Problem Statement - Guesstimate the revenue of Domino’s.
As you must have figured out, this is a Market Sizing type of Guesstimate.
Now, we move on to clarifying a few assumptions to narrow down the scope of the problem at hand.
Clarifications
- Dine-in/Takeaway
- Hours of operation
- One Domino’s store or the entire chain
Assumptions
- Both
- 12 hours (10-10)
- One store
We then saw three approaches to solve the problem.
Approach 1 - To guesstimate the area under that Domino’s and calculate the number of orders and multiply that by the average ticket size
= Population X penetration % X orders in a month X average order amount
Reasons - uncertain and require a lot of assumptions
Approach 2 - Constraint is the raw material
However, that will be dependent on the previous day’s demand and will gradually increase/decrease to match the demand
Approach 3 - Constraint as number of employees/pizza making
- Certain and finite
- Cannot increase the maximum number of pizzas made in a day without more investment
- Does not depend on whether the service is dine-in or take away
Assumptions
- All orders contain at least 1 baked item
- All baked items take the same time to prepare as a pizza (calzones, tacos etc)
- All side dishes take lesser time to prepare than the baked items (that is, baking takes the most time in preparing an order)
- Hours of operation - 9 am to 9 pm (12 hours)
- Regular small Domino’s (Domino’s cover a huge area through small restaurants covering a certain area, we rarely see big ones, even in malls
Time taken to make one pizza
= Prep time (take out the dough, apply toppings) + baking + packing
= 5 min (pre-made) + 15 min + 5 min = 25 min
The number of pizzas is dependent on the number of ovens, therefore, the maximum capacity
= Number of pizzas made in 1 hour * number of ovens * capacity of one oven (4)
= 4 * 2 * 4
= 32 pizzas
Now,
Cost of one pizza (mostly regular or medium-sized is ordered) = ₹200
+1 side per baked item = ₹100
+1 beverage = ₹50
The total revenue earned with one order = ₹350
Peak timings - Lunch (12 to 3) and Dinner (7 to 9) - 5 hours * 80% utilization
= Max capacity * Utilization % * No of hours * Revenue per pizza (This equation is important and summarizes your entire approach)
= 32 * 80% * 5 * 350
= ₹44,800
Off-peak - 9 to 12 and 3 to 7 (7 hours) * 50% utilization
= Max capacity * Utilization % * No of hours * Revenue per pizza
= 32 * 50% * 7 * 350
= ₹39,200
Total Revenue
= 44,800 + 39,200 = ₹84,000
The thing about guesstimates is that they can even be practised alone practically anywhere. If you’re not good at structured communication, practice speaking the solution out loud. If you’re not very good with numbers, practice your calculations. Because at the end of the day, there is no replacement for practice.