Boston Market Corp.

founded: 1985

Contact Information:

headquarters: 14103 denver west pkwy.
golden, co 80401-4086 phone: (303)278-9500 fax: (303)216-5339 url: http://www.bostonmarket.com

OVERVIEW

Boston Market Corporation is a wholly owned subsidiary of the McDonald's Corporation and operates almost 700 company owned restaurants in 28 states. Boston Market specializes in providing homestyle meals in a take out format. The entree selections include chicken, turkey, ham, and meatloaf. Side dishes are available to suit every taste and salads, breads, and desserts are also top choices. Supplying home meal replacements is the primary objective of the revitalized chain. It also offers a convenient lunch time menu. Boston Market foods can be purchased frozen at your local grocery store. The H.J. Heinz company manufactures this line of foods. A catering division was added in 2001.

COMPANY FINANCES

Boston Market filed for bankruptcy protection in October 1998 and did not file annual financial reports after that date. The company had accrued $900 million in debt at the time of its bankruptcy. In 2000 McDonald's Corporation acquired the company, operating it as a subsidiary venture. Prior to filing Chapter 11, the company posted a $223.9 million dollar net loss on $261.1 million in revenues in 1997.

ANALYSTS' OPINIONS

Boston Market is no longer publicly traded, and analysts do not provide research or coverage specific to Boston Market and its stock price. Analysts did not react strongly to McDonald's purchase of the Boston Market chain. The acquisition may have been too small in the scope of McDonald's operations to be viewed as significant. One analyst noted that the move constituted a risk for the hamburger empire—if it decided to resurrect the chicken franchises. Many observers believed that McDonald's saw the deal as a cheap land grab and a way to snap up choice store locations at a bargain price and convert them to McDonald's.

HISTORY

Boston Market Corporation, originally known as Boston Chicken, was founded in 1985. The initial business concept was based on the premise that the public would buy hot, home style meals that could be purchased and carried out for dinner. The company enjoyed phenomenal success with its initial venture and soon attracted the attention of the business community. The founding partners sold the company to one of its executives after only three years. This would be the first of numerous management changes at the top of the Boston Chicken food chain.

Executives relocated the corporate headquarters and outlined ambitious plans to make Boston Chicken a national restaurant chain. The company went public in 1993 and posted impressive numbers in the IPO (initial public offering) market. The stock opened at $10 per share and closed at $24.45, which represented a 145 percent gain on the day.

In 1994 the company reinvented itself and switched its name to Boston Market to reflect a wider array of menu items. There were then 534 stores operating in 23 distinct markets. Restaurants offered the traditional chicken meals along with ham, turkey, meatloaf and a variety of hot and cold side dishes, salads, and desserts. Lunch and breakfast items were also developed in an attempt to promote the chain as an all-day establishment. A vast network of franchises sprung up across the country and it appeared there was no stopping the "Chicken" as it was nicknamed by Wall Street analysts.

In 1996 Boston Market moved forward with a plan to feature lunch entrees, introducing its Boston Carver line of sandwiches. This decision placed the company in competition with traditional fast food restaurants for the lunch dollars. In order to be successful Boston Market offered coupons, discounts, and promotions to entice customers into the stores. The strategy seemed to work, so the company increased advertising and discounted dinner items in the same manner. By the end of 1996, the company was operating two unique businesses from within the same storefronts. During the daytime hours, fast food, sandwich items were sold. At night the premise switched to the home style take out meals. This resulted in two separate and costly marketing campaigns.

FAST FACTS: About Boston Market Corporation

Ownership: Boston Market Corporation is a privately held subsidiary of the McDonald's Corporation.

Officers: Michael D. Andres, Pres. and CEO

Employees: 15,000

Chief Competitors: Boston Market is a restaurant chain that offers home-cooked food in a fast-food setting. Its primary competitors are restaurants such as Burger King, Subway, Wendy's, Jack in the Box, Blimpie, and The Wall Street Deli.

THE BEST BIRD IN BOSTON?

That would be former Celtic, Larry Bird. Bird agreed to act as spokesman for the Boston Chicken brand frozen entrees. These entrees are manufactured by H.J. Heinz as part of a licensing agreement with Boston Market. The company believes Bird is just the right guy to represent its homestyle meals.

