A client that we previously worked with, Cynthia D$.($CD to her friends$)$ embraced our advice with respect to expansion strategies. Over the last five years she has built the start of a new fast food empire, CD Take Away. She has ten corporate locations across western Canada and is on plan to add two new locations a year for the next three years. The current locations are three in Calgary, two in Edmonton, two in Surrey, one in Vancouver, one in Saskatoon and one in Regina. After an initial break$-$in period of about $12$ months, each location has turned a profit in its second operating year. See location results below.

Based on our advice, CD partnered with a fast food industry member who brought over $15$ years of experience and connections. CD has built a strong team of business, financing, marketing and food industry knowledge. She retains a $70\%$ controlling ownership and is extremely passionate about expanding the venture and current operations. She envisions more locations.

CD and her partner feel that with about twenty or more profitable locations they will have a company that is extremely valuable and possibly marketable to a large company as a buyout windfall for CD and her partner. The long$-$term corporate goal is to have enough locations $($more than $20)$ such that a larger restaurant chain buys her out.

The current operations have in place a strong financing resource that is able to provide the necessary funds for an orderly planned expansion to open twenty plus locations at a reasonable interest rate over time.

CD knows that future success is built upon a strong team that are provided with focused and directed objectives and goals. She is extremely interested in developing a Balanced Scorecard approach to guiding and directing her expansion team. She has come to you for focused and specific advice on the design and implementation of a Balanced Scorecard to achieve her expansion plans.

Her current expansion team is two professionals with marketing, accounting and industry expertise. The corporate head office consists of herself, an administration clerk, the two expansion team members and the partner. CD has an idea to implement a BSC for her head office expansion team. The aim is to build a strong strategic and performance plan to direct the head office expansion for the next three years. In the three years she and her partner have plans for adding six to seven new locations across western Canada.

Exhibit $1$

Average Location Financials Year Two

CD Takeaway

Average location

Equipment & Fixtures $ $100,000$

Revenue $ $550,000$

Variable costs $121,00022\%$

Gross Profit $429,000$

Expenses

fixed facility including rent $125,000$

Depreciation expense $20,000$

fixed labour $95,000$

local marketing program $27,5005\%$

location head office fee $49,5009\%$

$317,000$

Net Earnings from operations $112,00020\%$

Interest expense $4,0004\%$ rate

Net Earnings b$/4$ tax $108,000$

Corporate Taxes $21,60020\%$

Net Earnings $ $90,40016\%$

Facility investment $100,000$

Head Office location Revenue $ $495,00010$ locations

Corporate Overhead

Administration clerk $60,000$

CD Wage $100,000$

Corporate overhead costs $50,000$

Expansion Team $($not us$)150,000$

Marketing national program $100,000$

$460,000$

Corporate Net Earnings before tax $ $35,000$