Question

You are considering to invest in a franchise for a coffee shop in your neighborhood. To understand the revenue potential, you decide to visit a coffee shop from the same chain next to your neighborhood. In the next few months, you visit this coffee shop at random times between 6am and 9am. You observe that the line (queue) averages about 13 customers and it takes about 3 minutes to get in and out of the coffee shop. Assuming this is a typical experience and each customer spends about $5 per visit, what is the revenue potential per hour of this coffee shop? Hint: Calculate the number of customers arriving per minute (i.e., λ). Convert this to customers per hour. Then, calculate the revenue from these customers (each customer spends about $5, on average)

Answer 1

Based on the information given, the computation shows that the revenue from the customers will be $1300.

How to calculate the revenue

The following can be deduced from the information given:

• Line average = 13 customers.
• Time taken to get in and out = 3
• Amount spent by each customer = $5

Therefore, the number of visits in an hour will be:

= 60/3

= 20 visits

Therefore, the revenue every hour will be:

= 20 × $5 × 13

= $1300

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