MAC234 - Management Accounting and Tasty Holdings Ltd case study - Management Assignment Help

Assignment Task

QUESTION 1

Tasty Holdings Ltd (from here on referred to as Tasty) is a listed South African company that recently acquired the franchise rights to bring Stardollar Ltd (from here on referred to as Stardollar) into South Africa. Due to the recent successes that Tasty has had in bringing other global franchises into South Africa, such as Burger Queen and Crispy Crema Donuts, the company believes that its Stardollar venture will be just as successful for the company and its shareholders. Stardollar is one of the world’s largest coffee companies, which operates in numerous different markets across the globe. Its primary source of revenue and profits is through the sale of coffee and food products in its coffee shops as well as the sale of coffee beans around the world. You were recently chatting to the CEO of Tasty, Mr. Davie, who provided you with the following details in respect of Tasty’s Franchise Agreement with Stardollar:

• Tasty was permitted to implement phase 1 of the franchise agreement from the 30th of April 2020. Phase 1 involved the setting up of a flagship Stardollar store in Cape Town located in Bree Street. Phase 2 involves the setting up of additional flagship stores in Johannesburg and Durban. However, Tasty will only be able to implement this phase once its Cape Town store has met certain revenue, profit and cash flow targets over the next two years.

• Tasty is required to pay a franchise fee1 of $25,000 per annum, regardless of the performance of its Stardollar stores. Furthermore, it is required to pay Stardollar 2.75% of its revenue earned per month.

• Prior to entering into any joint venture arrangements under the Stardollar brand name, Tasty is required to obtain written permission from Stardollar

Tasty’s Stardollar Store in Cape Town

It is currently the 30th of June 2020, and Tasty’s Stardollar store has been open for exactly 2 months. The store is currently split into two sections, with coffee and food products being sold out of one section, while coffee beans are being sold in the other section. Tasty managed to secure a 2- year lease from Highpoint Properties for an annual rental of R300,000 for 200m2 of leasing space, payable at the end of every month. The lease is subject to an annual escalation clause, which will come into effect as at the 30th of April 2021. This will result in the annual rental increasing by 11% starting from May 2021.

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