Red Hen Baking Company

Abstract

In 2007, the Red Hen Baking Company was deciding whether to move from its cramped and inefficient facility to a new facility. It had been in business about 8 years, and 2006 was the first year RHB realized a profit that was over $50,000. The added annual cost of the new location was about $58,000 and would require a $300,000 build-out. While the owner of Red Hen was excited about the possibility of a new, efficient bakery, he wondered if it was worth the added expense and risk.

Learning Objective: Students consider the benefits and risks associated with an expansion by the owner of a small business with limited capital.