Practice cases: Mainland China, Hong Kong, and Taiwan
Seven full cases: a dim sum restaurant in Hong Kong, home chargers for electric cars in a large Mainland Chinese city, a new e-bike line in Taiwan, a tea drink price war in Sichuan, night shifts in Hong Kong convenience stores, a Taiwanese tea chain entering Hong Kong, and delivery kitchens for a hotpot chain.
Key takeaways
- Where the structure comes from: it is built from the goal of this exact question (Profit = covers x spend per cover x (1 - food cost share) - staff - rent), not taken from a list.
- Where the structure comes from: it is built from the goal of this exact question (Size the yearly market, then compare contribution with and without the deal), not taken from a list.
- Where the structure comes from: it is built from the goal of this exact question (Value of the line = yearly cash x 5.75 - investment), not taken from a list.
Seven full cases: a dim sum restaurant in Hong Kong, home chargers for electric cars in a large Mainland Chinese city, a new e-bike line in Taiwan, a tea drink price war in Sichuan, night shifts in Hong Kong convenience stores, a Taiwanese tea chain entering Hong Kong, and delivery kitchens for a hotpot chain.
Cover the solution and run each case out loud, ideally with a partner playing the interviewer. Ask your own clarifying questions, state a hypothesis, build a structure from the maths of the goal (not from a memorised list), and do the math on paper before you look. Then compare your synthesis with the one given, and read the strong and weak candidate notes. Each case is labeled Starter, Standard, or Stretch.
Case 1: Kowloon Lantern Teahouse: full at lunch, but profit fell
Where the structure comes from: it is built from the goal of this exact question (Profit = covers x spend per cover x (1 - food cost share) - staff - rent), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Starter: Kowloon Lantern Teahouse: full at lunch, but profit fell
The prompt
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?
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.
Clarifying questions, with the interviewer's answers
- Is this one restaurant?Answer: Yes, the flagship restaurant. Figures are monthly averages.
- 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.
- 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.
A hypothesis to say out loud: 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.
The structure
- 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
The exhibit
| 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 |
Working it through
1. Sales last year
14,000 covers a month at HKD 160.
Sales last year (HKD a month):(8,000 + 6,000) × 160 = 2,240,0002. Sales this year
12,500 covers a month at HKD 160.
Sales this year (HKD a month):(8,000 + 4,500) × 160 = 2,000,0003. Profit last year
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 = 468,0004. Profit this year
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 = 270,0005. Effect of lost dinner and weekend covers
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) = -168,0006. Curveball: a set dinner, new diners
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) = 126,0007. Trading down
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) = -14,0008. Net effect of the set dinner
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
What the exhibit shows
Lunch did not change. Losing 1,500 dinner and weekend covers a month, plus a small pay rise, explains the whole fall.
The 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: 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.
A strong candidate
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 candidate
Suggested cutting prices across the whole menu, which would lower profit at the full lunch service too.
Case 2: Wenlan Charge: home chargers in a large Chinese city
Where the structure comes from: it is built from the goal of this exact question (Size the yearly market, then compare contribution with and without the deal), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Standard: Wenlan Charge: home chargers in a large Chinese city
The prompt
First, estimate how many home chargers for electric cars are installed each year in one large Chinese city. Then: Wenlan Charge, a charger maker, has been offered a partnership with a group of car dealers. Should it accept?
Difficulty: Standard. Format: market-sizing opener, then a business question. Industry: Electric vehicles and equipment. Region: Mainland China. Interview length: about 30 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- Which city, and how many people?Answer: A large eastern Chinese city of about 20 million people, with about 2.5 people per household (rounded, illustrative).
- How many households own a car, and how often do they buy one?Answer: About 40 percent own a car and replace it about every 8 years.
- What share of new cars are new energy vehicles (battery electric and plug-in hybrid cars), and who can install a charger?Answer: Use about half of new cars (illustrative). About 60 percent of those buyers have a fixed parking space where a charger can be installed.
- For the business question, what are the numbers?Answer: A charger costs Wenlan CNY 1,400 including installation. It sells at CNY 2,500 and wins about 12 percent of installs today. A car-dealer group offers to recommend Wenlan to buyers for a commission of CNY 300 per charger, which Wenlan expects would raise its share to 20 percent.
