EasyValuation
Mike’s Burgers
Case Prompt
- You are out to lunch with a friend at Mike’s Burgers, a Michelin-starred burger restaurant in Austin, Texas. Mike’s rose to prominence due to it’s unerring commitment to both quality and simplicity (Mike prides himself on only serving two items: burgers and beer). After a few burger sliders and more pitchers of beer than you care to count, your friend asks you how much you think the restaurant is worth and whether or not buying it would be a good investment.
- How would you go about determining the value of the restaurant?
General response summary
- Candidate should use a revenue –cost framework to determine cash flows. The value of the restaurant is the present value of the future cash flows.
- Once candidate has demonstrated that they want to use a revenue –cost framework, prompt them to provide detail about what the revenue and cost buckets consist of:
- For revenues, bucket consists of the number of items (burger + beer) ordered and their respective prices
- For costs, there are two components: fixed and variable
- Possible fixed costs: rent, maintenance, insurance, labor, license fees, etc.
- Variable costs: COGS (buns, burger patties, sauce, lettuce, tomato’s, beer)
Additional Info:
- Only one restaurant
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