Monforte Case Study

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would be able to sell at least 50,000lbs/yr. The net earnings are estimated $388,000 in the first year with a ROI of 24.56% (exhibit 3). By 2014, it’s believed that the charcuterie will grow to Monforte’s second strongest product and estimated net earnings of $506,901 (exhibit 3). This option exceeds the decision criteria.

The major risk is charcuterie not being as popular as estimated and it may not breakeven. This would cause Monforte’s bottom line to decrease even further bringing them closer to insolvency. We believe that the trend of heathier living, and the pairing with Monforte’s existing cheese, the charcuterie would be a medium risk with a high reward.

3. Auberge

The restaurant side would cost $1,110,000 to build with annual costs of $490,000 (exhibit 4). The farm side would cost $510,000 to set up with annual costs of $149,000 (exhibit 4) . Estimated revenues are between $100,000 and $200,000. For breakeven, we have broken revenues into 3 cases, best, base and worst case. Best case, $440,000 in revenue, it would take 243 days to breakeven with an ROI of -19.63% (exhibit 4). Base case, $390,000 in revenue, it would take 281 days to breakeven with an ROI of -27.53% (exhibit 4). Worst case, $340,000 in revenue it would take 331 days to breakeven with an ROI of -35.43% (exhibit 4).

This option meets the decision criteria but, is a high risk with a low ROI. This option also has high initial start-up costs which Monforte would have to further leverage themselves.