A hypothesis to say out loud: Only new energy vehicle buyers with a parking space need a home charger. My hypothesis is that the market is around one hundred thousand chargers a year, and that the dealer deal pays if it raises share enough to cover the commission.
The structure
- Size the yearly market, then compare contribution with and without the deal
- Households x car owners x purchases a year x new energy share x parking space
- Contribution today: share x margin per charger
- Key: Contribution with the dealer deal, and the share it needs
- What car makers do next
Working it through
1. Households
20 million people at 2.5 people per household.
Households:20,000,000 ÷ 2.5 = 8,000,0002. Cars bought by households each year
40 percent own a car, replaced every 8 years.
Cars bought a year:20,000,000 ÷ 2.5 × 0.4 ÷ 8 = 400,0003. Home chargers a year
Half are new energy vehicles, and 60 percent of those buyers have a parking space.
Home chargers a year:20,000,000 ÷ 2.5 × 0.4 ÷ 8 × 0.5 × 0.6 = 120,0004. Contribution today
12 percent share and CNY 1,100 of margin per charger.
Contribution today (CNY a year):120,000 × 0.12 × (2,500 - 1,400) = 15,840,0005. Contribution with the dealer deal
20 percent share, with CNY 300 of commission off each charger.
Contribution with the deal (CNY a year):120,000 × 0.2 × (2,500 - 1,400 - 300) = 19,200,0006. Share the deal needs
Candidate: "The deal pays if contribution with the commission beats today's CNY 15.84 million."
Break-even share (%):120,000 × 0.12 × (2,500 - 1,400) ÷ (120,000 × (2,500 - 1,400 - 300)) × 100 = 16.57. Curveball: free chargers from car makers
Interviewer: "Some car makers now include a free home charger with half of new cars." Candidate: "The market Wenlan sells to halves. With the dealer deal:"
Contribution with the deal, half market (CNY a year):120,000 × 0.5 × 0.2 × (2,500 - 1,400 - 300) = 9,600,0008. Supplying the car makers
Interviewer: "One car maker asks Wenlan to supply its free chargers at CNY 1,700 each. Wenlan could win 30 percent of those in this city." Candidate: "Dealer channel plus supply deal:"
Total contribution (CNY a year):120,000 × 0.5 × 0.2 × (2,500 - 1,400 - 300) + 120,000 × 0.5 × 0.3 × (1,700 - 1,400) = 15,000,000
The recommendation
About 120,000 home chargers a year are installed in a city like this. Wenlan should accept the dealer deal. First, at a 20 percent share the deal lifts yearly contribution from about CNY 15.8 million to CNY 19.2 million. Second, it pays as long as share rises above 16.5 percent, which leaves a margin of safety against the expected 20 percent. Third, if car makers start including free chargers, the dealer channel alone would fall to about CNY 9.6 million, so Wenlan should also bid to supply car makers: at CNY 1,700 per charger and a 30 percent share, total contribution would recover to about CNY 15 million. Sign the dealer deal for one year and review the share it actually delivers.
Risks: Dealers may push rival chargers that pay a higher commission; Car makers may choose one national charger supplier.
Next steps: Agree a share target and review date with the dealer group; Meet the purchasing teams of the three largest car makers selling in the city.
A strong candidate
Built the sizing chain with clear assumptions, found the break-even share for the deal, and responded to the curveball with a new channel rather than only a smaller number.
A weak candidate
Sized the market from total population without asking who has a parking space, then accepted the deal because "more share is always better."
Case 3: Chiaolin Cycles: should it build an e-bike line?
Where the structure comes from: it is built from the goal of this exact question (Value of the line = yearly cash x 5.75 - investment), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Stretch: Chiaolin Cycles: should it build an e-bike line?
The prompt
Written case: Chiaolin Cycles, a Taiwanese bicycle maker, is deciding whether to build a new e-bike assembly line. Using the data pack below, prepare three slides: should Chiaolin build the line, what are the main risks, and how should it reduce them? Money figures are in Taiwan dollars (TWD).
