business case
Part 1. Running a Business
Only a tiny fraction of family-owned businesses are still growing four generations after
their founding, but happily for lovers of premium-quality ice cream, Graeter’s is one of
them.
Now a nearly $50 million firm with national distribution, Graeter’s was founded in
Cincinnati in 1870 by Louis Charles Graeter and his wife, Regina Graeter. The young
couple made ice cream and chocolate candies in the back room of their shop, sold them in
the front room, and lived upstairs. Ice cream was a special treat in this era before
refrigeration, and the Graeters started from scratch every day to make theirs from the
freshest, finest ingredients. Even after freezers were invented, the Graeters continued to
make ice cream in small batches to preserve the quality, texture, and rich flavor.
Book Title: eTextbook: Foundations of Business
Part 1. The Environment of Business
Part 1. Running a Business
Let’s Go Get a Graeter’s!
After her husband’s death, Regina’s entrepreneurial leadership became the driving force
behind Graeter’s expansion from 1920 until well into the 1950s. At a time when few
women owned or operated a business, Regina opened 20 new Graeter’s stores in the
Cincinnati area and added manufacturing capacity to support this ambitious—and
successful— growth strategy. Her sons and grandchildren followed her into the business
and continued to open ice-cream shops all around Ohio and beyond. Today, three of
Regina’s great-grandsons run Graeter’s with the same attention to quality that made the
firm famous. In her honor, the street in front of the company’s ultramodern Cincinnati
factory is named Regina Graeter Way.
The Scoop on Graeter’s Success
Graeter’s fourth-generation owners are Richard Graeter II (CEO), Robert (Bob) Graeter
(vice president of operations), and Chip Graeter (vice president of retail operations). They
grew up in the business, learning through hands-on experience how to do everything from
packing a pint of ice cream to locking up the store at night. They also absorbed the
family’s dedication to product quality, a key reason for the company’s enduring success.
“Our family has always been contented to make a little less profit in order to ensure our
long-term survival,” explains the CEO.
Throughout its history, Graeter’s has used a unique, time-consuming manufacturing
process to produce its signature ice creams in small batches. “Our competition is making
thousands and thousands of gallons a day,” says Chip Graeter. “We are making hundreds
of gallons a day at the most. All of our ice cream is packed by hand, so it’s a very
laborious process.” Graeter’s “French pot” manufacturing method ensures that very little
air gets into the product. As a result, the company’s ice cream is dense and creamy, not
light and fluffy—so dense, in fact, that each pint weighs nearly a pound.
Another success factor is the use of simple, fresh ingredients like high-grade chocolate,
choice seasonal fruits, and farm-fresh cream. Graeter’s imports some ingredients, such as
vanilla from Madagascar, and buys other ingredients from U.S. producers known for their
quality. “We use a really great grade of chocolate,” says Bob Graeter. “We don’t cut
corners on that … Specially selected great black raspberries, strawberries, blueberries,
and cherries go into our ice cream because we feel that we want to provide flavor not from
artificial or unnatural ingredients but from really quality, ripe, rich fruits.” Instead of tiny
chocolate chips, Graeter’s products contain giant chunks formed when liquid chocolate is
poured into the ice-cream base just before the mixture is frozen and packed into pints.
Maintaining the Core of Success
Graeter’s “fanatical devotion to product quality” and its time-tested recipes have not
changed over the years. The current generation of owners is maintaining this core of the
company’s success while mixing in a generous dash of innovation. “If you just preserve
the core,” Bob Graeter says, “ultimately you stagnate. And if you are constantly stimulating
progress and looking for new ideas, well, then you risk losing what was important.… Part
of your secret to long-term success is knowing what your core is and holding to that. Once
you know what you’re really all about and what is most important to you, you can change
everything else.”
One of those “important” things is giving back to the community and its families via local
charities and other initiatives. “Community involvement is just part of being a good
corporate citizen,” observes Richard Graeter. When Graeter’s celebrated a recent new
store opening, for example, it made a cash donation to the neighborhood public library. It
is also a major sponsor of The Cure Starts Now Foundation, a research foundation
seeking a cure for pediatric brain cancer. In line with its focus on natural goodness,
Graeter’s has been doing its part to preserve the environment by recycling and by
boosting production efficiency to conserve water, energy, and other resources.
Graeter’s Looks to the Future
Even though Graeter’s recipes reflect its 19th-century heritage, the company is clearly a
21st-century operation. It has more than 200,000 Facebook “likes,” connects with brand
fans on Twitter, and invites customers to subscribe to its email newsletter. The company
sells its products online and ships orders via United Parcel Service to ice-cream lovers
across the continental United States. Its newly opened production facility uses state-of-
the-art refrigeration, storage, and sanitation—yet the ice cream is still mixed by hand
rather than by automated equipment. With an eye toward future growth, Graeter’s is
refining its information system to provide managers with all the details they need to make
timely decisions in today’s fast-paced business environment.
