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Internal Analysis essay
 
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Internal Analysis. Custom Internal Analysis Essay Writing Service || Internal Analysis Essay samples, help

Company Identification       

Mr. Empanada is a fast casual restaurant that was founded in 1984 by Albert and Audrey Perez. After operating for six years, the Perezs sold Mr. Empanada in 1990. The new owners were unable to grow the company which ultimately lead to its closing in 1993. Later, in 2003, Albert realized the empanada business was what he was meant to do and relaunched Mr. Empanada. By mid 2012, Mr. Empanada was able to add four franchised restaurants located throughout the Tampa Bay area. The company was also able to land itself a spot as a food vendor in the Tampa Bay Times Forum. More recently, an additional location was opened in St. Petersburg this past September (2012).

To ensure product quality, Mr. Empanada manufactures its own products at its Armenia location. In 2011 alone, the manufacturing facility produced roughly 1 million empanadas generating $1.7 million in revenues (Mr. Empanada).

In terms of Mr. Empanada’s organizational structure, it is relatively simple. You have the founder, Albert Perez, who oversees the entire organization. His wife, Audrey Perez, is in charge of franchise marketing, development, and sales. Their daughter, Lisa, manages buying and production. Although they are in charge of different areas in the organization, everyone oversees their employees. They strive for a family culture, meaning their organizational structure is more informal, or as Albert Perez describes it, “We keep it simple.”

Product/services Identification

Although the franchise itself is a product that Mr. Empanada Franchising Corporation wants to sell, the primary products provided by Mr. Empanada are empanadas. Empanadas are stuffed pastries that are either baked or fried. Empanadas are viewed as Latin in origin with the earliest record of the recipe published in Catalonia, Spain around the 1500’s. It is believed that the recipe originated around Central Asia and the Middle East and that Portuguese settlers brought it to Europe and eventually to the Americas. Now Empanadas are eaten all over the world with different nations having a wide variety of fillings and preparation methods.

Mr.Empanada introduces the empanada to their customers online stating:

“Naturally quick in preparation the empanada is far from traditional fast food. Empanadas are one of the world’s most popular cuisines. Enjoyed under a multitude of names, this real neat little treat can satisfy your hunger as snacks, lunch or dinner.”

All empanadas sold by Mr. Empanada are produced at their 2,000 square foot manufacturing facility on Armenia Avenue. The dough is handmade and loaded into machines, which add the stuffing and form perfect empanadas. Among the core values in the family business is the incomparable and unyielding regard for quality. No compromises are made when it comes to ingredients. The beef used in preparation is top quality along with the crab meat, which is imported from Venezuela.Additionally,Mr. Empanada only uses Philadelphia cream cheese to ensure consistent quality. The empanadas are available in two sizes: large and mini. Apart from the empanadas, Mr.Empanada offers Cuban sandwiches and sides such as salads, soups, and french fries.

Even though there are a few small companies around the United States that, like Mr.Empanada, specialize in empanadas, Mr.Empanada is the only chain in the Southeast. Further, they seem to be the only one to attempt selling them with a pre-produced, fast-casual business model. Specialty food offerings, like the empanada, are a niche market that has a high potential for growth. The low cost and simplicity of preparation, combined with the delicious taste and wide variety of flavors, make a recipe for success.

Customer Identification

The company achieved an award from the USDA on Mr. Empanada’s meat products. Mr. Empanada places an importance on the feedback they receive from customers. They use the information provided in customer reviews to improve and gain an insight into how they are being perceived. Further, this information allows them to consider potential opportunities for growth ("Mr. empanada," 2008).

As Audrey Perez said, “Our customers are anyone and everyone.” To be more specific, Mr. Empanada’s customers can be separated into two categories:

  • Franchise customers
  • Regular customers

Franchise customers

Franchise customers are those customers who are thinking of buying a Mr. Empanada’s franchise or have already bought a franchise. If a customer is considering the purchase of a Mr. Empanada franchise, they are told to consider number of factors before signing a contract as a franchisee. Simply purchasing a Mr. Empanada franchise is not going to generate a successful business. The franchisee must have an appropriate plan to run the franchise. Additionally, favorable economic and market conditions, skilled employees and dedication towards customers would also help the franchisee to achieve success in this line of business ("Thinking of buying,").