Difficulty: Stretch. Format: written case, with a data pack. Industry: Manufacturing. Region: Taiwan. Interview length: about 45 minutes. The company is fictional and all figures are illustrative. In a written case you usually get 30 to 60 minutes with a data pack, then present your slides and answer questions.
Clarifying questions, with the interviewer's answers
- What return does the company need?Answer: It uses an 8 percent discount rate and wants payback within five years.
- How long will the line last?Answer: About 8 years. At 8 percent, TWD 1 a year for 8 years is worth about TWD 5.75 today.
- Where would the e-bikes be sold?Answer: About 40 percent in one large export market, and the rest across Europe and Asia.
A hypothesis to say out loud: E-bike margins are thin because the motor and battery are expensive. My hypothesis is that the line pays off at planned volume, but that the result is sensitive to volume and to trade barriers in the largest market.
The structure
- Value of the line = yearly cash x 5.75 - investment
- Contribution per e-bike and yearly cash
- Key: Payback and NPV
- Break-even volume
- Risk: the largest export market
The exhibit
| Item | Value |
|---|---|
| Capacity of the new line (e-bikes a year) | 60,000 |
| Expected sales (e-bikes a year) | 50,000 |
| Price to distributors (TWD per e-bike) | 34,000 |
| Variable cost, about half of it motor and battery (TWD per e-bike) | 27,000 |
| Fixed running cost of the line (TWD million a year) | 150 |
| Investment (TWD million) | 600 |
| Life of the line (years) | 8 |
| Share of sales in the largest export market (%) | 40 |
Working it through
1. Contribution per e-bike
Price to distributors minus variable cost.
Contribution (TWD per e-bike):34,000 - 27,000 = 7,0002. Yearly cash
50,000 e-bikes at TWD 7,000, minus TWD 150 million of fixed running cost.
Yearly cash (TWD million):50,000 × (34,000 - 27,000) ÷ 1,000,000 - 150 = 2003. Payback
TWD 600 million divided by the yearly cash.
Payback (years):600 ÷ (50,000 × (34,000 - 27,000) ÷ 1,000,000 - 150) = 34. NPV over 8 years
Yearly cash times 5.75, minus the investment.
NPV (TWD million):(50,000 × (34,000 - 27,000) ÷ 1,000,000 - 150) × 5.75 - 600 = 5505. Break-even volume
The yearly cash that gives an NPV of zero is 600 divided by 5.75, plus the fixed cost, all divided by TWD 7,000 per e-bike.
Break-even volume (e-bikes a year):(600 ÷ 5.75 + 150) × 1,000,000 ÷ (34,000 - 27,000) = 36,3356. Curveball: a new import duty
The largest export market announces a 25 percent import duty on e-bikes. Distributors say Chiaolin must cut its price by TWD 4,000 on the 20,000 e-bikes sold there to keep them.
Yearly cash after the price cut (TWD million):(50,000 × 7,000 - 20,000 × 4,000) ÷ 1,000,000 - 150 = 1207. NPV after the price cut
The new yearly cash times 5.75, minus the investment. Payback becomes 5 years.
NPV with the price cut (TWD million):((50,000 × 7,000 - 20,000 × 4,000) ÷ 1,000,000 - 150) × 5.75 - 600 = 908. NPV if Chiaolin leaves that market
Selling only 30,000 e-bikes elsewhere at the full price.
NPV without that market (TWD million):(30,000 × 7,000 ÷ 1,000,000 - 150) × 5.75 - 600 = -255
What the exhibit shows
Each e-bike earns TWD 7,000, so the line needs high volume to cover TWD 150 million of fixed cost, and 40 percent of sales depend on one market.
