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You are considering to invest in a franchise for a coffee shop in your neighborhood. To understand the revenue potential, you decide to visit a coffee shop from the same chain next to your neighborhood. In the next few months, you visit this coffee shop at random times between 6am and 9am. You observe that the line (queue) averages about 9 customers and it takes about 3 minutes to get in and out of the coffee shop. Assuming this is a typical experience and each customer spends about $5 per visit, what is the revenue potential per hour of this coffee shop? Hint: Calculate the number of customers arriving per minute (i.e., λ). Convert this to customers per hour. Then, calculate the revenue from these customers (each customer spends about $5, on average)

You are considering to invest in a franchise for a coffee shop in your neighborhood. To understand the revenue potential, you decide to visit a coffee shop from the same chain next to your neighborhood. In the next few months, you visit this coffee shop at random times between 6am and 9am. You observe that the line (queue) averages about 9 customers and it takes about 3 minutes to get in and out of the coffee shop. Assuming this is a typical experience and each customer spends about $5 per visit, what is the revenue potential per hour of this coffee shop? Hint: Calculate the number of customers arriving per minute (i.e., λ). Convert this to customers per hour. Then, calculate the revenue from these customers (each customer spends about $5, on average)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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You are considering to invest in a franchise for a coffee shop in your neighborhood. To understand the revenue potential, you decide to visit a coffee shop from the same chain next to your neighborhood. In the next few months, you visit this coffee shop at random times between 6am and 9am. You observe that the line (queue) averages about 9 customers and it takes about 3 minutes to get in and out of the coffee shop. Assuming this is a typical experience and each customer spends about $5 per visit, what is the revenue potential per hour of this coffee shop? Hint: Calculate the number of customers arriving per minute (i.e., λ). Convert this to customers per hour. Then, calculate the revenue from these customers (each customer spends about $5, on average)
Transcribed Image Text:You are considering to invest in a franchise for a coffee shop in your neighborhood. To understand the revenue potential, you decide to visit a coffee shop from the same chain next to your neighborhood. In the next few months, you visit this coffee shop at random times between 6am and 9am. You observe that the line (queue) averages about 9 customers and it takes about 3 minutes to get in and out of the coffee shop. Assuming this is a typical experience and each customer spends about $5 per visit, what is the revenue potential per hour of this coffee shop? Hint: Calculate the number of customers arriving per minute (i.e., λ). Convert this to customers per hour. Then, calculate the revenue from these customers (each customer spends about $5, on average)
Expert Solution
Step 1

From the above given information,

9 customers arrive in the queue and takes at about 3 minutes to get in and out of the coffee shop. 

Money spent by a customer = $5

 

Arrival rate, λ= 9÷3×60 =180 customers per hour

Thus the arrival rate is 180 customers per hour. 

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