Gril$-$Kleen Hide Assignment Information Instructions $1.$Carefully evaluate the pros and cons of the alternative markets $($product applications$)$ for a cleaner with its characteristics. Which is the best market to enter? $2.$ Do you feel the intellectual property needs protected and would you pay to protect it$?$ ngMeSports CASE $8$ THE GRIL$-$KLEEN CORPORATION "Well, where do I begin? Warren Ryan wondered as he surveyed the chaos before him. Boxes and bottles were piled all over the place, invoices and order forms cluttered the desktop and filled the drawers, and he couldn't seem to locate anything resembling an orderly set of books It was spring of $2010,$ and just a few days earlier Ryan had quit his job with a large management consulting firm to assume the presidency of Gril Kleen Corporation and help get the young company off the ground. The company's efforts to market its innovative product, a liquid restaurant grill cleaner, had been extremely successful. Ryan felt that with a professional marketing approach, the product could capture a sizable share of a national market The product, a chemical solution that could be applied directly to a working grill to clean off burnt$-$on food and accumulated grease in a matter of minutes, represented a significant departure from the existing methods of cleaning restaurant grills. It appeared to have several major advantages over competing products, and initially it had generated such enthusiastic response from users that the product had practically sold itself. PRODUCT EVOLUTION Gril Kleen had been developed for their own use by two brothers who owned a small busy restaurant in Eastern Massachusetts. The restaurant's grill needed cleaning several times a day, especially during busy periods, and the brothers were disturbed by the amount of time and Page $404$ effort it took to clean the grill. They were also bothered by the orders they lost while the grill was being cleaned Most grill$-$cleaning products then available could not be used on a hot grill, and the time required to cool, clean, and then reheat the prill varied from about $20$ minutes to almost an hour, depending on the method being used and the condition of the grill. Two of the most popular methods of cleaning grills used a carborundum "stone" or a wire mesh screen to scrub the grill clean. Though inexpensive they required a great deal of physical labor and both products tended to wear, with some danger of stone chips or metal particles ending up in food cooked on the grill Spray foam oven$-$cleaner type products, similar to those sold for home use, were easier to use but considerably more expensive. Most had critical effective temperatures of around $160-200-$ Fahrenheit, compared to normal grill operating temperatures of around $3508,$ and often had objectionable odors, which restricted their use in small or poorly ventilated restaurants Dissatisfied with the products then on the market, the two brothers decided to develop their own grill cleaner. They sought the advice of one of their customers in the chemical business, and from him they learned about some chemicals and began to experiment with different combinations in various proportions The cleaner they sought would clean grills quickly easily and at normal operating temperature. It had to be sconomical ay mandhu leSports RH CUSWEIS $-$ CRY DUSTERESS, TOT I wey I DO SME CCAS Degai w exprimer WIUT UNITED CULTURELIO various proportions The cleaner they sought would clean grills quickly, easily, and at normal operating temperature. It had to be economical, easy to mix and ha no discernible odor of taste, and it would have to pass safety requirements $($i$.$e$.,$ be both nontoxic for use on food preparation surfaces and noncaustic to the user's skin$).$ In addition, it had to leave the grill seasoned so that food wouldn't stick to the grill after it had been cleaned After experimenting and modifying the solution for a couple of years, the brothers finally arrived at a mixture having all the desired properti It would work on both hot and cold grills, and the grill operator could clean a grill in less than five minutes by simply pouring the solution on allowing it to dry, and then rinsing the grill with water. After a light seasoning with cooking oil, the grill was ready for use again. Soon, friends in the restaurant business heard about the product and began asking for samples, then coming back for more. As demand increased, the brothers started to sell the product by the gallon, charging whatever they felt the market would bear THE GRIL$-$KLEEN CORPORATION The product appeared to be so successful that the brothers began to think about marketing it on a larger scale. One of the restaurant's customers, a