The recommendation
Slide 1, the answer: Chiaolin should build the e-bike line, but in a way that limits its dependence on one export market. At the planned 50,000 e-bikes a year, each e-bike contributes TWD 7,000, so the line earns about TWD 200 million a year after TWD 150 million of fixed running cost. It pays back the TWD 600 million investment in 3 years and has an NPV of about TWD 550 million over its 8-year life. Slide 2, the main risks: first, volume, because NPV falls to zero at about 36,000 e-bikes a year, about 27 percent below plan; second, the largest export market, which takes 40 percent of sales, because a new import duty that forces a TWD 4,000 price cut on 20,000 e-bikes cuts yearly cash to TWD 120 million, cuts NPV to about TWD 90 million and stretches payback to 5 years; third, leaving that market would be worse, with an NPV of about minus TWD 255 million, so absorbing the price cut is the better fallback. Motor and battery costs, about half of variable cost, add a further swing. Slide 3, how to reduce them: sign volume agreements with the largest distributors before committing the investment, grow sales in other markets so that no single market is 40 percent of sales, and design the line so it can also assemble regular bicycles if e-bike demand is weak. As a next step, ask the three largest distributors for signed volume ranges and get quotes for a flexible line.
Risks: Motor and battery prices can swing, and they are about half of variable cost; Rivals may cut prices if the export market shrinks for everyone.
Next steps: Ask the three largest distributors for signed volume ranges; Get quotes for a line that can switch between e-bikes and regular bicycles.
A strong candidate
Led with the answer, showed NPV, payback, and break-even volume, and compared absorbing the duty with leaving the market.
A weak candidate
Listed the data pack line by line and concluded "e-bikes are a growing market, so build," with no view on volume or the duty.
Case 4: Shuyun Tea: should it match a rival's CNY 9.9 price?
Where the structure comes from: it is built from the goal of this exact question (Monthly contribution = cups sold x (price - cost per cup), today and at the rival's price), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Standard: Shuyun Tea: should it match a rival's CNY 9.9 price?
The prompt
Shuyun Tea runs 300 tea drink shops in Sichuan, in western China. A large rival has started selling many drinks at CNY 9.9, and Shuyun now sells 10 percent fewer cups. Should Shuyun cut its prices to match?
Difficulty: Standard. Format: candidate-led, with interviewer dialogue. Industry: Food and drink retail. Region: Mainland China. Interview length: about 30 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- What are Shuyun's price and costs?Answer: Its average drink sells for CNY 16. Ingredients, cups and delivery app fees cost about CNY 6 a cup (illustrative).
- How many cups does it sell?Answer: About 3 million cups a month before the rival's move, and 2.7 million now (illustrative).
- Could the shops make many more drinks?Answer: At peak hours most shops are already busy. Together they could make at most about 3.6 million cups a month (illustrative).
A hypothesis to say out loud: Matching a much lower price needs a big rise in cups to keep the same contribution. My hypothesis is that Shuyun should not match, and should answer price-sensitive buyers in a narrower way.
The structure
- Monthly contribution = cups sold x (price - cost per cup), today and at the rival's price
- Contribution per cup at CNY 16 and at CNY 9.9
- Key: Cups needed at the lower price, and what the shops can make
- Which buyers left, and a narrower answer for them
Working it through
1. Contribution per cup today
Candidate: "CNY 16 minus CNY 6."
Contribution per cup today (CNY):16 - 6 = 102. Monthly contribution now
Candidate: "Sales fell from 3 million to 2.7 million cups a month, at CNY 10 each."
Monthly contribution now (CNY):3,000,000 × 0.9 × (16 - 6) = 27,000,0003. Contribution per cup at CNY 9.9
Candidate: "CNY 9.9 minus the same CNY 6."
Contribution per cup at CNY 9.9 (CNY):9.9 - 6 = 3.94. Cups needed at CNY 9.9
Candidate: "To keep CNY 27 million a month at CNY 3.9 a cup:"
Cups needed a month at CNY 9.9:3,000,000 × 0.9 × (16 - 6) ÷ (9.9 - 6) = 6,923,0775. Increase needed
Candidate: "Compared with the 2.7 million cups sold now."
