Pizza al Taglio
Pizza al Taglio is a small, kiosk-style takeaway food shop which has recently begun operating in the City of London. The shop is run by Gianni, who has employed three of his cousins as staff.
At present, Pizza al Taglio sells only one product – slices of pizza made to the particular recipe associated with Gianni’s hometown in Italy. This artisan pizza has proved very popular, with queues often forming at lunchtime.
We have been engaged to estimate how much revenue the shop can be expected to pull in per month.
This case is a straightforward estimation. There will be other valid routes, beyond that shown here, by which the candidate might arrive at an answer. However, whichever method they use should follow a clear, rational structure, with any assumptions being reasonable ones.
Gathering Information and Making Assumptions
The candidate should begin by asking structured questions to gather salient information.
Where information is not available, they must substitute reasonable assumptions.
The shop primarily serves office workers in the city, who will often have a
slice of pizza at lunch or after work. Thus, it opens from 9am until 6pm.
Gianni does not open his shop on Sundays.
Pizza is sold for £6 per slice.
These pizzas are cooked on-site, one at a time, in a small, electric pizza oven. They can be sold later the same day, but are not stored overnight, as they would no longer be fresh enough to sell.
In addition to this data, we make the following assumptions:
The small oven is likely to be the bottleneck in pizza production. Pizza requires around ten minutes to cook. Thus, we assume the staff can produce one pizza every 10 minutes.
We assume that Gianni’s pizzas each have eight slices.
We assume that there will be negligible demand for pizza before lunchtime and that between 9am and noon, the staff are making pizza to stock up for the lunchtime rush.
However, since the case prompt mentions queues at lunch, we expect to sell all the pizza we have between noon and 2pm.
We then expect to sell at around 50% capacity to tourists and those leaving work for the rest of the day.
We assume that higher numbers of tourists in London on weekends will still generate the same lunchtime rush and that the level and distribution of demand will generally be equivalent across weekdays and Saturdays.
Once equipped with the relevant information, the candidate can begin to make calculations to arrive at a value for Pizza al Taglio’s revenue.
If a pizza takes 10 minutes to prepare, then six can be made per hour.
6 x 8 = 48 slices per hour
The entire production capacity from 10am until 2pm is sold during the lunchtime rush.
4 hours at 48 slices per hour = 192 slices
From 2pm until 6pm, 50% of production capacity is sold.
4 hours at (48/2) slices per hour = 96 slices
Total sold per day = 192 + 96 = 288 slices per day
At £6 per slice, 288 slices = 288 x 6 = £1728 revenue per day
Approximately four weeks per month means 4 x 6 = 24 days of business
24 x £1728 = £41,472
Thus, Pizza al Taglio’s expected revenues are approximately £41.5k per month.