The old adage, "Don't count your chickens before they've hatched," was never more applicable. Uncontrolled growth and a poorly devised marketing scheme derailed plans for a fast food empire. The excessive use of coupons had hurt the bottom line and the mixed message media campaign had destroyed the brand identity. By 1997 the company was struggling to maintain business and attract new customers. In a last ditch attempt to save the core business, management restructured the organization and bought back the now extensive collection of franchises. Mounting debts and decreased revenues proved insurmountable and in 1998 the company was forced to file for Chapter 11 Bankruptcy.

Boston Market collapsed rapidly and with little warning. The company which had traded at a high of $41.50 in 1995, dropped to a dismal $0.75 a share in October of 1998, and faced delisting from the NASDAQ exchange. It was not until after the filing that investors and shareholders began to sort through the figures for the facts. Neither were encouraging. The company had been the victim of uncontrolled growth, creative financing, and poor management. A large number of franchises had been created before there was a clear market demand for the product. One analyst later likened it to the "Field of Dreams" strategy—build it and they will come. In addition, the company had funded the expansion itself with debt and equity offerings. It had then given this money to "area developers" to operate franchises. When the franchises failed, they were unable to pay back the company. The top-level management had no experience in the food industry. Scott Beck and Saad Hadhir, two former Block-buster Entertainment executives, had assumed control of Boston Market and led it to bankruptcy. Beck and Hadhir abandoned the company before it reached bankruptcy proceedings, leaving newly appointed CEO J. Michael Jenkins to face angry investors and shareholders. Ultimately many parties contributed to the unraveling of the once promising company. Management, of course, was held accountable, but many financial analysts were also called to task for not identifying the problems with the balance sheet at Boston Market.

Boston Market is poised to make a comeback in the new century. Purchased by McDonald's in 2000, observers thought the deal was merely a real estate transaction to secure prime sites for future McDonald's, Chipotle Grills, or Donato's (two new themed eateries owned by the corporate giant). Several years later it appears that there may be a second chance for the "Chicken." Revived by the expertise and experience of the team from the Golden Arches, Boston Market is establishing a new identity in the dog-eat-chicken world of the food service industry.

STRATEGY

Boston Market's future survival strategy will be determined by its new owner, McDonald's. Once believed that McDonald's would simply close all Boston Market outfits and utilize the locations for its existing franchises, this does not appear to be the plan. McDonald's stated that it would decide the fate of each unit on a case by case basis. In January 2002 Boston Market was working on new initiatives designed to reestablish its customer base. The company is testing menu items in its Milwaukee franchises. A grilled chicken menu is in the works for dinner and the stores' interiors have been redecorated to facilitate in-store dining. Boston Market will also once again attempt to enter the lunch market.

INFLUENCES

The company's 1998 bankruptcy was a clear signal that certain programs were not advisable. The huge failure of the lunch time service ultimately proved to be the undoing of the company. By entering the lunch market the company cannibalized its own dinner customers. Frequent discount coupons for lunch items cut deeply into revenues and resulted in losses. As the company prepares to once again enter the lunch hour competition, it will not repeat its mistakes. Low fat and vegetarian items have been test marketed with promising results. There are no current plans to follow McDonald's lead and enter the breakfast market. The company did make an earlier attempt to break into this category in the mid-1990s with the purchase of a 52 percent stake in Einstein/Noah's Bagels. This proved to be an ill-conceived notion and only added to the company's substantial debt.

CHRONOLOGY: Key Dates for Boston Market Corporation

1985:

Boston Chicken was founded in Newton, Massachusetts

1992:

Company bought by Blockbuster Inc. executives and relocated to Chicago

1993:

Boston Chicken goes public

1994:

Company name changed to Boston Market and moved to Colorado

1996:

Entered the lunch business with Boston Carver sandwiches

1997:

Company began restructuring and buying back franchises

1998:

Filed Chapter 11 Bankruptcy

2000:

McDonald's purchases company

2001:

Launches catering business

CURRENT TRENDS

The company has opened a catering division to provide meals for holiday dinners, picnics, tailgate celebrations and other informal gatherings. The offerings include sandwich platters, box lunches, dessert platters, and buffet-style meals with entrees and side dishes. This program is an extension of the family take-home meal designed to serve larger family gatherings.