Increase in cups needed (%):(3,000,000 × 0.9 × (16 - 6) ÷ (9.9 - 6) ÷ (3,000,000 × 0.9) - 1) × 100 = 1566. Best case at CNY 9.9
Candidate: "Even if the shops made their full 3.6 million cups a month:"
Monthly contribution at full capacity and CNY 9.9 (CNY):3,000,000 × 1.2 × (9.9 - 6) = 14,040,0007. Curveball: a smaller cup
Interviewer: "Marketing suggests a smaller cup at CNY 11.9 that costs CNY 4.5 to make. It would win back the 300,000 lost cups a month, but 400,000 current cups would trade down to it." Candidate: "New cups at CNY 7.4 each, minus CNY 2.6 lost on each cup that trades down:"
Monthly gain from the smaller cup (CNY):300,000 × (11.9 - 4.5) - 400,000 × ((16 - 6) - (11.9 - 4.5)) = 1,180,000
The recommendation
Shuyun should not match the CNY 9.9 price; it should hold its main prices and add a smaller cup at CNY 11.9. First, each cup earns CNY 10 today but would earn only CNY 3.9 at CNY 9.9. Second, keeping today's CNY 27 million a month at CNY 9.9 would need about 6.92 million cups, 156.41 percent more, far beyond what the shops can make. Even at full capacity Shuyun would earn just CNY 14.04 million. Third, the smaller cup wins back the 300,000 lost cups and adds about CNY 1.18 million a month, even after 400,000 cups trade down. Test the smaller cup in 30 shops and track how many buyers trade down.
Risks: More current buyers than expected may trade down to the smaller cup; The rival may cut prices further on the drinks Shuyun sells most.
Next steps: Test the smaller cup in 30 shops for six weeks; Find which shops lost the most cups, and whether they sit near the rival.
A strong candidate
Worked out how many cups a price cut would need, saw it was beyond capacity, and answered the rival with a narrower offer for the buyers who left.
A weak candidate
Matched the price to protect market share, without checking that it halves contribution even with full shops.
Case 5: Lotus Corner: night staff costs in Hong Kong convenience stores
Where the structure comes from: it is built from the goal of this exact question (Night contribution per store = night sales x margin - night staff cost, by type of store), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Standard: Lotus Corner: night staff costs in Hong Kong convenience stores
The prompt
Lotus Corner runs 120 convenience stores in Hong Kong, all open 24 hours. Its night staff costs have risen, and the board asks whether every store should stay open all night. The exhibit shows night trading by type of store. What should Lotus Corner do?
Difficulty: Standard. Format: interviewer-led, with an exhibit. Industry: Convenience retail. Region: Hong Kong. Interview length: about 30 minutes. The company is fictional. All figures are illustrative, except the facts that name their source.
Clarifying questions, with the interviewer's answers
- Who works at night, and what are they paid?Answer: Two staff per store from 11 pm to 7 am, an 8-hour shift. They earn the statutory minimum wage, which rose to HKD 43.1 an hour on 1 May 2026 (Hong Kong Labour Department, checked 2026-10-02). Other employment costs add 20 percent (illustrative).
- Are all the stores alike?Answer: No. 40 stores are near MTR stations and nightlife; 80 are on quiet residential streets (illustrative).
- What would closing at night lose besides night sales?Answer: I will come back to that.
A hypothesis to say out loud: The night shift costs the same in every store, but night sales differ by area. My hypothesis is that busy stores pay for their nights and quiet ones do not.
The structure
- Night contribution per store = night sales x margin - night staff cost, by type of store
- Key: Night sales by type of store: busy or quiet
- Night staff cost: hours x minimum wage x other employment costs
- Daytime sales lost if a store closes at night
- Safety and what customers expect of the brand
The exhibit
| Measure | Busy stores | Quiet stores |
|---|---|---|
| Stores | 40 | 80 |
| Night sales per store (HKD a night) | 6,000 | 1,500 |
| Gross margin on sales (%) | 30 | 30 |
| Night staff per store | 2 | 2 |
| Daytime sales per store (HKD a day) | 40,000 | 25,000 |
Working it through
1. Night staff cost per store
Two staff for 8 hours at HKD 43.1, plus 20 percent.
Night staff cost per store (HKD a night):2 × 8 × 43.1 × 1.2 = 8282. Average night sales
The board looked at the average across all 120 stores. At a 30 percent margin it earns HKD 900, which seems to cover the staff.
Average night sales per store (HKD):(40 × 6,000 + 80 × 1,500) ÷ 120 = 3,0003. A busy store at night
HKD 6,000 of sales at a 30 percent margin, minus night staff.
