A local sandwich place has a shop located in a busy business district. The business district is filled with large head-offices of major corporations, a train station & a university. The sandwich place only sells one type of sandwich priced at $5.00. This is a cold-cut salmon sandwich with bread, smoked salmon, salad, cheese & sauce. The sandwiches are freshly made and only prepared after the order is placed, so no pre-packaged sandwiches. The shop has 3 employees who all service customers and it is a take-away without any seating.
Try to estimate the total revenue this shop can generate in one month. Costs are no factor here. Try to base your estimation on logical & reasonable assumptions that would be common for a sandwich place as described here.
Since this is a candidate-led case, the candidate should drive the case from start to finish.
- The candidate should make his/her own assumptions whereas interviewer should check for business sense, logical assumptions, details and structure.
- Solution below is a possible solution based on our assumptions.
Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.
Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.
Diagram 1 can be shared with candidate that provides a structure for the case.
We can make the following assumptions:
- Sandwich is a cold-cut, so it shouldn't take more than 5 minutes to prepare each sandwich.
- Shop follows office hours operating 9 hours from 10.00 AM to 07.00 PM.
- Shop is closed during the weekend.
- Between 10.00 AM & 12.00 PM the shop is preparing for the busy lunch-rush, so it doesn't sell anything in those 2 hours.
- Assuming shop has three time-segments with a lunch-rush between 12.00-02.00 PM, light afternoon between 02.00-05.00 PM and evening rush between 05.00-07.00 PM.
Revenues are generated within the three time-segments mentioned above only. You could argue that you need the time between 10AM and 12PM to prepare the sandwiches for the lunch-rush.
We can now calculate revenue:
- 3 employees are able to prepare 36 sandwiches an hour.
- During lunch hour, they sell 100% of production which is 36*2=72 sandwiches.
- During the afternoon, they sell at 25% capacity which is (36*25%)*3=27 sandwiches.
- During the evening, they sell at 50% capacity which is (36*50%)*2=36 sandwiches.
- Total daily revenue is (72+27+36)*$5=$675.
- Total monthly revenue is $675*20 days=$13,500.
Total estimated revenue is $13,500 per month.
- How could this shop double his revenue in the same location?