Estimation question

How much revenue does your favorite restaurant makes each year?

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What this question tests

Estimation combining seating capacity, turnover, and average spend into a defensible revenue figure.

How to approach it

  1. Pick a concrete restaurant type to ground the estimate, for example a mid-size sit-down restaurant with about 40 seats.
  2. Estimate table turnover, assuming each seat turns over roughly 2 times at lunch and 2 times at dinner, about 4 turns daily.
  3. Estimate average spend per customer, assuming around 25 dollars including drinks, a reasonable mid-tier assumption.
  4. Calculate daily revenue: 40 seats times 4 turns times 25 dollars equals 4,000 dollars per day.
  5. Annualize: 4,000 dollars times 365 days gives roughly 1.46 million dollars, adjusted down slightly for slower weekdays to around 1.2 to 1.4 million.
  6. Sanity check against typical restaurant industry revenue benchmarks for a similarly sized establishment.

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