Vegan Burger Launch Case: Pricing Against the Regular Burger and Break-Even Volume

A burger restaurant chain is considering adding a vegan burger to its menu at a price of \$5. What concerns do you have about the plan overall, what information do you need, and how would you decide whether it makes financial sense? The report recalls only a few points of this case: the \$5 price, that you should ask what the regular burger sells for, that customers will not pay the same price for a vegan burger as for a regular burger, and a break-even calculation. Other figures, such as costs and volumes, would come from the interviewer when asked; this version leaves them as quantities you must request and work with symbolically. ### Clarifying Questions - What does the regular burger sell for, and what does each burger cost to make? - Will customers pay more or less for the vegan burger than for the regular one, and is there evidence such as a survey or a menu test? - What one-time costs does the launch require, such as equipment, a separate preparation area, supplier setup, staff training and marketing? - Is the goal profit from the burger itself, or attracting customers who do not visit today? ### Part 1 — Overall concerns What concerns would you raise about launching a vegan burger at \$5, and what information would you ask for before going further? ```hint Beyond the burger Think about what happens in the kitchen, in the supply chain and to sales of the existing menu when a new item is added. ``` #### What This Part Should Cover - Demand, and whether vegan burger buyers are new customers or existing ones switching - Unit cost and margin at the proposed price - Operational, supply and brand risks ### Part 2 — The price against the regular burger Customers will not pay the same price for a vegan burger as for a regular burger. Ask for the regular burger's price and explain what each possible answer implies for the \$5 price. ```hint Either direction Consider both a regular burger priced above \$5 and one priced at or below it. ``` #### What This Part Should Cover - What the regular burger's price implies about how attractive \$5 is to customers - The effect of the price on margin when customers switch from the regular burger - How the right price could be found with evidence ### Part 3 — Break-even Set up the calculation that tells the chain how many vegan burgers it must sell to break even, including the effect on regular burger sales. ```hint Not every sale is new Some vegan burger buyers would have bought a regular burger anyway. Decide what each such sale is really worth to the chain. ``` #### What This Part Should Cover - A break-even formula with clearly defined inputs - The effect of switching from the regular burger, and of extra sales from new customers - Which input is most uncertain and how to measure it before a full launch ### What a Strong Answer Covers - Asks for the regular burger's price and costs before judging the \$5 price - Reasons about total restaurant profit, not only the new item's own margin - A correct break-even setup that accounts for cannibalization and fixed launch costs - Sensitivity to the most uncertain inputs and a plan to measure them, such as a pilot - A clear recommendation with the conditions under which it would change ### Follow-up Questions - Suppose the vegan burger costs more to make than the regular burger. How does that change your recommendation? - How would you test the vegan burger in a few restaurants before a full launch, and what would you measure? - How would your answer change if the vegan burger mainly brings in groups who would otherwise have eaten elsewhere?