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Medium Profitability

Dine-in Restaurant Chain

#Consumer Goods #Retail
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 25 minutes
Difficulty Medium
Source PeterK
10 / 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
Mock Interview
Interviewer

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?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

Saturdays restaurant chain introduced donuts that are currently unprofitable. The case asks candidates to calculate the daily break-even sales per restaurant. The solution requires dividing total annual fixed costs ($540k) by gross margin per unit to get annual units needed, then converting to daily sales per store. The answer is 20 donuts per restaurant per day (a 33% increase from current 15-donut average).

Key Insights:

  1. Break-even formula: (Fixed Costs ÷ Gross Margin per Unit) ÷ (Days per Year × Number of Locations) = Daily Units per Location
  2. The 40-restaurant chain may lack sufficient scale to absorb the high fixed costs of a dedicated donut production facility
  3. Strategic considerations beyond break-even: loss-leader potential, customer cross-selling, and partnership opportunities with other chains to share facility costs
  4. Candidates should proactively identify missing information and clearly structure their approach before calculating