Night contribution, busy store (HKD a night):6,000 × 0.3 - 2 × 8 × 43.1 × 1.2 = 9724. A quiet store at night
HKD 1,500 of sales at the same margin, minus the same staff cost.
Night contribution, quiet store (HKD a night):1,500 × 0.3 - 2 × 8 × 43.1 × 1.2 = -3785. Yearly loss from quiet stores at night
80 quiet stores, 365 nights.
Night result of quiet stores (HKD a year):80 × 365 × (1,500 × 0.3 - 2 × 8 × 43.1 × 1.2) = -11,023,5846. Curveball: daytime shoppers
Interviewer: "Closing at night would also lose about 2 percent of daytime sales in those stores, from shoppers who like a store that never closes." Margin lost on HKD 25,000 of daytime sales a day:
Daytime margin lost (HKD a year):80 × 365 × 25,000 × 0.02 × 0.3 = 4,380,0007. Net gain from closing quiet stores at night
The night loss avoided, minus the daytime margin lost.
Net gain from night closing (HKD a year):80 × 365 × (2 × 8 × 43.1 × 1.2 - 1,500 × 0.3) - 80 × 365 × 25,000 × 0.02 × 0.3 = 6,643,584
What the exhibit shows
The average hides two different businesses: busy stores earn well at night, while quiet stores lose money every night they stay open.
The recommendation
Lotus Corner should close its 80 quiet residential stores overnight and keep the 40 busy stores open all night. First, two night staff at the HKD 43.1 minimum wage cost HKD 827.52 a store each night. Second, a busy store makes HKD 972.48 a night after staff, but a quiet store loses HKD 377.52, about HKD 11.02 million a year across 80 stores. The average of HKD 3,000 of night sales hid this split. Third, even after losing HKD 4.38 million a year of daytime margin, closing quiet stores at night gains about HKD 6.64 million a year. Test night closing in ten quiet stores first and track their daytime sales.
Risks: Daytime shoppers may leave in larger numbers than the 2 percent expected; Rivals may win loyal customers by staying open all night.
Next steps: Close ten quiet stores at night for three months and compare their daytime sales with similar stores; Review night sales store by store each quarter, since some areas may change.
A strong candidate
Split the stores by type instead of trusting the average, priced the night shift from the minimum wage, and checked what closing would cost in daytime sales.
A weak candidate
Saw average night sales of HKD 3,000 covering the staff cost and kept every store open.
Case 6: Kaiyuan Tea: should a Taipei chain enter Hong Kong?
Where the structure comes from: it is built from the goal of this exact question (Profit per shop for Kaiyuan = own shop: drinks x contribution - running costs; franchise: sales x royalty), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Standard: Kaiyuan Tea: should a Taipei chain enter Hong Kong?
The prompt
Kaiyuan Tea, a bubble tea chain with 80 shops in Taiwan, wants to enter Hong Kong. It can open its own shops or sign a franchise partner. The exhibit shows the numbers for one shop. Should it enter, and how?
Difficulty: Standard. Format: interviewer-led, with an exhibit. Industry: Food and drink retail. Region: Taiwan and Hong Kong. Interview length: about 30 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- What would an own shop cost?Answer: About HKD 1.5 million to fit out, and HKD 360,000 a month to run: rent HKD 150,000, staff HKD 180,000 and other costs HKD 30,000 (illustrative).
- What does a franchise partner offer?Answer: A Hong Kong food group would open and run the shops itself and pay Kaiyuan 6 percent of sales as a royalty (illustrative).
- How many drinks would a shop sell?Answer: Similar shops in busy districts sell about 600 drinks a day at HKD 32 each. Ingredients and cups cost HKD 9 a drink (illustrative).
A hypothesis to say out loud: Hong Kong rents are high, so my hypothesis is that an own shop only just covers its costs, and that a franchise partner gives Kaiyuan a safer way in.