Becoming a Mr. Empanada franchisee requires serious commitment and works best if an individual is able to make thoughtful decisions for the business. A positive customer experience at Mr. Empanada should not be the basis for purchasing a franchise; rather the franchisee must evaluate the opportunities, threats, strengths, and weakness that could come with the franchise. As a franchisee of Mr. Empanada, one must reflect diligence and business ethics while using business practices that preserve the good reputation of the brand. If an individual wants to become the owner of a Mr. Empanada franchise, they must obtain all relevant information pertaining to the business. Therefore, the potential franchisee must talk to qualified advisors to check the viability of purchasing a Mr. Empanada franchise ("Thinking of buying,")

Regular customers

The food items made by Mr. Empanada are far from the traditional offerings that one would experience at conventional fast food restaurants. Mr. Empanada has no specific target market, serving various segments from children to elders. Furthermore, it’s not just the general public that the company serves, but schools, hospitals, country clubs and various events in that area as well.       

While the fast food industry was under deep recession and economic downturn, fast-casual restaurants like Mr. Empanada were serving their customers at their best. Fast-casual restaurants have done an excellent job satisfying the needs of their customers through quality and service, and as a result, have built a loyal customer base. The characteristics that these customers love about Mr. Empanada, is the freshness, food quality and service. Perhaps is it those characteristics that lead customers to give fast-casual restaurants higher satisfaction ratings. Fast- casual restaurants are in an excellent position to grow their business. (Brandau, 2011).  If Mr. Empanada wants to increase customer visits, they need to increase their ability to satisfy guests’ needs. In order to do that, Mr. Empanada must have a specific target market. This will allow them to focus their research and development on understanding their target customer’s needs, which could lead to a more effective marketing strategy.

Market Locations

 

Mr. Empanada is a small Latin styled restaurant with only seven establishments. Five of the seven are located in the city of Tampa, FL, including their vendor location at Tampa Bay Times Forum. The sixth location is in Lutz, FL and the latest addition, opened just last month, is in St. Petersburg, FL. At this time, Florida is Mr. Empanada’s only market, although they are hoping for further expansion in the future.

            According to the National Restaurant Association, the Florida restaurant industry is projected to reach $31.5 billion in sales, putting Florida in the top 4 states by sales volume. Additionally, industry sales in Florida are projected to grow by 3.9%. Based on this information, Florida is in a good position for market growth. This could mean that Mr. Empanada has the opportunity to grow its brand awareness, which, in turn, could lead to franchise growth and higher profits. (“2012 restaurant industry forecast,” 2012).

Mission/Vision Analysis

 

Mission

A mission statement is meant to convey what an organization is. It should describe the company’s purpose, strategy, values, and standards and behavior. According to Professor Bechtold, a proper mission statement should include the following eight components:

  1. Describe the company’s customers.
  2. The products and services that they sell.
  3. The markets that they are selling to.
  4. The level of technology within the organization.
  5. The economic objectives for survival, growth, and profitability.
  6. The philosophy of the firm.
  7. How the company wishes to be viewed by the public.
  8. How does the firm treat its employees.

Mr. Empanada’s mission states:

“Mr. Empanada’s mission is to provide our customers with delicious food, amazing service, and a friendly atmosphere. We desire to be the first place customers think of when it’s time to eat out.”

Using the above as a guide, Mr. Empanada’s mission statement is missing almost all of these components. Although they explain the general philosophy of the company, the mission statement is in need of improvement. At this point, the mission statement is too broad and needs to be tailored to include the specifics of the company. Without a strong mission statement, a customer or potential franchisee, will be unable to grasp what the company is.

Vision

            A vision statement is used to describe the company’s ideal, yet realistic, future. It should convey a larger sense of the company’s purpose and describe the impact they wish to have on society. Further, a company’s vision statement must be consistent with their mission statement.

Mr. Empanada’s vision states:

“By consistently exceeding customer’s expectations, and giving back to the communities where we do business, we will have the privilege of bringing Mr. Empanada to cities across the United States. Ultimately, we will make empanadas as well-known and popular in our culture as pizza and hamburgers.”