PRODUCTS

Boston Market provides convenient hot meals for busy customers. Entrees include chicken, turkey, ham, and meatloaf. Side dishes include potatoes, corn, vegetables, soup, and salads. Sandwiches are available for lunchtime and are made fresh each day. Frozen entrees are available under the Boston Market name in local grocery stores throughout the nation. All of the food items available in the restaurants are available for delivery to catered events. Lunch sales account for 40 percent of sales with the remaining 60 percent coming from dinner meals.

GLOBAL PRESENCE

Boston Market operates in the United States. In December 1999 Jack Greenberg, Chairman and CEO of McDonald's, was questioned about the planned acquisition of Boston Market. On the subject of international expansion for the chain, he replied, "Given their problems today, it is a little too early to speculate about it, but we will see how the brand does. I think it has got something. . .it is a viable brand. We know they have good people because they have turned this business around. . .Will it ever be big enough to excite me? I hope so, but I don't know yet." The company announced in 2002 plans to open the first Boston Market in Sydney, Australia. McDonald's regards Boston Market as a potential growth vehicle and may expand next in Hong Kong.

CORPORATE CITIZENSHIP

Boston Market has a history of supporting charitable causes. In the past the company has asked its customers which organizations should receive the company's dollars. Boston Market's survey of customers indicated that breast cancer was an important issue with many of the patrons. In response Boston Market handed out informational flyers discussing breast cancer screening, donated money to the National Breast Cancer Hot-line, and handed out coupons for $20 off the cost of mammograms.

In Boston the company participated in a community gardening program, Boston Market Gardens of Giving. The program taught children to garden and the food products were donated to local homeless shelters. The gardens included herbs, salsa, vegetables, and roots for soup making.

SPUDS IN CYBERSPACE

Boston Market was the subject of an unfortunate Internet rumor concerning the integrity of its potato-making process. A post on an Internet message board claimed that the company did not use fresh potatoes for its mashed potatoes, but instead used powdered instant mashed potatoes. A concerned shareholder called the company for an explanation. He asked for and received a tour of the Boston Market kitchen where he witnessed the making of the mashed potatoes. The findings? The mashed potato side dishes are made fresh from real potatoes!

EMPLOYMENT

Boston Market has a comprehensive employee training program that goes beyond the usual opportunities afforded by the fast food industry. Once hired, employees receive extensive training to assist them in performing their duties. The first tier of training focuses on the technical requirements of operating the machinery, cooking appliances, computers, and cash registers. Successful candidates advance to managerial training and learn how to schedule shifts, order food and maintain operations. Interpersonal communication training is also provided as staff progress in their careers and assume supervisory roles. Boston Market encourages employees to attend skills training classes and set personal and employment goals.

SOURCES OF INFORMATION

Bibliography

alexander, devon. "boston market fights breast cancer with coupons." potentials in marketing, august 1997.

allen, robin lee. "boston chicken saga: example of biting off more than the operation could chew." nation's restaurant news, 19 october 1998.

"boston chicken takes up gardening." nation's restaurant news, 25 september 1995.

harper, roseanne. "boston market to redo lunch." supermarket news, 14 january 2002.

mcdonald's to launch boston market in australia, plans brand growth." nation's restaurant news, 18 june 2001.

papiernik, richard l. "boston chicken: tough year ahead." nation's restaurant news, 1 june 1998.

——. "boston chicken simmers in a stew that's boiling over." nation's restaurant news,12 october 1998.

——. "did somebody say mcrescue? mcd to buy boston market." nation's restaurant news, 13 december 1999.

——. "investors show a lack of concern for mcd's boston chicken buyout." nation's restaurant news, 7 february 2000.

schwartz, nelson d. "the boston chicken problem." fortune, 7 july 1997.

wilkerson, jerry. "sometimes more is less: the boston chicken decline." nation's restaurant news, 9 november 1998.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. boston market corporation's primary sic is:

5812 eating places

also investigate companies by their north american industry classification system codes, also known as naics codes. boston market corporation's primary naics code is:

722110 full-service restaurants