An inspiration: Mainstreet Delicatessen and Bakery.

Santos, Annette Taijeron ; Santos, Melanie Cayabyab

CASE DESCRIPTION

Throughout U.S. history, economic recessions come and go. However, despite poor economic conditions, many entrepreneurs still venture out and take the risks of starting up a small business. In fact, according to the 2008 Global Entrepreneurship Monitor executive report, entrepreneurial behavior shows positive signs (Ali et al., 2008). Yet, it is important to note that there have been many small businesses that have failed due to economic recessions (Shane, 2009). Although reality can be harsh, entrepreneurs who believe they have what it takes to thrive in spite of the troubled times, continue to step forward and take the chance. This is true in the case of Christina Toves Perez, the proud co-owner of Mainstreet Delicatessen and Bakery.

Despite the fact that her small business started during the recent economic recession, Christina had high hopes and dreams that her business would continue to flourish. From this case, Christina's persistence is exhibited through her endurance of the trials and roadblocks that tested her efforts. This case is a real world example of what many entrepreneurs may experience during an economic recession. Additionally, it may also serve as an inspirational piece to many aspiring and continuing entrepreneurs.

This case is versatile and for the most part has a difficulty level of three and up, appropriate for junior level and beyond. The case is designed to be taught in two to three class hours in a management, managerial economics, or an entrepreneurship course, and is expected to require about three hours of outside preparation for students, consisting mainly of reading the case and familiarizing themselves with the business environments on the U.S. territory of Guam in the Western Pacific region.

CASE SYNOPSIS

This case is about Mainstreet Delicatessen and Bakery, hereafter referred to as Mainstreet. Located in Hagatna, Guam, Mainstreet recently opened its doors to Guam's residents on February 4, 2009. Mainstreet is a family-owned business. It is owned by Christina Toves Perez, Michael E. Perez, and Josefina Eustaquio Toves. The business opened during the current economic recession which started in December 2007, according to CNNmoney.com (Isidore, 2008). According to Christina, the bakery is an expansion of what used to be Toves Bakery, which is further discussed in the case study. Although Mainstreet is fairly new, a rich history of tradition revolves around the business. Being a new business in Guam's economic market, Christina had to rely on her experience in her mother's bakery business and from there make improvements as days pass by.

HISTORY

Filled with a rich history of tradition, Mainstreet is not the first bakery to exist under two of its current owners. It is, however, the first business owned by Christina Toves Perez. Before the birth of Mainstreet, the bakery business started with Christina's grandfather, Jose Garrido Eustaquio, who was more popularly known as Cinda. In 1923, Cinda, who was a carpenter by trade decided to venture out and explore other business possibilities with the help of his brotherin-law Juan S. Garcia. Their search for a new business opportunity resulted in the opening of Our Home Bakery, which was located across the street from Pedro's Plaza in Hagatna, Guam. According to Christina, the bakery was very popular and marked the beginning of the Cinda Family tradition.

Our Home Bakery experienced many ups and downs, but for the most part, successfully thrived throughout its duration. The bread that can be purchased at Cinda's bakery was said to be very delicious and popular. The recipe for Cinda's bread is what made it so mouth-watering and kept customers coming back for more. Only family members have the knowledge of what the recipe contains, for it is a secret family recipe and has been guardedly passed down from generation to generation.

Although the bakery was forced to close its doors during the Japanese occupation of Guam, Cinda continued to provide loaves of bread to the American prisoners until his supply of flour depleted. Since then, his family relocated to Yona for residency until the war ended in 1945. Soon after, Our Home Bakery was back in business. Subsequently, Cinda not only catered to the residents of Guam but to many official Navy functions as well. Cinda also had the distinct opportunity to serve the U.S. Secretary during his visit to Guam. In return for his services to the military, Cinda was honored and given a new mixer for his bakery. Shortly, thereafter, Cinda had to officially shut down Our Home Bakery around 1950 due to illness and poor health. Ten years later, Cinda passed away on April 30, 1960.

Since then, Cinda has served as an inspiration to his children and many of his grandchildren, who proudly continue the Cinda family tradition of baking using his best kept secret bread recipe. Many of them bake as a craft while others opened their very own home bakery business. Two examples include one of Cinda's younger daughters, Josefina Eustaquio Toves and his granddaughter Christina Toves Perez.

In 1975, Josefina, mother of Christina, more popularly known as "Auntie Fa" opened Toves Bakery in Agat. Auntie Fa baked specialty cakes, wedding cakes, cookies, pies, and pantosta (toasted bread), which was baked with the popular Cinda bread secret recipe. Due to some setbacks that Christina did not elaborate on, the bakery was relocated to Yona in 1989 and it has remained there since. At the age of 79, Auntie Fa had to undergo knee surgery, which limited her ability to stand for long durations having some negative impact on her bakery business. As a result, she had to shut down her business.