            As a vision statement, Mr. Empanada’s vision encompasses the required components, and therefore is properly executed. Due to an incomplete mission statement, it is hard to analyze the relationship between Mr. Empanada’s mission and vision. Although they are heading in the right direction, there are improvements that must be made. By creating a cohesive mission and vision, that include the proper components, a customer will be able to gain a general knowledge of what to expect.

Organization Culture Analysis

 

A company’s culture is typically implied, rather than defined, and often develops over time. This culture can be seen throughout the organization in areas like employee dress, turnover, customer service, customer satisfaction and other areas of operations. To understand Mr. Empanada’s culture, an analysis of these areas will be featured below. (“Corporate culture,”).

Employee dress is an important aspect of a company’s culture. How an employee looks is often the first thing a person will notice. If inappropriately dressed, a customer could have a negative perception of the employee and further, the company as a whole. At Mr. Empanada, employees are required to wear a green shirt and black hat with the company’s logo, and khaki pants. By doing this, employees are dressed cohesively, and are perceived as a team. Further, when everyone is dressed the same it creates a culture of equality, where no one person is dressed better than the rest. Having a specified dress code also creates unity between the various locations. When entering one location, a customer can expect that the employees will be dressed in the same attire as employees found at another location.

In any organization, employee turnover is an area that cannot be over looked. For example, if turnover is high, it can hurt workplace relationships which will ultimately hurt the companies overall perceived culture. However, when turnover is low, it can produce productive and strong relationships. At Mr. Empanada, employee turnover in the manufacturing department is low while frontline turnover tends to be higher(although no specific data was given to support this). If this were to be the case, one could assume their turnover rate to be relatively neutral; that is not too high and not so low. This could mean that although strong workplace relationships do exists at Mr. Empanada, there are some relationships that are not as strong as they might hope. To ensure that the organizations culture is properly maintained, having and understanding the turnover rate is vital.

Creating a customer service based culture can be difficult but rewarding. Employees need to understand why excellent customer service is important, and must be encouraged to make responsible decisions when performing these duties. Further, an employee must be informed of the proper behaviors to up hold when dealing with both customers and coworkers (Morrow, 2000). At Mr. Empanada, employees are trained and expected to treat customers, and each other, with the utmost respect. Every customer that visits Mr. Empanada should leave having had a great experience.

A good customer service culture can lead to increased customer satisfaction. However, customer service alone cannot generate the highest form of customer satisfaction. A customer’s satisfaction can be attributed to the product/service offering, quality, price, speed and much more. At Mr. Empanada, they strive to create a culture that focuses on producing consistent, quality products. Combining this culture with a good customer service culture, Mr. Empanada could have the ability to create continually high customer satisfaction ratings. To give an idea of how Mr. Empanada’s customers perceive them, lets take a look at some of the company reviews found on yelp (“Mr. empanada,”):

  • Four stars: “Love the empanadas here. Everything from beef to chicken to broccoli and cheese. Great for lunch or take-out!!”
  • Three stars: “I have to be honest the empanadas are very very good here but,$2.69 for one empanada is a problem for me. Stopped by for some quick eats and ordered six beef empanadas and the total was $17. I had to ask again, how much? So I looked at the menu and I was surprised when I saw the price... good eating but too expensive.”
  • Five stars: “I LOVE these empanadas. I spent the summer in Tampa and just decided to try it. It is my favorite place to eat when I am there. I can't find anything like this in the midwest, which is pretty sad. The cravings have gotten so bad that I thought about opening a franchise so I can eat it whenever I want! I even thought about having them ship me some frozen one. Honestly, I can't wait to go back to Tampa so I can eat at Mr. Empanadas. I would recommend the beef and cheese or the crab meat. They are both amazing!!!!”
  • Two stars: “Had the beef and cheese empanada.  Nothing special, similar to a Hot Pocket. Service was rather cold when I went. Though I hear the Guava and Cream Cheese empanadas are something special.”

These reviews all vary in opinion, however, several do mention pricing to be an issue. This is something Mr. Empanada may want to keep their eye on. In terms of consistency and quality, the reviews seem to agree that Mr. Empanada’s products are very good. Although not all the reviews were mentioned, the customers’ satisfaction seemed to be leaning towards the higher end. This is great news for Mr. Empanada because it can help generate good word of mouth and expand their brand awareness.

