An investor seeks to launch a nightclub in Downtown Kingston targeting Queen’s University students. The candidate must assess viability by calculating capacity, nightly throughput, revenue under baseline pricing ($5 cover, $5/shot), and comparing it against two alternative pricing strategies to identify the most profitable approach.
Key Insights:
- Capacity calculation requires careful attention to usable vs. total space and applies a per-person space requirement constraint
- Customer throughput modeling must account for turnover—people leaving and being replaced during operating hours, not just initial capacity
- Pricing strategy analysis requires comparing net profit impact (revenue minus incremental costs), not just revenue changes alone
- Gender-based pricing can be profitable by capturing consumer surplus if female customers have higher willingness to pay for certain experiences (additional shot purchases offset cover discount)
- Market viability depends on competitive positioning—understanding competitor offerings (Ale House, Stages, The Spot, Undies) and pricing benchmarks is essential to justify entry