line foreman for a Boston electric Company was impressed by the demand for the product, and urged the brothers to consider manufacturing and selling it on a regular basis. In carly $2007,$ the three of them formed the Gril$-$Kleen Corporation. Working out of the basement of the restaurant, the three new partners bottled and sold Gril$-$Kleen in their spare time and on their days off The chemicals were mixed in a large plastic tub with a spigot, then transferred to gallon$-$size plastic bottles labeled "Gril Kleen." On Tuesdays, when the restaurant was closed, the two brothers made sales calls to other restaurants, leaving behind samples of the product Even with this minimal sales effort, orders began to increase to the point where larger facilities were needed to bottle and store the product. Less than a year after its incorporation, the Gril$-$Kleen Corporation moved to a new and larger headquarters in a nearby industrial park The new plant was a $1,500$ square foot cinderblock building, and the equipment consisted of a large stainless steel tub, formerly used for pasteurizing milk and capable of producing $450$ gallons of Gril$-$Kleen per day. The company hired one part$-$time employee to mix the chemicals and fill the bottles After one unfortunate experience with a traveling salesman who offered to sell the product and instead, sold several phony exclusive distributorships" for Gril$-$Kleen throughout New England before he disappeared the company established relationships with half a dozen bona fide distributors of restaurant and cleaning supplies in New England As sales volume grew, the need for a full time manager became increasingly apparent. Orders and invoices were piling up$,$ billing was haphazard, records were disorganized and incomplete with no regular system of record$-$keeping orders often went unfilled, or customers were never billed for orders that had been shipped Recognizing that the company had grown too large to contine operating on a one$-$day$-$per$-$weck basis, the ownershired a local politically ambitious individual to run the company and offered him a $25$ percent interest in the business. The new partner was well known localis, had a rt$-$raiungusar carnacumamharamnaaluthath $12$:$59$ AM ng MeSports www number of important connections, and the company owners felt that his name would lend some prestige to the operation As it turned out, he devoted little of his time and attention to running the business and most of it to campaigning for re$-$election, even charging some of his campaign expenses to the company. After more than a year, with company sales declining, the other three partners bought him out, paid his bills, and returned to running the business on their days off. Page $195$ WARREN RYAN At this point, Warren Ryan, a management consultant working on an assignment nearby, began patronizing the restaurant and became friendly with the owners. When he learned of the situation at Gril Kleen, he suggested that the company hire hus consulting firm to do a market study and map out an operating and marketing plan for the company. He also recommended that they utilize his firm's Executive Search service to find a new president for Gril Kleen. Reluctant to deal with a large consulting firm or to hire anyone they didn't know to run the company, the brothers asked Ryan if he would take over the job himself Ryan, an MBA with extensive experience in marketing, advertising, and industrial management, was intrigued by the idea. He had grown up in a household with a small, family$-$owned business, and had long been interested in applying his management and marketing skills to running a company. He agreed to consider the offer, and then began to research the product and its market. From library sources, he estmated the national restaurant cleaning market at about $580$ million a year, and learned that no single company held a dominant share of the market From experience with the product and interviews with current users of Gril Kleen, he became convinced of Gril$-$Kleen's performance superiority over competing products. Moreover, he was impressed by the apparent success of the company despite the lack of good planning, and concluded that the product could be developed successfully. After senous consideration and considerable research, he decided to accept the otfer, and in April $2010$ became the new president of the Gril Kleen Corporation THE SITUATION IN EARLY $2010$ When Ryan took over, he found the product being manufactured in the small, one$-$story cinderblock plant in Hingham. The company's one part time employee could mix and bottle up to $200$ gallons a day to meet orders, and plant capacity could easily be increased by buying a larger mixing tank and hiring more labor. It was also possible to rent additional floor space if necessary. The product was packaged in cases of four $(+)$ one$-$ gallon$-$size plastic containers. It was sold for S$28$ a case retail $$18$ a case wholesale, FOB, the wholesaler's warehouse Included with each case was a $16-$ounce squeeze$-$type plastic applicator bottle Sales volume at the time was approximately $$35\mathrm{.