 

 

Marketing Strategic Analysis

Currently, Mr.Empanada has no marketing strategy in place. With a very weak approach to marketing, it is difficult for them to find benchmarks to accurately compare with in the industry. Having a variety of offerings allows for different approaches to a marketing campaign and customer base.This could explain why their current approach is “anyone and everyone is a customer”. Although the convenience of the product characteristics, as well as the nature of the product itself makes this statement somewhat true, detailed marketing research has to be conducted to determine a specific target market. This can only be done after those consumers are identified, and their tastes are defined. Since this is an analysis of the company in its current state, a SWOT (strengths, weaknesses, opportunities and threats) analysis, as well as a breakdown of their 4+1 P’s (Product, Price, Promotion, Placement, and People) will be featured below.

SWOT Analysis

(Note:  Opportunities and threats are sometimes considered as solely external factors and are mentioned in the preceding external analysis.)

Strengths:

  • Unique idea: most restaurants that serve empanadas do not focus primarily on empanadas.
  • Variety of flavors: some of the flavors would not be considered traditional, and may appeal to a broader market than traditional empanadas.
  • Innovative process: unlike most restaurants that serve empanadas, they are premade, allowing for mass production and better inventory and supply chain management.
  • Storage potential: the packaged product, when frozen, is good for up to 9 months, which is not often found in the restaurant industry and is convenient for franchisees.
  • Cross-trained employees: employees require very little training and can easily switch between positions within the company.
  • Quality: no compromises are made when it comes to cleanliness and ingredient quality.

Weaknesses:

  • Lack of focus: there is no defined target market and no research has been done regarding what they should focus on as a primary competitive advantage.
  • Low profitability: overall profitability has to be improved to increase investor interest.
  • Online presence: the website is poorly designed and does not convey the values and atmosphere of the company accurately or positively.
  • Advertising: there is a lack of strong advertisements.
  • Locations: restaurant locations are poor which is deterring potential brand awareness.
  • Food trends: the food is frozen, not prepared on site. Also, the empanadas are deep fried, not baked.

The concept of focusing on empanadas as the primary food for sale at a restaurant is new, giving them a unique competitive advantage. The pre-prepared and storable nature of the food products makes them an easily manageable and convenient good.  Empanadas can be filled with almost any flavor, meaning Mr.Empanada can adapt their offerings to trends in consumer taste. The empanadas take approximately 4 minutes to prepare, are a less messy alternative to the average burger or taco, and can be eaten as any meal of the day. Mr. Empanada delivers empanadas to the franchisees and an additional 1-2 week inventory is kept on hand at the Armenia facility. Mr.Empanada has found a new niche and has the potential to do what Starbucks did with coffee, Taco Bell did with tacos, and Pinkberry did with frozen yoghurt. 

Price:

            The pre-produced nature of the empanadas at the manufacturing facility allows for mass production, which greatly reduces costs in comparison with traditional on-site cooking. The average unit cost per empanada produced is 0.60%u20B5for a large empanada (overhead 0.05%u20B5, dough 0.03%u20B5, and all other costs 0.52%u20B5), and 0.25%u20B5 for a small empanada (overhead 0.03%u20B5, dough 0.015%u20B5 and all other costs 20.5%u20B5).They are then sold for approximately $1.00-$3.00. Mr.Empanada is currently developing pricing plans for meals. No research has been done in consumer preferences and whether differences in pricing could lead to more profitability. Consumer’s true feelings about pricing have not been analyzed by Mr.Empanada, but our preliminary online research suggests consumers believe them to be highly priced.

Promotion:

            Although no formal strategic marketing plan was ever put in place by Mr.Empanada they have tried reaching out through various channels. They currently rely heavily on word-of-mouth advertising and reach out to the community around them. The structure of the model is decentralized, however, each franchise promotes independently. Mr. Empanada has tried reaching out to the public with coupons targeted towards the Hispanic market, but was a failure as very few were ever returned. The Mr.Empanada website is poorly designed and does not convey the values or quality of the company it represents.

Placement:

            All the preliminary research we have done points to their being no other fast-casual chains with a specialized focus on empanadas. This means Mr. Empanada may have created its own niche in the market. When it comes to fast-casual restaurants, there are several competitors such as, Chipotle, The Taco Bus, Taco Bell, Panera Bread, and Pita Pit that exist. However, none of these establishments make empanadas. With a potentially wide international appeal and a large variety of flavors, there are many areas that would be appropriate for placement. Mr.Empanada needs to conduct research to determine what consumers are willing to pay,their tastes, and where additional Mr. Empanadas would be profitable.

