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Easy Profitability

Choi Sun is Here

#Retail F&B #Fintech
ProHub Comment

This is a straightforward profitability case that requires candidates to build a financial model comparing incremental revenue from faster transactions against Choi Sun's service costs. The key insight is recognizing that the value proposition differs significantly by customer segment—only the take-out segment benefits from faster transaction times, while eat-in customers are constrained by table turnover, not payment speed.

Estimated Time 15 minutes
Difficulty Easy
Source HKUST
50 / 100
Our client, Leung Kee, is a popular lunch-service-only cha chaan teng (Hong Kong-style café) in Quarry Bay, serving mostly office workers and locals in the area. As a recently-established venue, Leung Kee is currently accepting only cash transactions. Leung Kee has been approached by Choi Sun Financials, a fledgling fintech company focusing on providing streamlined financial transactions to small and medium enterprises, with an offer to use their services. Is Choi Sun’s offer a good idea?

Clarifying Information

Leung Kee:

  1. Opening hours 12 pm – 2 pm, Mondays to Fridays, 50 weeks a year.
  2. Despite its short opening hours, the café is very popular, with queues forming before the café is opened each day and many disappointed customers still in queue turned away at closing.

Choi Sun’s services:

  1. Integrated point-of-sale terminal accepting major credit cards, EPS (Electronic Payment Services), Octopus, Alipay, WeChat Pay, etc.
  2. Promises faster transaction speeds, convenience for customers.

Customers:

  1. Eat-in: Groups of 4–6 people seated at larger tables.
  2. Take-out: Typically office workers taking lunch back to eat in office.
  3. Given the choice, all customers will pay using non-cash methods (i.e. they will use the services provided by Choi Sun).

Current operations:

  1. Eat-in: Tables are seated for an average of 20 minutes.
  2. Eat-in: There are 10 tables available for eating in.
  3. Take-out: Average transaction time is 60 seconds.

Choi Sun’s service specifications:

  1. Trials at a similar cha chaan teng in Kwun Tong shows transaction times can be reduced by 15 seconds on average.
  2. Choi Sun will charge the greater of 2% or HK$5 per transaction.
  3. There is an annual fee of HK$50,000 that covers all necessary training, hardware, and maintenance.

Average customer spend:

  1. Eat-in: The average table bill is HK$500.
  2. Take-out: The average customer order is HK$100.