Coffee Shop Co.

11/2/22, 8:52 PM Coffee Shop Co.
| Bain & Company
Careers at Bain
Practice Case
Coffee Shop Co.

Client Background
You’re having lunch with an old friend from

university, and she’s looking for some business
advice. She is thinking of opening a coffee shop in
Cambridge, England, a large university city an
hour and a half away from London.
She sees potential in this business but wants your

help in determining whether opening a coffee
shop is a good idea.
What do you think?
https://www.bain.com/careers/interview-prep/case-library/coffee-case-study/ 1/6
11/2/22, 8:52 PM Coffee Shop Co. | Bain & Company
Case Setup
Start any case by understanding the question

you’re asked to solve. Ask your interviewer
questions if you feel confused or need more
information. We want you to succeed in your
interviews!
Take the time (1-2 minutes) to think about how

you would approach the problem. Always
structure your thinking, and communicate your
ideas with your interviewer.
Here are some sample questions to ask yourself:
• How big is the opportunity?

• How much does it cost to open a coffee shop?
• What is the shop’s go-to-market strategy?
Show example setup 

Click to enlarge
Analysis
You show your proposed framework to your

friend, and she really likes it! She’s especially
interested in figuring out how big the market is to
best estimate how much coffee she can sell. She
knows the market probably includes commuters,
visitors, etc., but for now, she wants you to focus
on Cambridge residents alone.
How do you estimate the size of the market?
Show answer 
Two potential approaches come to mind when
estimating market size:
1. "Top-down" approach: Start with a large number

(e.g. total relevant population) and progressively
narrow down.
2. "Bottom-up" approach: Start with a small number
(e.g. average cups of coffee consumed per day)
and progressively scale up.
After you show her the potential options for

estimating market size, she wants you
to approximate the market size using your
framework. Assume that Cambridge has a
population of 100,000 people and, on average,
each drinks 1 cup of coffee per day.
*Note: When making assumptions about market

size, there is no “right” or “wrong” answer. Base
your estimations on your reasonable assumptions
about the market.
Show calculation 
Click to enlarge
Now that you have the market size, your friend

wants to gain a better understanding of how much
coffee she would need to sell to break even in her
first year.
How much coffee does she need to sell to break

even in the first year?
Here is some additional information:
• Price per coffee = £3

• Cost to open shop = £245,610
• Cost to run shop each year = £163,740
• Cost per cup of coffee = £1
Show calculation 
Breakeven
(Price * Quantity) - (Fixed costs + variable costs) = £0
Profit = £0
Revenue - Cost = £0
(3*Q) – (163,740 +245,610+ [1*Q]) = 0
2Q - 409,350 = 0
Q = 204,675 cups to breakeven
Case Recommendation
After running through the calculations, do you

think it's reasonable for her to open up a coffee
shop?
A good answer 
Yes! Because there are 7,000,000 cups sold and the
break-even point is 204,675 cups, which is ~3% of the
market share, breaking even is achievable.
A better answer 
A better answer would take into account how long it
would take for her to recoup the cost to open the
store and other considerations before proceeding.
Breaking even is achievable, but we’d want to

understand more about our friend’s investment
timeline. Depending on how many years she plans to
run the store, it might be difficult to recoup the cost

of opening it.
Other key questions she needs to think about before

proceeding include:
What is CoffeeCo's go-to-market strategy?
How will the organization differentiate itself among

its competitors?
Is there a dominant player that will make it difficult to

win share?
Is the market full of smaller competitors that

CoffeeCo could beat?
TRY ANOTHER CASE

Coffee Shop Co. - Bain & Company

Uploaded by

Copyright:

Available Formats

Coffee Shop Co. - Bain & Company

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Coffee Shop Co. - Bain & Company

Uploaded by

Copyright:

Available Formats

11/2/22, 8:52 PM Coffee Shop Co.

| Bain & Company

You’re having lunch with an old friend from

She sees potential in this business but wants your

What do you think?

Start any case by understanding the question

Take the time (1-2 minutes) to think about how

Here are some sample questions to ask yourself:

• How big is the opportunity?

Show example setup 

You show your proposed framework to your

How do you estimate the size of the market?

1. "Top-down" approach: Start with a large number

After you show her the potential options for

*Note: When making assumptions about market

Now that you have the market size, your friend

How much coffee does she need to sell to break

Here is some additional information:

• Price per coffee = £3

(Price * Quantity) - (Fixed costs + variable costs) = £0

(3*Q) – (163,740 +245,610+ [1*Q]) = 0

Q = 204,675 cups to breakeven

After running through the calculations, do you

Breaking even is achievable, but we’d want to

run the store, it might be difficult to recoup the cost

Other key questions she needs to think about before

What is CoffeeCo's go-to-market strategy?

How will the organization differentiate itself among

Is there a dominant player that will make it difficult to

Is the market full of smaller competitors that

TRY ANOTHER CASE

You might also like

(3Q) – (163,740 +245,610+ [1Q]) = 0