The structure
- Profit per shop for Kaiyuan = own shop: drinks x contribution - running costs; franchise: sales x royalty
- Contribution per drink and drinks per day
- Key: Own shop: rent, staff, fit-out and break-even volume
- Franchise: royalty with no fit-out cost
- What happens if sales come in lower
The exhibit
| Item | Value |
|---|---|
| Price per drink (HKD) | 32 |
| Ingredient and cup cost per drink (HKD) | 9 |
| Expected drinks a day | 600 |
| Rent (HKD a month) | 150,000 |
| Staff (HKD a month) | 180,000 |
| Other costs (HKD a month) | 30,000 |
| Fit-out cost of an own shop (HKD) | 1,500,000 |
| Franchise royalty (% of sales) | 6 |
Working it through
1. Contribution per drink
HKD 32 minus HKD 9 of ingredients and cup.
Contribution per drink (HKD):32 - 9 = 232. Monthly running cost
Rent, staff and other costs.
Running cost of an own shop (HKD a month):150,000 + 180,000 + 30,000 = 360,0003. Break-even volume
Drinks a day to cover the running cost, over 30 days.
Break-even drinks a day:(150,000 + 180,000 + 30,000) ÷ (32 - 9) ÷ 30 = 5224. Own shop profit
At 600 drinks a day.
Own shop profit (HKD a month):600 × 30 × (32 - 9) - (150,000 + 180,000 + 30,000) = 54,0005. Months to recover the fit-out
HKD 1.5 million divided by the monthly profit.
Months to recover the fit-out:1,500,000 ÷ (600 × 30 × (32 - 9) - (150,000 + 180,000 + 30,000)) = 27.786. Franchise royalty
6 percent of the same shop's sales, with no outlay for Kaiyuan.
Royalty per franchise shop (HKD a month):600 × 30 × 32 × 0.06 = 34,5607. Curveball: a rival opens nearby
Interviewer: "A rival chain has just opened next to our best site. Similar shops now expect 500 drinks a day." Candidate: "An own shop would then make:"
Own shop profit at 500 drinks a day (HKD a month):500 × 30 × (32 - 9) - (150,000 + 180,000 + 30,000) = -15,0008. Royalty at the lower volume
Candidate: "And the royalty from a franchise shop:"
Royalty at 500 drinks a day (HKD a month):500 × 30 × 32 × 0.06 = 28,800
What the exhibit shows
An own shop needs about 522 drinks a day just to cover its costs, so a small shortfall in sales wipes out its profit.
The recommendation
Kaiyuan should enter Hong Kong through the franchise partner first, and keep the option to open its own shops later. First, an own shop needs about 522 drinks a day to cover its HKD 360,000 of monthly costs, close to the 600 expected. Second, at 600 drinks it earns HKD 54,000 a month and takes about 27.8 months to recover its fit-out. A franchise shop pays a royalty of HKD 34,560 a month with no outlay. Third, at 500 drinks an own shop loses HKD 15,000 a month, but the royalty still brings HKD 28,800. Agree sales targets per shop with the partner, and a right to buy shops back after three years.
Risks: A partner may not keep Kaiyuan's drink quality and service; Royalties give Kaiyuan less profit than own shops if sales turn out strong.
Next steps: Set quality checks and sales targets in the franchise contract; Track drinks a day in the first five franchise shops before planning more.
A strong candidate
Found the break-even volume for an own shop, compared it with the royalty on the same sales, and tested both at a lower volume.
A weak candidate
Chose own shops because they earn more per shop at 600 drinks, without asking what happens if sales come in lower.
Case 7: Laojie Hotpot: grow through new restaurants or delivery kitchens?
Where the structure comes from: it is built from the goal of this exact question (For each route: units needed = revenue to add / revenue per unit; then money needed and return on it), not taken from a list. Each branch is one driver of that goal, and the hypothesis above says which branch to test first.
Worked case
Stretch: Laojie Hotpot: grow through new restaurants or delivery kitchens?
The prompt
Laojie Hotpot runs 50 hotpot restaurants in Chengdu and Chongqing. It wants to grow revenue by 30 percent in three years. It could open more dine-in restaurants or open delivery-only kitchens that sell hotpot sets through delivery apps. Which route should it take?
Difficulty: Stretch. Format: candidate-led, with interviewer dialogue. Industry: Restaurants. Region: Mainland China. Interview length: about 35 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- How big is the business now?Answer: Each restaurant takes about CNY 12 million a year, so CNY 600 million in total (illustrative).