THE DECISION

In 2006, Christina had to make one of the biggest decisions in her life. She had to decide whether or not she would be the one to continue the Cinda family tradition of baking. Although the choice was clear, Christina, contemplated the twelve years of service she had devoted to a company, Swatch Group for Guam and Micronesia as a duty free agent. The thought neither crossed her mind, nor did she ever see herself being a baker, what more, owning a bakery. But, there was this sense of obligation that Christina felt, a nagging plea to keep her family tradition alive. She made the hard decision to resign from her job. Reflecting back, Christina proudly affirms, she was not forced to quit her job; rather, she made a conscious decision, of her own freewill, and did it because she is passionate and proud of her family tradition.

THE BIRTH OF MAINSTREET

Beginning in 2006, for two years, Christina worked on Mainstreet's business plan with the help of the Guam Small Business Development Center (Guam SBDC), located at the University of Guam's Jesus and Eugenia Leon Guerrero School of Business and Public Administration Building (SBPA). At Guam SBDC, she worked closely with Business Counselor Rodney Webb. He provided her with the guidance and direction she needed. Christina worked day and night in anticipation of completing her business plan making sure every detail was clear and precise. She envisioned Mainstreet with a unique aura consisting of three generations of Cinda while still upholding some of the past traditions of the Cinda Family. She basically wanted to incorporate a new business concept that would include a specialty shop of freshly baked goods and a gourmet delicatessen while keeping the family tradition of baking alive.

When Christina finally finished her business plan, she began to get cold feet and had second thoughts about submitting her plan. She feared that she was missing many essentials and did not think she could pull it off. However, with much persuasion and encouragement from her family, she presented her plan to the Bank of Guam in September 2008. Her years of hard work and preparation paid off, she was awarded the funds to help her purchase the former Martinez home in Hagatna where Mainstreet would soon be located.

ROADBLOCKS TO SUCCESS

Like many entrepreneurs, Christina experienced several roadblocks along her journey to opening Mainstreet: the business plan, location, contractors, original opening date, financial instability, public health, and fear. Although Christina had a great business plan, reality hit.

While diligently following her business plan and guided by her vision, Christina realized all too quickly that she had to make adjustments because her plan could not be followed to the tee. Soon after, Christina discovered that location would be another issue. Mainstreet's current location was not Christina's first choice. During the initial construction stage, some major issues surfaced that eventually led to the contractors bailing on her without completion of the tasks agreed to. That experience left Christina feeling cheated and desperate with intense feelings of wanting to give up. However, with vision in mind, she persisted and continued to pursue her dream. Mainstreet's original opening date was scheduled for December 2008, but because of the issues she faced with the contractors, the date was pushed back, which in turn caused many other setbacks.

Through it all, Mainstreet was finally ready for opening. During the first few weeks after its opening, Christina began to experience a decline of customers for various reasons she states. One of the main reasons was due to limited seating. Initially, Mainstreets was designed to accommodate a maximum of 10 seated customers. Immediately, there was a need to expand seating capacity towards the back end of the building to accommodate more customers. Christina must also contend with the ambience Mainstreet exudes. Many customers perceive Mainstreet as a coffee shop, a place where they can escape the rush and enjoy a good cup of coffee. This exacerbates the already problematic seating capacity. Christina feels that the seats should be available as a courtesy to those customers having more than a cup of coffee; preferring that those desiring to order food items from the menu and dining in be entitled to a seat. Aside from losing customers due to lack of seating, Mainstreet faced challenges with their initial hours of operations. Mainstreet originally opened at 5:30 am to catch the early commute and closed at 6:00 pm. However, Christina realized that closing at 6:00 pm did not provide much profit opportunity. As a result, Christina made some adjustments and changed the hours of operation from 5:30 am to 4:00 pm.

THE BUSINESS

Market Structure

In Hagatna, there are not many bakeries present in the vicinity, which gives Mainstreet a competitive edge. Bakeries found in the area include OPs Bakery, located in the Agana Shopping Center and Winchell's donut shop across the Bank of Guam Headquarters building. Though, Mainstreet is not just any ordinary bakery that can be found within many island villages such as Dededo, Yigo, or Mangilao. It is a home bakery, which provides customers a cozy, warm environment, almost like home. From first glance, the building looks like an old home, but upon stepping in the door, customers experience the feeling of being part of Christina's family.

In terms of pricing, Christina wants to offer a great deal to her customers. She makes every effort to ensure that the products found at her bakery are not only affordable for her customers, but also provides her the capacity to, at the very least, break-even. Her bakery provides an array of products: the Cinda bread, cookies, cakes, pies, pantosta, and gourmet options for the sandwich connoisseur. In addition, her bakery also provides specialty coffee blends and an assortment of teas, which cannot be found anywhere else on Guam. Christina wants to make it known that her products are top-of-the-line.

Competitive Advantage

According to Christina, Mainstreet's competitive advantage is that her bakery provides savory dishes and sweet desserts and pastries under one roof, which builds on a related product link, their Cinda bread. Many of Mainstreet's customers come back because of their bread and guarantee the bakery staff their loyalty.

Strengths, Weaknesses, Opportunities, Threats (SWOT)

Christina conveys, the bakery has opportunity for market growth, business expansion and identifies areas for improvement, but faces the risks and consequences associated with market fluctuation. The Table below displays a sample of Mainstreet's SWOT analysis.

