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Starter: Kowloon Lantern Teahouse: full at lunch, but profit fell
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
Kowloon Lantern Teahouse runs a popular dim sum restaurant in Hong Kong. Its monthly profit has fallen by about 40 percent, even though it is still full at lunch. The exhibit shows the figures. Why did profit fall, and what should the owners do?
Format note: Difficulty: Starter. Format: interviewer-led, with an exhibit. Industry: Restaurants. Region: Hong Kong. Interview length: about 25 minutes. The company is fictional and all figures are illustrative.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: Is this one restaurant?
Answer: Yes, the flagship restaurant. Figures are monthly averages.
If asked: Which meals changed?
Answer: Weekday lunches are as full as ever. Dinner and weekend meals fell. The owners believe more of their local diners now spend evenings and weekends across the boundary in Shenzhen; for this case, take that as the reason.
If asked: Did prices or costs change?
Answer: Menu prices did not change. Staff costs rose 5 percent after a pay rise. Rent is fixed until the lease ends next year.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
The restaurant is full at lunch, so my hypothesis is that the fall comes from dinner and weekend meals, with the staff pay rise adding a little on top.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Profit = covers x spend per cover x (1 - food cost share) - staff - rent
- Key: Covers (meals served) by time: lunch, dinner, weekends
- Spend per cover and food cost
- Fixed costs: staff and rent
Exhibit 1
Reveal to candidate: when they ask for this data, say "Open Exhibit 1" (they press "Show exhibit 1" on their screen).
| Measure | Last year | This year |
|---|---|---|
| Lunch covers a month | 8,000 | 8,000 |
| Dinner and weekend covers a month | 6,000 | 4,500 |
| Average spend per cover (HKD) | 160 | 160 |
| Food cost (% of sales) | 30 | 30 |
| Staff cost (HKD a month) | 600,000 | 630,000 |
| Rent (HKD a month) | 500,000 | 500,000 |
So-what
Lunch did not change. Losing 1,500 dinner and weekend covers a month, plus a small pay rise, explains the whole fall.
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Sales last year
What a strong candidate does: 14,000 covers a month at HKD 160.
Sales last year (HKD a month): (8,000 + 6,000) × 160 = 2,240,000
Step 2: Sales this year
What a strong candidate does: 12,500 covers a month at HKD 160.
Sales this year (HKD a month): (8,000 + 4,500) × 160 = 2,000,000
Step 3: Profit last year
What a strong candidate does: Sales after 30 percent food cost, minus staff and rent.
Profit last year (HKD a month): (8,000 + 6,000) × 160 × (1 - 0.3) - 600,000 - 500,000 = 468,000
Step 4: Profit this year
What a strong candidate does: The same, with fewer covers and higher staff cost. The fall is about 42 percent.
Profit this year (HKD a month): (8,000 + 4,500) × 160 × (1 - 0.3) - 630,000 - 500,000 = 270,000
Step 5: Effect of lost dinner and weekend covers
What a strong candidate does: 1,500 fewer covers, each worth HKD 112 after food cost. The staff pay rise explains the other HKD 30,000.
Effect of lost covers (HKD a month): (4,500 - 6,000) × 160 × (1 - 0.3) = -168,000
Step 6: Curveball: a set dinner, new diners
What a strong candidate does: Interviewer: "The owners want a weekday set dinner at HKD 120. They expect 2,000 set dinners a month: 1,500 from new diners and 500 from current diners who would otherwise spend HKD 160. It needs HKD 20,000 more staff a month." Candidate: "The new diners add:"
Profit from new diners (HKD a month): 1,500 × 120 × (1 - 0.3) = 126,000
Step 7: Trading down
What a strong candidate does: Candidate: "The 500 current diners now spend HKD 40 less each."
Profit lost to trading down (HKD a month): 500 × (120 - 160) × (1 - 0.3) = -14,000
Step 8: Net effect of the set dinner
What a strong candidate does: New diners, minus trading down, minus extra staff.
Net gain (HKD a month): 1,500 × 120 × 0.7 + 500 × (120 - 160) × 0.7 - 20,000 = 92,000
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Profit fell from about HKD 468,000 to HKD 270,000 a month because the restaurant lost dinner and weekend diners. First, 1,500 fewer dinner and weekend covers a month cost HKD 168,000 of profit. Second, the staff pay rise cost another HKD 30,000. Third, lunch is already full, so the room to grow is in the evenings and at weekends. Launch the HKD 120 set dinner: even after 500 current diners trade down and extra staff cost HKD 20,000, it adds about HKD 92,000 a month. Also test weekend family menus and dinner delivery, and use next year's lease renewal to negotiate the rent.
Risks a strong answer names: More current diners than expected may switch to the cheaper set dinner; Weekend travel patterns may change again.
Next steps: Run the set dinner for eight weeks on two weekdays first; Track covers by day and time, and the share of set-dinner guests who are new.
Strong versus weak
A strong answer
Split covers by time of day, found the one line that moved, and tested the set dinner for trading down before recommending it.
A weak answer
Suggested cutting prices across the whole menu, which would lower profit at the full lunch service too.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
Total
0 out of 25
Score all five criteria to see the band and the feedback template.