD

of Brisbane. You met with James who took you through a complete overview of the store and the

surrounding area. He was OK with the idea that you needed to take notes in preparation for a report.

Paula had also arranged for you to meet with Ron Langford in his office later that afternoon.

Hurley’s Cafe

After talking with James, you went over your notes to revise and edit key concerns and significant

events that you had written down earlier.

1. The long drive from Toowoomba to Brisbane would make attending the weekly managers meeting

difficult considering many meetings did not finish until into the evening after refreshments. There is

also manager training sessions that need to complete over the next 6 months in conjunction with a few other assistant managers. Navigating the steep narrow climb up the range with trucks blocking the way is quite difficult even in daylight hours. Being a competent driver you feel that it would be unlikely that you would be involved in an accident, but it still concerns you considerably.

2. The two hour delivery would make fresh pastry deliveries from the company’s central bakery plant

impractical. The pastries would arrive after the morning rush. These are a key part of the MacVille assortment.

3. There is also a concern about getting the company branded supplies through as quickly as a CBD

Brisbane store could.

4. Hurley’s cafe was a family run store and some family members were employed on the staff. James

was engaged by the family to supervise the operations of the store and Mr. Hurley as manager would authorise wages but anyone can authorise deliveries.

5. When asked about written policy and procedures manual, James said that Mr. Hurley set the policy

and procedures verbally and on the few days each week he was in the store he would show the staff how to do things the way he wanted them done.

6. Water use – Running the dishwasher when only half full. Washing fruit and vegetables under a fast

running tap. Toilets all used the single flush system. Dual flush would cost about $7,500 to upgrade.

The dishwasher was always set to full wash and had a Water Efficiency Labeling and Standards

Scheme (WELS) rating of 3. The more water efficient 5-6 star dishwashers cost about $6,000 and above. James explained that Mr. Hurley instructed the staff to keep the non-native flowering plants in the courtyard fully watered. The store currently uses 41,500lt a week.

7. James spoke about the cafe attracting a large % of retirees because of the easy access to busses and

the stores central location.

8. The same staff member that completed the cash register balancing also completed the bank deposit

form and did the banking as well. The banking was not done every day and often $4,000 was kept on the premises overnight in the cash register. There was no safe. There is a bank two shops away

but the Hurley family bank is a couple of blocks away and there was not always time to do the banking.

9. James replied to you question about the possibility of break-ins saying that there was a 50% chance

of it happening and the risk was moderate.

1. Not all takings from the cash register by family staff members were recorded.
2. The fit-out in parts looked old and unattractive, with some chairs unstable and broken and some

parts of the worn carpet was simply taped over with gaffer tape.

2. One of the staff was a qualified chef who had developed an innovative and popular range of rice

wraps that were tasty, gourmet and healthy. None of the other cafes in the area offered these.

Meeting with Ron Langford

In the afternoon you met with Ron Langford in his office to discuss the cafe, council by-laws and

aspects concerning the surrounding district. You took notes that included the following significant information.

1. Ron explained that there were opportunities for opening more cafes in the surrounding shopping

centres like Wilsonton, Clifford Gardens and K-Mart Plaza.

2. Ron explained that the Federal Government was now introducing legislation that backs up the local

by-law concerning efficient water usage, particularly by industries. The current by-law has fines of up to $50,000 for excessive water breaches. Ron did explain that the council was giving some time to ‘make good’ under certain circumstances on a case by case basis. Ron also agreed with the idea of installing a water tank in the court yard for the cafe to use and would help get it built.

3. Ron explained that Toowoomba was obviously a place for retirees and the population was growing.
4. Ron spoke about the Federal Government’s National Broadband Network being rolled out in

Toowoomba that would allow efficient and effective video streaming and teleconferencing.

5. Ron spoke about the current by-law that was due for implementation on the 1stof next month

allowing cafes to expand their footpath dinning and so put more tables and chairs outside their premises.

Queensland management team meeting

Soon after you got back from your research trip to the Toowoomba store, you were attending a meeting

with the Queensland management team and Paula gave you the report “Report into the acquisition and

re-branding of the NSW expansion store”. Paula said that there may be some things to learn from the NSW experience. In the report you noticed the summary.

Key problems identified:

1. Lack of internal controls, particularly over cash handling, monitoring and recording.

2. Failure to meet compliance standards in OHS, Privacy and Industrial relations law.

3. Lack of written policy and procedures to guide staff in carrying out their duties.

4. Lack of a professional business culture in the family run business.

5. Failure of the business to monitor the external environment and find opportunities and threats to

the business.

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