People:

            People are an integral part of Mr. Empanada. The close-knit family and their core values are what built this company into what it is today. The employees are considered part of the family and receive over minimum-wage pay upon entering the company. Other perks of working for Mr.Empanada include semi-annual or annual pay raises. Additionally, they have a system in which money spent on food by employees goes into an account for gifts and other employee events. Further, employees are cross-trained by the company so they can be involved in different positions.

Financial Strategic Analysis

The overall success of a company depends on the financial stability that it has in all its dealings. This means that a given company must be fully aware of how it is performing financially, knowing where it stands in comparison to previous years and industry competitors. Below is a chart containing key ratios that will be used in analyzing Mr. Empanada’s financial position.

 

Mr. Empanada Franchise Corp.

Mr. Empanada

Financial Ratio

2010

2011

2010

2011

Net Working Capital

$10,601.33

$11,701.01

$69,041.58

$85,012.61

Current Ratio

2.54

2.75

14.75

31.30

Gross Profit Margin

N/A

N/A

27.32%

26.41%

Profit Margin

N/A

N/A

-5.02%

4.14%

 

Net working capital is always employed in measuring a company’s ability to cover all short-term liabilities.  Whenever a company posts a positive net working capital, the eventual result means that that specific company has the ability to pay off its short-term liabilities. Both Mr. Empanada Franchise Corp. and Mr. Empanada have positive net working capitals. This is reflective on how the company has been performing in the years under analysis. There has been a rise in their networking capital hence necessitating the idea of a positive working. This also means the company as a whole has the short-term assets needed to cover their short-term liabilities. Additionally, from 2010 to 2011 the net working capitals increased. This is positive because they were able to either increase current assets or decrease current liabilities.

The current ratio is also essential in any business and its analyses. It is directly related to net working capital. The current ratio also measures a company’s ability to pay off its current liabilities with its current assets. When looking at the current ratio, the higher it is the better. Anything below 1 would mean the company would be unable to pay off its current liabilities. Basing on the chart above, Mr. Empanada Franchise Corp. and Mr. Empanada both have the ability to pay off any obligations in case the latter arise. However, Mr. Empanada has a much higher ratio meaning this entity alone is in a favorable financial position. Further, from 2010 to 2011 the current ratio for Mr. Empanada about doubled. If this trend continues, Mr. Empanada will be in a great position financially to cover any liabilities that may arise in the future.

Gross profit margin refers to a financial ratio that is used in measuring the given portion of money any company has left over from its revenue after eventually deducting all the costs of the goods sold. For every sale that Mr. Empanada made, only 27 cents in 2010 and 26 cents in 2011 were left for any additional expenses. A company’s net profit margin measures the portion of money a company has left over after accounting for all potential expenses. In this case, Mr. Empanada has a negative profit margin of -5.02%. This means that for every sales dollar, they were losing five cents. In 2011, Mr. Empanada was able to increase their net profit margin to 4.14%, meaning for every sales dollar they were making roughly four cents. Unfortunately, these are not great numbers and should be monitored closely. With the net profit margin being so low, the company is generating profit, but not enough to ensure strong financial viability in current or future years.

In addition to these ratios, Mr. Empanada’s financial statements revealed a strength. From 2010 to 2011 they were able to reduce officer salary from $72,600.00 to $14,450.00; that is an 80.1% decrease. If Mr. Empanada can continue to find areas in which to cut costs, they could greatly improve net profits.

R & D Strategic Analysis

Research and development (R&D) is a key element in business. It has the potential of reducing cost, and providing a core competency, a competitive advantage, for a company. In industries such as pharmaceuticals and technologies, research and development is the key for growth. It will give companies the competitive advantage to develop and produce new products, and reduce major costs. However, in the fast-casual dining, there is not much necessity for developing software, or hardware that will reduce costs, or provide a new product. Thus, it is not favorable for a company such as Mr. Empanada, to have a major spending budget for R&D. In fact, according to the financial statement, Mr. Empanada does not have any R&D spending. However, there are some aspects in which Mr. Empanada can benefit fromconducting R&D. Mr. Empanada does not have to heavily invest in R&D in order to strengthen its business. Simply staying up-to-date with current technology, such as manufacturing machinery, delivery systems, and inventory monitoring systems, would all reduce costs. 

