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Medium Profitability Structured Math

Sports Bar

#Consumer Goods #Food Services
ProHub Comment

This is a quantitative profitability case requiring strong structured math skills. The candidate must organize extensive customer volume data by time period and day-of-week, calculate revenues and costs systematically, and ultimately assess return on investment (4.1% over 5 years with 4.8-year break-even). The key is recognizing that while profitable, the returns are marginal relative to the $500K investment, requiring a nuanced recommendation that weighs the investment against alternatives.

Estimated Time 26 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 12% 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
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Practice this case with AI Mock Interview

An entrepreneur seeks investment from his father to open a sports bar. The case requires calculating weekly profitability from customer traffic data, accounting for food/drinks revenue with different margins (12% and 50%), and labor/lease costs. The analysis shows $104K annual profit and 4.1% 5-year ROI on $500K capital, prompting discussion of whether this represents an attractive investment opportunity.

Key Insights:

  1. Must organize complex data by time period (day vs. night) and day-of-week (weekday vs. weekend) to calculate accurate order volumes
  2. Different gross margins for food (12%) vs. drinks (50%) require separate revenue calculations; drinks are more profitable per unit
  3. Break-even point of 4.8 years and low ROI (4.1% over 5 years) suggest the investment may not be competitive with alternative investment opportunities
  4. Critical cost categories missing from analysis (utilities, marketing, insurance) represent downside risks to profitability
  5. Final recommendation should frame investment decision from father’s perspective: comparing 4.1% return against other investment options and comparing 4.8-year payback against required timeline