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Medium Profitability Break-even Analysis

Dine-in Restaurant Chain

#Food & Beverage #Restaurant Operations
ProHub Comment

This is a straightforward break-even analysis case requiring candidates to work backwards from fixed costs to determine required unit sales per location. The case tests basic financial modeling skills and the ability to structure a top-down approach across multiple business units. Strong candidates should also contextualize the answer by discussing whether 20 donuts is achievable given current 15-donut sales and consider strategic implications like loss-leader pricing or partnership opportunities.

Estimated Time 15 minutes
Difficulty Medium
Source PeterK
50 / 100
Saturdays, a casual dine-in restaurant chain in North America, has gained fame for its delicious chicken thighs. They introduced donuts last year to increase revenue, but this new menu item has yet to turn a profit. What’s the daily break-even number of donuts sold per restaurant?

Clarifying Information

  1. Each restaurant sells an average of 15 donuts per day
  2. Donuts are priced at $2.5 each across the chain
  3. There are 40 restaurants in the chain
  4. The gross margin for donuts is 75%
  5. The fixed costs for this product line is $540k annually covering expenses such as donut production facility costs and marketing
  6. Please consider 360 days in a year