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Medium Profitability Structured Math

Sports Bar

#Food Services
ProHub Comment

This is a math-intensive case requiring structured calculation of weekly and annual profitability. The case tests the candidate's ability to organize complex data, perform accurate calculations, and contextualize financial results within an investment decision framework. The critical insight is recognizing that while the business shows positive profit ($104,050 annually), the 4.1% ROI over 5 years with a 4.8-year break-even is unattractive compared to alternative investments.

Estimated Time 25 minutes
Difficulty Medium
Source NYU
10 / 100

Your client is an entrepreneur looking to invest in a new bar. He needs to determine how profitable the company will be and convince his primary investor, his father, that it will be a viable business.

What factors would you consider and investigate?

Clarifying Information

Revenues:

  1. The average customer spends $15 on food per visit
  2. The average customer spends $20 on drinks per visit
  3. Capacity constraints and benchmarking should also be discussed here

Costs:

  1. Lease cost is $10,000 per month
  2. Labor costs can be seen below
  3. COGS: Food has a 20% gross margin
  4. COGS: Drinks have a 50% gross margin
  5. There is no specific data on utilities, legal, insurance, licenses, training, remodeling, equipment, and other startup costs

Labor Needs:

  1. Kitchen (when open): 4 people @ $10/hr
  2. Bar: 1 person @ $5/hr
  3. Wait Staff: 3 people @ $5/hr
Mock Interview
Interviewer

Your client is an entrepreneur looking to invest in a new bar. He needs to determine how profitable the company will be and convince his primary investor, his father, that it will be a viable business. What factors would you consider and investigate?

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
Practicing...
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Practice this case with AI Mock Interview

An entrepreneur needs to convince his father to invest $500K in a sports bar. The candidate must calculate profitability based on customer volumes, pricing, and cost structure, then assess whether this represents a viable investment compared to other opportunities. The financial analysis shows the business is profitable but returns are modest relative to the capital required.

Key Insights:

  1. The case requires organizing disparate data (customer volumes by day/time, pricing, labor costs, COGS percentages) into coherent financial calculations
  2. Critical thinking about incomplete information: candidates should recognize excluded costs (utilities, marketing, insurance) that would further impact profitability
  3. Investment perspective is essential: a profitable business may still be a poor investment if returns are low relative to capital deployed and payback period is long
  4. Strong candidates identify ways to improve the model (revenue diversification, cost reduction through used equipment, premium pricing through brand loyalty)