}000$ a year. The average wage rate was approximately one case per month The company's primary customers were six wholesale distributors in Massachusetts two of these were suppliers of cleaning and chemical products to restaurants, one was a paper products distributor another one sold restaurant equipment one sold janitorial supplies to hotels and motels, and the last one sold food products and supplies to theaters Ryan found few recorda lile financial data, and to regular flow of paperwork then the company Prices were based on those charged for a $2$@$0$:$76\mathrm{.}6$ Up MeSports geographical territory. Ryan wondered whether market testing would be useful in analyzing market need, product potential, and the habit patterns of users in the various markets, and if so$,$ whether market testing should be accomplished by field product testing, field interviews, or mail or telephone surveys It was felt by Warren Ryan that Gril$-$Kleen could significantly increase its share in this market. Current sales of $$35,000$ a year represented a little less than half of $1$ percent of the potential market for restaurant cleaning products in the New England area alone. However, the product appeared to fill a particular need in this market, while there was considerable competition from similar products in the other markets under consideration $($marine$,$ industrial, consumer$).$ PRICING To help determine standard costs, break$-$even volumes over a range of possible product prices, and profit margins, Ryan collected the cost data in Exhibit $1$ EXHIBIT $1$ Cost Data for Gril Kleon Motorals $1$ ounce $$00281$ batchs $32$ cao $1\mathrm{.}120$ lbs$.$ $$45\mathrm{.}32(83$ percent wator$)$ Bottles $($cost per thousands Number of Units dollar amount is cost per $1\mathrm{.}000)1\mathrm{.}0005,00010\mathrm{.}00016011201$ $$\mathrm{.}90155$ $as $135$ $ $78125154\mathrm{.}751847525\mathrm{.}000$ $ $60\mathrm{.}759730147\mathrm{.}25178\mathrm{.}95220245128195202\mathrm{.}75$ Caps $28$ m $33$ mm $ $121520$ $$1013$ W $-60564112/$cfi$/6/50!/4/738/2$@$0$:$83\mathrm{.}980$ ports Telephone Gas heat Insurance Accounting Depreciation Office $450200$ Salos costs estimated at $400$ percent of labor, G&A at $250$ percent of labor. $300300500$ Ryan needed to determine a pricing strategy, set profit targets, determine the volume necessary to meet those targets, and establish a policy trade discounts, allowances, and credit terms. He also needed further information on price elasticity $($one dealer had tripled his sales from $4$ to $1$ cases a month by lowering the retail price from $$28$ a case to $$24)$ Checking the reorder rates, Ryan calculated the rate of usage of the product to be approximately one case every month in a small one$-$grill restaurant. Approximately $97$ percent of end$-$users who had tried Gril$-$Kleen continued to order it$.$ DISTRIBUTION Among the distribution decisions to be made were whether to $(1)$ hire a sales force $($and if so$,$ how large$),(2)$ use manufacturer's representatives $($and if so$,$ how many and with what commissions$).(3)$ sell exclusively to wholesalers, $(4)$ sell directly to restaurants and large chain operations, and $(5)$ grant exclusive privileges to any dealers, distributors, or representatives $($and if so$,$ what demands to make upon the holders of such exclusive rights$)$ Other decisions related to distribution included questions on consignment sales, volume discounts $,$ and shipping costs Ryan also had to decide whether to expand his distribution network geographically or to concentrate on getting a larger share of the New England market. PROMOTION To successfully promote the product. Ryan had to determine which media to employ, how much to spend on advertising, and how to push or pull the product through to the ultimate user. In addition, he had to design some catalog sheets and fact sheets for Gril$-$Kleen similar to those in Exhibits $2$ and $3$ In designing these, he had to decide which product features to stress price, convenience, effectiveness, safety, and so on EXHIBIT $2$ Sample Catalog Sheet TECHNICAL DATA FOR OVEN CLEANER AND DEGREASER General Description...DUBOIS OVEN CLEANER and DEGREASER is a light tanklin liquid which is holy effective for the removal of baked on fats Grond carbon dopornomalyon on Als B $1$:$00$ AM $33/2021$