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.
Total estimated revenue per month is $13,500 based on our assumptions.
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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?