- What do the two formats look like?Answer: A new dine-in restaurant takes about CNY 10 million a year, costs CNY 4 million to open and keeps 15 percent of sales as profit. A delivery kitchen takes CNY 3 million a year, costs CNY 0.6 million to open and keeps 10 percent after app commissions and packaging (illustrative).
- How much money is there to spend?Answer: About CNY 60 million over three years (illustrative).
A hypothesis to say out loud: Delivery kitchens are cheap to open but earn a thinner margin. My hypothesis is that they reach the target with less money, and that the answer depends on the return on that money.
The structure
- For each route: units needed = revenue to add / revenue per unit; then money needed and return on it
- Revenue to add: 30 percent of today
- Key: Units needed and money to open them, by format
- Profit margin and return on the money spent
- Orders taken from the chain's own restaurants
Working it through
1. Revenue to add
Candidate: "30 percent of CNY 600 million."
Revenue to add (CNY a year):50 × 12,000,000 × 0.3 = 180,000,0002. Restaurants needed
Candidate: "At CNY 10 million each."
New restaurants needed:50 × 12,000,000 × 0.3 ÷ 10,000,000 = 183. Money for restaurants
Candidate: "CNY 4 million each to open."
Money to open restaurants (CNY):18 × 4,000,000 = 72,000,0004. Kitchens needed
Candidate: "At CNY 3 million each."
Delivery kitchens needed:50 × 12,000,000 × 0.3 ÷ 3,000,000 = 605. Money for kitchens
Candidate: "CNY 0.6 million each to open."
Money to open kitchens (CNY):60 × 600,000 = 36,000,0006. Return on money, restaurants
Candidate: "15 percent of the new revenue each year, over the money spent."
Yearly return on money, restaurants (%):50 × 12,000,000 × 0.3 × 0.15 ÷ (18 × 4,000,000) × 100 = 37.57. Return on money, kitchens
Candidate: "10 percent of the new revenue, over a much smaller outlay."
Yearly return on money, kitchens (%):50 × 12,000,000 × 0.3 × 0.1 ÷ (60 × 600,000) × 100 = 508. Curveball: orders taken from our restaurants
Interviewer: "In a test, a fifth of each kitchen's orders came from people who used to order delivery from our own restaurants." Candidate: "Only CNY 2.4 million per kitchen is new, so we need more kitchens:"
Delivery kitchens needed with a fifth taken from own restaurants:50 × 12,000,000 × 0.3 ÷ (3,000,000 × 0.8) = 759. Return with the extra kitchens
Candidate: "The same new profit, over 75 kitchens at CNY 0.6 million, or CNY 45 million."
Yearly return on money, 75 kitchens (%):50 × 12,000,000 × 0.3 × 0.1 ÷ (75 × 600,000) × 100 = 40
The recommendation
Laojie should grow mainly through delivery kitchens, because only that route fits its CNY 60 million budget. First, adding CNY 180 million of revenue needs 18 new restaurants and CNY 72 million, more than the budget, against 60 kitchens and CNY 36 million. Second, kitchens earn a thinner margin but return 50 percent a year on their money, against 37.5 percent for restaurants. Third, even if a fifth of kitchen orders come from its own restaurants, it needs 75 kitchens and still returns about 40 percent. Use the money left over for a few flagship restaurants that keep the brand visible. Pilot 10 kitchens first and track how many orders are truly new.
Risks: Delivery apps may raise their commissions, which would cut the kitchens' thin margin; Hotpot sets eaten at home may weaken the dine-in experience the brand is known for.
Next steps: Pilot 10 kitchens in districts far from current restaurants; Track new and repeat customers per kitchen each month.
A strong candidate
Turned the growth target into units and money for each route, compared returns on the money, and tested how many kitchen orders are really new.
A weak candidate
Chose restaurants because their margin is higher, without noticing they need more money than the chain has.
Sources for this lesson (2)
- Recognized public explanations of case-interview concepts and terms
- Hong Kong Labour Department: Statutory Minimum Wage flyer 2026 (HKD 43.1 an hour from 1 May 2026), checked 2026-10-02
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