Graeter’s competition ranges from small, local businesses to international giants such as
Unilever, which owns Ben & Jerry’s, and Nestle, which owns Haagen-Dazs. Throughout
the economic ups and downs of recent years, Graeter’s has continued to expand, and its
ice creams are now distributed through 6,200 stores in 46 states. Oprah Winfrey and other
celebrities have praised its products in public. But the owners are just as proud of their
hometown success. “Graeter’s in Cincinnati is synonymous with ice cream,” says Bob
Graeter. “People will say, ‘Let’s go get a Graeter’s.’”*
Questions
1. How have Graeter’s owners used the four factors of production to build the business
over time?
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2. Which of Graeter’s stakeholders are most affected by the family’s decision to take a
long-term view of the business rather than aiming for short-term profit? Explain your
answer.
3. Knowing that Graeter’s competes with multinational corporations as well as small
businesses, would you recommend that Graeter’s expand by licensing its brand to a
company in another country? Why or why not?
Part 1. Building a
Business Plan
A business plan is a carefully constructed guide for a person starting a business. The purpose of a
well-prepared business plan is to show how practical and attainable the entrepreneur’s goals are. It
also serves as a concise document that potential investors can examine to see if they would like to
invest or assist in financing a new venture. A business plan should include the following 12
components:
Introduction
Executive summary
Benefits to the community
Company and industry
Management team
Manufacturing and operations plan
Labor force
Marketing plan
Financial plan
Exit strategy
Critical risks and assumptions
Appendix
A brief description of each of these sections is provided in Chapter 5. This is the first of seven
exercises that appear at the ends of each of the seven major parts in this textbook. The goal of
Book Title: eTextbook: Foundations of Business
Part 1. The Environment of Business
Part 1. Building a Business Plan
these exercises is to help you work through the preceding components to create your own business
plan. For example, in the exercise for this part, you will make decisions and complete the research
that will help you to develop the introduction for your business plan and the benefits to the
community that your business will provide. In the exercises for Parts 2, 3, 4, 5 and 6, you will add
more components to your plan and eventually build a plan that actually could be used to start a
business. The flowchart shown in Figure 3-4 gives an overview of the steps you will be taking to
prepare your business plan.
Figure 3-4.
Business Plan
Source: Hatten, Timothy, Small Business Management, Fifth Edition. Copyright 2012 Cengage Learning.
The First Step: Choosing Your Business
One of the first steps for starting your own business is to decide what type of business you want to
start. Take some time to think about this decision. Before proceeding, answer the following
questions:
Why did you choose this type of business?
Why do you think this business will be successful?
Would you enjoy owning and operating this type of business?
Warning: Do not rush this step. This step often requires much thought, but it is well worth the time
and effort. As an added bonus, you are more likely to develop a quality business plan if you really
want to open this type of business.
Now that you have decided on a specific type of business, it is time to begin the planning process.
The goal for this part is to complete the introduction and benefits-to-the-community components of
your business plan.
Before you begin, it is important to note that the business plan is not a document that is written and
then set aside. It is a living document that an entrepreneur should refer to continuously in order to
ensure that plans are being carried through appropriately. As the entrepreneur begins to execute
the plan, he or she should monitor the business environment continuously and make changes to
the plan to address any challenges or opportunities that were not foreseen originally.
Throughout this course, you will, of course, be building your knowledge about business. Therefore,
it will be appropriate for you to continually revisit parts of the plan that you have already written in
order to refine them based on your more comprehensive knowledge. You will find that writing your
plan is not a simple matter of starting at the beginning and moving chronologically through to the
end. Instead, you probably will find yourself jumping around the various components, making
refinements as you go. In fact, the second component—the executive summary—should be written
last, but because of its comprehensive nature and its importance to potential investors, it appears
after the introduction in the final business plan. By the end of this course, you should be able to put
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7.
the finishing touches on your plan, making sure that all the parts create a comprehensive and
sound whole so that you can present it for evaluation.
The Introduction Component
Start with the cover page. Provide the business name, street address, telephone number,
Web address (if any), name(s) of owner(s) of the business, and the date the plan is issued.
Next, provide background information on the company and include the general nature of
the business: retailing, manufacturing, or service; what your product or service is; what is
unique about it; and why you believe that your business will be successful.
Then include a summary statement of the business’s financial needs, if any. You probably
will need to revise your financial needs summary after you complete a detailed financial plan
later in Part 6.
Finally, include a statement of confidentiality to keep important information away from
potential competitors.
The Benefits-to-the-Community Component
In this section, describe the potential benefits to the community that your business could provide.
Chapter 2 in your textbook, “Ethics and Social Responsibility in Business,” can help you in
answering some of these questions. At the very least, address the following issues:
Describe the number of skilled and nonskilled jobs the business will create, and indicate
how purchases of supplies and other materials can help local businesses.
Next, describe how providing needed goods or services will improve the community and
its standard of living.
Finally, state how your business can develop new technical, management, or leadership
skills; offer attractive wages; and provide other types of individual growth.
Review of Business Plan Activities
Read over the information that you have gathered. Because the Building a Business Plan exercises
at the end of Parts 2, 3, 4, 5 and 6 are built on the work you do in Part 1, make sure that any
weaknesses or problem areas are resolved before continuing. Finally, write a brief statement that
summarizes all the information for this part of the business plan.