           Mr. Empanada has the ability to manufacture their own empanadas, with their own unique dough, made from scratch. Currently, the employees put the empanadas on racks, and blast freezes them in amounts between 5,000 to 6,000 empanadas. However, management is looking into the possibility of investing in a tunnel blast freezer that would be attached to the empanada production machine. This could create a strength in the manufacturing division, because the tunnel blast freezer has the ability to cut production time in half.

Currently, Mr. Empanada has one truck to make the deliveries to their customers and franchisees. The fuel cost for the transport of product is immense. In this modern age, hybrid trucks are available. Advanced technology such as hybrid power train will help lower fuel costs. With the decrease in fuel cost, Mr. Empanada will have an increase in net profit, which will secure the companies growth.

An inventory monitoring system is the core competency of Walmart. This giant corporation has invested immense amounts of money to develop an inventory monitoring system. This system will provide in detail the products they have in inventory, and when they are about to be out-of-stock, and will notify the suppliers to supply more of each product. Off course, Mr. Empanada does not need a sophisticated system such as the one from Walmart, but research has shown that having a proper inventory monitoring system in place will reduce cost. Mr. Empanada has a well-maintained tracking system. The employees track everything that has to do with the operations. However, some of the work is still done manually, which means counting and keeping track on paper. This is the old-school way of keeping track of operational information, which could still create an efficiency problem. The next step would be to completely integrate into a digital tracking system that would eliminate the need for manual tracking.

            Mr. Empanada has both strengths and weaknesses when it comes to research and development. Establishing a research and development team that will keep up to date on potential opportunities will benefit Mr. Empanada in reducing costs. The strength that Mr. Empanada carries is in their tracking system, which still needs improvement, technological wise. The weaknesses Mr. Empanada has are the delivery system, and the production cost in having to wait on the blast freezer usage.

Operations Strategic Analysis

Operations are the most important aspect of any type of business. It is the way that a company conducts its business. Having proper operation procedures in place will secure a companies efficiency, reduce cost, and boost growth. Within operations fall many different subcategories, which include, customer relation procedures, employee relation and training procedures, and manufacturing procedures. Mr. Empanada shows a tremendous strength in operations for a small sized company.

            Mr. Empanada provides quality service to its customers. Instead of providing retail prices, Mr. Empanada opts for wholesale prices for school accounts, such as Tampa Catholic High School, Hospitals, Country Clubs, and Bingo Nights. Due to the fact that they provide this type of service to these specific accounts, Mr. Empanada are able to keep their clients satisfied. Another extended feature of this service is that each store serves different schools or events, such as soccer tournaments. This will maintain good customer relation with steady clients.

            Mr. Empanada follows a cross-training procedure when it comes to new employees, and individual training procedures when it comes to franchisees. People looking for work at Mr. Empanada would have to be cross-trained, which entails being able to functionally perform in any area of the operations at Mr. Empanada (e.g. retail, manufacturing, and delivery). About 80% of the employees are able to functionally perform well in the retail area, and the rest can perform every single job in the business. 

            Albert Perez, the founder of Mr. Empanada strives to create a clean and healthy environment. The frying oils are filtered every day, and changed every week. Albert believed in providing a consistent, quality product. The beef that Mr. Empanada serves is made of 86% lean meat of the highest quality from City Meets. The USDA factory operates Monday through Friday, 8:30 am until 4:30 pm. The dough is made by hand, and can produce between 2,000 to 10,000 empanadas per day. Any extra dough is thrown away, due to fear of cross contamination. The empanadas are then placed in a blast freezer, in order to preserve the product, and store for later use. Deliveries are made once a week, with a truck thatcan contain about 50 cases(between 3,000 to 5,000 empanadas). Also, every morning all the machines are cleaned before operations commence. In the retail department, after the empanadas have been produced and frozen they are prepared for sale at the individual stores. As a customer orders their empanadas, the employee would take the frozen empanada, and set it in the deep fryer for 4 minutes, then the employee would sell the finished product to the customer.

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