No matter how difficult the road ahead may be or unclear the visibility of the future, Christina is focused on sustaining her business. Her strength of mind is rooted in her unrelenting commitment to keep her family traditions alive. This commitment cultivates the strength and courage she needs to keep moving forward. She did not submit to the fate of wonder and regret questioning what might have been. Rather, she is living her dream, Mainstreet is her reality and she is determined to get through the tough times that may lie ahead.

Strengths                  Weaknesses                 Opportunities

Commitment to family   Finances                   Market growth
tradition              Limited seating capacity   Expansion
Secret family recipe   Slow response to meet      Delivery service to
Passionate owners      demand for growth          nearby businesses
Loyal customers                                   Location
Good food                                         Local economic growth
Local business

Strengths                  Threats

Commitment to family   Slowdown in economy
tradition              Spending habits of
Secret family recipe   consumers
Passionate owners      Customer preferences
Loyal customers        Growing competition
Good food              growth  industry wide
Local business         Misconception that they
                       are a coffee shop

FURTHER EFFORTS

February 4, 2010 will mark Mainstreet's first year in business. Christina's lessons of the first year will only improve her ability to minimize, if not avoid, mistakes and strengthen her business acuity to build a successful business enterprise rooted in strong family traditions. Through sharing her experiences, Christina hopes to inspire other family members to live their dreams. With plans to expand her business in the next two years, Christina will create an opportunity for other family members to showcase their various baking specialties. In five years' time, she plans to possibly purchase the lot next door to support future business growth plans.

CONCLUSION

Christina has many dreams and is just taking things one day at a time. She has learned to manage her fears and is learning how to gain the confidence she needs to pursue the dreams she has for Mainstreet. To be an aspiring entrepreneur is one thing, but to actually carry out your dream is another. Christina must now plan for the next growth phase of her company and is excited at the thought. She states that to open up a business, the person must love what he or she is doing. "If your heart is not in it, during the bad times, you're not going to want to be there."

DISCUSSION QUESTIONS

1. What is your evaluation of this organization? What would you say are some of its successful ingredients to date?

2. What potential problems or challenges do you foresee in the near term (1-2 years)? What potential problems or challenges do you foresee in the long term (3-5 years)?

3. What should the owners do to ensure the company's continued success?

4. What is the difference, if any, between a small business owner and an entrepreneur?

The case looks at the organization from one of the three owner's perspective. In anticipation of future growth, the owner has some ideas of how she should respond to the challenges ahead.

ADDITIONAL ASSIGNMENT

Instructors using this case in a higher level business course might want to form student teams and ask them to assume the role of consultant and conduct research beyond the case to answer the following questions. Students may then be assigned to turn in an analytical report as well as an oral presentation.

1. Christina has sought your consulting expertise and asked you to assess the company's strategy, competitive market position, and overall situation, and recommend a set of actions to improve the company's future prospects. Please prepare a report to Christina and the other two co-owners of Mainstreet Delicatessen and Bakery. Be sure your report includes:

a. An identification of the key elements of the company's strategy,

b. A discussion of which of Porter's five generic competitive strategies most closely match the competitive strategy that Mainstreet Delicatessen and Bakery is employing,

c. The pros and cons of the company's strategy,

d. An assessment of Mainstreet Delicatessen and Bakery's strengths, weaknesses, opportunities, and threats,

e. An evaluation of the key success factors that Mainstreet Delicatessen and Bakery and its rivals compete against,

f. The strategic issues and problems that Mainstreet Delicatessen and Bakery's owners need to address, and

g. A set of action recommendations to deal with these issues and problems.

2. What are the pros and cons of Mainstreet Delicatessen and Bakery's strategy? What evidence indicates that the strategy is working well or not so well?

3. What does a SWOT analysis reveal about Mainstreet Delicatessen and Bakery's overall situation?

REFERENCES

Ali et al. (2008). What are Entrepreneurs Up To. Global Economic Monitor.

Isidore, C. (2008, December 1). It's Official: Recession since Dec. '07. Retrieved November 26, 2009, from CNNmoney Web site: http://money.cnn.com/2008/12/01/news/economy/ recession/index.htm?postversion =2008120112

Perez, Christina T. (2009, November, December). Mainstreet Bakery and Delicatessen. (M. Santos, Interviewer)

Recession.org Web site. (2009). Late 2000's Recession. Retrieved December 4, 2009, from Recession.org Web site: http://recession.org/history/late-2000s-recession

Recession.org Web site. (2009). United States Recession History. Retrieved December 4, 2009, from Recession.org Web site: http://recession.org/history

Shane, S. (2009, October 30). From Start-up to Stop: The Recession andEntrepreneurship. Retrieved November 26, 2009, from The Journal of the American Enterprise Institute Web site: http://www.american.com/archive/2009/october/from-start-up-to-stop-the- recession-and-entrepreneurship

Annette Taijeron Santos, University of Guam

Melanie Cayabyab Santos, University of Guam