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Coursework Brief: Elliot's has become a global brand since its inception as a confectionary manufacturer in the 19th century. The company began as a small scale sweet and chocolate manufacturer in York and followed a similar business progression path to its nearest rivals, Terry's and Rowntree's. Elliot's range of commercial interests have been diverse. At the peak of Elliot's business life in the 1950's it manufactured sweet and confectionary products from its 12 acre factory site on the edge of the city. It also had extensive interest in the catering sector, owning 12 high quality tea/ coffee rooms across the North of England, an outside catering business, contracts to provide catering at 3 racecourses, (race day catering plus event banqueting throughout the year), a central bakery and a coffee roasting plant for its retail outlets. The company also owned 500 terrace houses in close proximity to the confectionery plant, which were purchased to provide affordable housing for employees. The company started to fragment in the 1960's. The most significant development was the sale of the confectionary brand and manufacturing capacity to an American conglomerate that wished to gain a foothold in the European confectionery business. This transaction involved the sale of the product and brand names. It also included all manufacturing and distribution equipment to allow the purchasing company to continue to manufacture from the existing York factory. However, the sale did not include the factory land or buildings, which the conglomerate agreed to lease on a 25-year contract. Released from confectionery manufacturing responsibilities and with an influx of capital from the sale of that part of the business, Elliot's board of directors looked to expand the hospitality and retail portfolio. The directors considered that their existing retail range of traditional tea/coffee rooms and outside catering had become outdated. However, rather than addressing the needs of that division of the business they were left alone. Seven of the high street tea/ coffee shop properties are owned outright by the company, the other five are occupied on leasehold contracts. Instead the directors concentrated their capital in alternative areas of growth. The 1960's were a period of rapid expansion for roadside restaurants and roadside hotels, which were dominated by the brands Little Chef and TrustHouse Forte. Elliot's board of directors duly ventured into the roadside business throughout the late 60's and 70's, acquiring in total 50 'Elliot's Diners' and 15 'Elliot's Lodge' hotels. All of these properties and the land they occupy
are owned by the company. piry of the 25-year factory lease and the end of production at 4/6 cturing from this site had progressively declined as the leasing wompany nou switched the production of brands to its other manufacturing bases. Elliot's were now left with a manufacturing site that was not attractive to other potential leaseholders. The site has remained unused to this day. What were grand buildings have now fallen into a state of disrepair, making the potential for development for alternative use more capital intensive. Planning consent has, however, been obtained to convert the factory into 150 apartments. The planning consent also allows for 200 townhouses to be built in the grounds. Interest has been expressed by a number of building development companies in options available to be involved in the redevelopment of the site. At the time of the new millennium, trends in the retail and hospitality business had changed. Roadside diners were no longer in vogue and the market for lodge hotels was becoming saturated. Food and accommodation services associated with the Elliot's brands had becoming outdated, as had the physical building facilities. Again, the board of directors were faced with making decisions; to retreat from the business or to rebrand, refurbish and re-launch the existing sites, and if so, which ones? The company failed to address options for development choosing instead to keep all the units in operation, with minimal investment in maintenance, just sufficient to keep them operational. In contrast, the board of directors chose to invest heavily in an alternative recognised area of growth, the up market country house hotel and spa. The last 20 years has seen the expansion of 'Elliot's Country Spa Hotels'. The company owns 25 of these hotels; a further 15 are leasehold properties. A significant amount of investment has been made in these properties. Some were purchased or leased as existing hotels, most of which required capital cost in bringing them to the Elliot's Country Spa Hotels high standards of facilities and décor. Others were purchased as country homes/ estates, which required them to be reconfigured to provide hotel accommodation and guest services. All of the properties required high levels of investment in the building of self contained spa facilities; each of which include a swimming pool, gym, treatment rooms, lounge, Jacuzzi, steam and salt steam room. The board of directors consider the move into country spa hotels to be a lucrative one, so much so that they wish to expand rapidly by buying out one of
their main competitors, with a portfolio of 50 properties. This purchase will more than double the Elliot's hotel portfolio. The current directors are aware that the company has a legacy of pockets of business, each with trading and property portfolio implications; retail shops, bakery, coffee roasting plant, outside/ event catering, roadside restaurants and roadside lodges, terrace house rentals, factory site grounds and buildings. Before progressing with further expansion plans into spa hotels the directors wish to rationalise the company's business activities. In particular, they wish to ensure that future capital expenditure is funded adequately, either from capital that exists within the business already that may be raised from the property portfolio, and/or from the sale or investment in the most profitable divisions of the business. A Retail Division Manager has recently been appointed. They have raised concerns over how the Country Spa Hotels facilities are managed. Each property has a general manager and a spa manager. Hotel managers are appointed for their hospitality managerial experience while spa managers have a health and fitness background. The Division Manager has observed that the spa managers are generally allowed to manage their facility with little support from resources available in the hotel. For example, levels of cleanliness in the spas are poor whereas cleanliness in the hotels under the management of specialist housekeepers meet high standards. The Division Manager has concerns that the lack of attention paid to levels of cleanliness in the spas is off-putting to members and guests and more worryingly that health safety and hygiene legislative requirements are not being met, placing staff and users of the facilities in danger and the company liable to prosecution.
The way that hotel and spa managers are allowed to operate autonomous from one another is replicated throughout the retail division. Managers are not required to liaise with one another to share information on best practice and to combine their purchasing potential. Instead, managers are allowed to source services locally, resulting in an array of arrangements and varying levels of consistency and costs. The Retail Division Manager is extremely concerned about the condition of the company's legacy retail and hospitality businesses that have had minimal investment. These concerns have been brought to the attention of the board of directors, along with the recommendation that consultants should be commissioned to provide advice on the management of the Country Spa Hotels and legacy retail business assets. You have been appointed as a property portfolio investment consultant by the Elliot's board of directors to advise them on options available to finance the purchase of a further 50 country house hotels. You are required to prepare a report that will describe options for developing assets/parts of the business or options to disposing of them, which should include the following: a) Describe the key considerations and components of an estates strategy. b) Outline your recommended strategy for the Group, explaining the reasoning behind your proposals. In dealing with the case study you should: i) State clearly any reasonable assumptions you feel necessary. ii) Note that marks will be awarded on the basis of the relevance to the answers to the case study.