Coffee Shop Co. Case Study (Part-1)
A Bain & company practice case sample
Client Background
You’re having lunch with an old friend from university, and she’s looking for some business advice. She is thinking of opening a coffee shop in Cambridge, England, a large university city an hour and a half away from London.
She sees potential in this business but wants your help in determining whether opening a coffee shop is a good idea.
What do you think?
Case Setup
I would first ask her to find out if there are any competitors who have opened similar coffee shop? Secondly, do people (residents, commuters, visitors) enjoy having coffee there? Are they looking for some other cheap alternative or some with much better quality, taste and options?
Answer to these questions will help me analyze the market structure of the location where she wants to setup her coffee shop. I would get an idea to ascertain my view on how big the opportunity is?
To gain more clarity about the type of business I would ask her preference on-a sit-down coffee shop, a large drive-through shop, a small kiosk a franchised sit-down coffee shop.
Assumption: She aspires to set up a sit-down coffee shop which can typically costs between $200,000 and $375,000 to set up.
Setup for the business:
1. Revenue: Each coffee sold* Price
2. Cost: Fixed Cost( rent, maintenance cost, staff salary, advertisement) + Variable Costs( raw materials- milk, coffee beans, cups, lids)
Analysis
You show your proposed framework to your friend, and she really likes it! She’s especially interested in figuring out how big the market is to best estimate how much coffee she can sell. She knows the market probably includes commuters, visitors, etc., but for now, she wants you to focus on Cambridge residents alone.
How do you estimate the size of the market?
Taking a top down approach I will first ascertain the total population of Cambridge. Following is the break down of the same on the basis of assumption:
1. Remove children (age 0–11) from the target group.
2. This will leave us with total number of adults and adolescents, now calculating total coffee drinkers.
3. Keeping a margin for coffee being made at home
4. Removing days of holiday when the coffee shop will be shut.
