Montegro's Italian Grille: Business Decision Case Study Analysis

This case study analyzes the business decisions of Montegro's Italian Grille, a successful 19-year-old restaurant in Miami. It explores the factors influencing the owners' consideration of selling the business, including its prime location, financial performance, and market position. The analysis delves into the criteria the owners prioritize, such as business valuation, rent factors, and real estate capitalization rates. It examines the potential benefits of retaining the business versus the implications of a sale, considering the restaurant's growth trajectory and competitive advantages. Furthermore, the case study discusses valuation methods, including the value of operation and real estate, to determine the restaurant's worth. Ultimately, it offers recommendations on whether the owners should proceed with the sale, weighing the risks and opportunities involved, and considering the long-term financial implications of their decision. The case study references several sources to support its analysis and findings.

Running head: MONTEGRO’S ITALLIAN GRILLE
Montegro’s Itallian Grille
Name of the student:
Name of the university:
Author note

1MONTEGRO’S ITALLIAN GRILLE
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................2
Question 3........................................................................................................................................3
Question 4........................................................................................................................................4
Reference.........................................................................................................................................5

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Question 1
There are certain factors that are important for the MIG owners before deciding on selling
the restaurant to AECB. The restaurant was situated at a major high- traffic area in the financial
quarter of Miami, Florida. It was a 19- year- old, award winning successful and majestic
restaurant situated in an area of 1 acre (Singer & Wodar, 2011). These were something special
for a business which is not attained easily. Even the three partners were satisfied with their
business and they were willing to sell it only if their criteria were fulfilled. To bring the
restaurant to such a prestigious place, it took the brothers quite a lot of effort and they were able
to implement their practical solutions on the basis of their concepts and theories, experience and
information about the profession. The restaurant was their dream project which was carved out
of their joined enterprise. Even, the restaurant business of Dan and his partners became
successful just in one year of operation which is unlike other restaurant business. The restaurant
had not only survived in their first critical year but also sustained longer than any other new
venture in that location. These were the positive sign on the part of MIG which should be
considered by the owners before selling their own asset (Astrachan & Jaskiewicz, 2008).
Question 2
If the partners keep the company, MIG would be at the peak of success as compared to its
competitors. On their 19th anniversary they were already a successfully established company so it
can be easily assumed that in duration of 5- year they will rule among the top restaurant
businesses in the world. In almost two decades, if they can run a successful eatery in an area like
Miami then it can be easily realized that they will succeed in a journey of 10 years and more
(Rule, 2014). Within a matter of two years they became the best in Miami so it can be calculated

3MONTEGRO’S ITALLIAN GRILLE
that in 5 years they will become the best in the US and if they continue in this way then it will
become the best all over the world in 10 years. The three factors- business multiple, rent factor
and real estate capitalization rate are the basis which Dan and his partners need to think about
before selling Their net profit increased as they provided good quality as well as quantity at an
affordable range which attracted more customers. Recession in the US resulted in the loss of
many restaurants and MIG was no exception but they recovered quicker than others without
amending their prices. MIG was a casual restaurant which had the highest growth rate of 0-3%
and expected to be 14% in 2014 (Brown, Thomas & Bosselman, 2015).
Question 3
The MIG partners can find out the worth of their restaurant from the report National
Restaurant Industry’s chief who stated that the restaurant sales had achieved profit with an extra
expenditure growth of consumer in the near future. They have also improved their job market,
rise in sale and low prices attributed to the positive growth of the company. The MIG partners
were not worried about the earnings because they were going to build a new one by selling the
previous one. The selling of the restaurant can just become a matter of property. The price of sale
can be amounted to what the buyer company will pay for the location. MIG owners gave their
own justified price which included both the property as well as the business. Two methods are
used to find the economic value of restaurants. They are- Value of operation which is four times
the net income and value of real estate which is calculated by dividing the net income by the
property cost. This method will allow them to find out the real worth of MIG and thus they will
decide the actual price (Lokyer, 2009).

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Question 4
It can be suggested that the MIG owners should not have made a decision to sell their
restaurant. This is because MIG has made a successful impact in the restaurant industry and it
cannot be assured that the new venture will develop in the same way as MIG. One should not
take risk when it comes to business and economy. As it is seen in the summary of financial
report of MIG, their gross profit in a span of 6 years was $1382131 and their net income was
$61411. It is an important aspect to decide whether the amount received after selling will be
sufficient for providing capital for the new venture or spending for a life time. The silence on the
part of the bank previously can also be an issue if they are providing the actual worth or not
(Parsa et al., 2005).

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Reference
Astrachan, J. H., & Jaskiewicz, P. (2008). Emotional returns and emotional costs in privately
held family businesses: Advancing traditional business valuation. Family Business
Review, 21(2), 139-149.
Brown, E. A., Thomas, N. J., & Bosselman, R. H. (2015). Are they leaving or staying: A
qualitative analysis of turnover issues for Generation Y hospitality employees with a
hospitality education. International Journal of Hospitality Management, 46, 130-137.
Lokyer, S. E. (2009). Closures, downbeat industry reports deflate recent turnaround
optimism. Nation’s Restaurant News, 43(29), 4.
Parsa, H. G., Self, J. T., Njite, D., & King, T. (2005). Why restaurants fail. Cornell Hotel and
Restaurant Administration Quarterly, 46(3), 304-322.
Rule, B. J. (2014). Restaurant Valuation. Appraisal Journal, 82(2).
Singer, G. D., & Wodar, B. D. (2011). Selling a Business. The CPA Journal, 81(5), 38.