McKinsey 1st Round Case - Party Burger

Information to be shared only under request:

• The client feels they are losing control of their service. They aim to better understand the problem and solve it.
• The chain includes 10 owned restaurants spread across different cities.
• On average, the restaurants’ rating for the service is 2.5 out of 5 stars, while other factors are rated 4 out of 5 or more.
• If asked about the reviews, please provide Exhibit 1.

Example of an excellent answer (score: 2)

GOAL CLARIFICATION

An excellent candidate would clarify the objective of the client.

STRUCTURE

1. Identify where the problem is
   1. Identify the part of the flow with issue (e.g., service, kitchen, etc.)
   2. Identify how it is done
   3. Compare metrics with past data or competitors
2. Understand the reason for the problem
   1. Internal reasons
      1. Service inefficiency
      2. Kitchen inefficiency
      3. Communication problems
   2. External reasons
      1. Excess customers
      2. Delays by suppliers
      3. Competitors e.g., stealing experienced employees
      4. Regulation e.g., Pandemic measures are slowing down the service
3. Identify a solution
4. Risks and next steps

The candidate may state a hypothesis when presenting the structure. The structure may differ from this but it should follow a rationale and answer the question, considering the client's goal.

COMMUNICATION

An excellent candidate should present clearly the different areas in a structured way.

Moreover, the candidate should clearly present the rationale for why he/she wants to explore a particular point, connecting the answer to the objective of the client.

Suggested score

An excellent candidate should: 

1. Clarify the goal of the client
2. Include the main elements as presented above in the structure
3. Communicate the structure in a clear way

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following:

• The candidate did not clarify the objective
• The candidate did not include two or more of the areas described above
• The candidate included multiple useless elements in the structure
• The candidate communicated the structure in a disorganized way or without a clear connection to the goal

Example of an excellent answer (score: 2)

From Exhibit 2, the candidate should understand that the problem is affecting all the restaurants of the chain, even if some perform slightly better than others.

From Exhibit 3, the candidate should note that Competitors A, B and C have much better performances than our client’s average. Competitor D instead seems to be facing similar problems.

The candidate may suggest looking at how our process is different than the one of Competitors A, B and C.

Suggested score

An excellent candidate should: 

1. Take a reasonable amount of time to look at the graphs and ask questions to understand how to read them
2. Understand the problem is affecting all the restaurants of the chain (internal problem)
3. Understand some competitors do not face this problem
4. Consider analyzing the solutions implemented by the successful competitors

Recommended score calculation: starting from 2, decrease the score by 0,5 points down to 0 for any of the following:

• The candidate did not repeat the goal
• The candidate did not take some time to look at the graph
• The candidate did not identify the insights of the graphs (internal problem, not affecting some competitors)
• The candidate did not suggest a way to proceed with the analysis

Example of an excellent answer (score: 2)

• Revenue side
  • Quicker service may allow us to serve more customers
  • Improved service may encourage higher spending per order (e.g., getting desserts/extras)
  • Introduce new meals that would require more time with the current setting (new products)
  • Improved morale of the team thanks to the automation: less stress and more tips for them could lead to higher quality service, which in turn could result in better reviews and more customers
  • Faster service could spread word-of-mouth and thus increase the number of customers
• Cost side
  • Reduced food waste thanks to the reduced mistakes
  • Reduced staff (as we are already working at full capacity, there won’t be extra staff needed)
  • Higher costs due to the implementation of the new system

Suggested score

An excellent candidate should: 

1. Take some time to think of the question
2. Identify at least 3 possible answers
3. Structure the ideas and illustrate them clearly
4. Present ideas that are tailored to the situation of the restaurants

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following:

• The candidate did not take some time to answer
• The candidate did not structure the ideas
• The candidate provided few answers / answers that are too generic / answers that are not focused on the financial side
• The candidate did not present them clearly

Information to be shared only under request:

• If the candidate forgot the benefits of the IT system, let he/she know it will reduce the serving time by 20 minutes (we can assume occupation time would drop from 1.5 hours to 1 hour) and that the mistakes will drop from 11 to 2 per day.
• The only two effects we will consider are these two (i.e., ignore higher spending on desserts or cost saving due to waste reduction).
• The occupancy rate would remain close to 100%
• The 10 restaurants are open 350 days per year.
• All tips are kept by the waiters and do not result in additional revenues for the restaurant.

Example of an excellent answer (score: 2)

To compute payback time, calculate (i) additional margins due to extra customers (ii) costs per year (iii) payback time.

i. Additional margins due to extra customers

• Number of tables served (as-is) = 20 * 3h / 1.5 h = 40 tables/day
• Number of tables served (to-be) = 20 *3h / 1h = 60 tables/day
• Additional tables per day = 60-40 = 20 tables/day
• Additional customers per day = 20*4 = 80 customers/day
• Additional daily margins in a restaurant = 80*10 = 800 $/day
• Additional margins for all restaurants in a year = 800*350*10 = 2.8m $/year

ii. Costs per year

• Upfront investment = $8m
• Yearly fee = 8m * 10% = $800k

iii. Payback time = 8m / (2.8m – 0.8m) = 4 years

Note: it is not necessary to compute additional tips since they would go to waiters.

Suggested score

An excellent candidate should: 

1. Ask for additional information
2. Take a reasonable amount of time to structure the computation
3. Compute the solution clearly
4. Comment on the results

Recommended score calculation: starting from 2, decrease the score by 0,5 points down to 0 for any of the following:

• The candidate did not ask for additional information
• The candidate did not set up the analysis correctly or clearly
• The candidate made mistakes in the computation
• The candidate did not comment on the implications of the result

Example of an excellent answer (score: 2)

The candidate should:

1. Recap the objective
2. Provide an answer-first approach to the question asked
3. Mention risks and the next steps to take

RECAP THE OBJECTIVE

“Our client asked us to understand the reason behind the negative reviews and provide ideas to solve it.”

ANSWER-FIRST APPROACH TO THE QUESTION

“Based on our analyses, service teams seem to lack the ability to communicate effectively with the team in the kitchen. A possible solution would be to invest in an automated system to manage orders. This would imply a reduction of the service time and of the number of mistakes, resulting in: 

• Additional yearly margins of $2m, net of the fee for the software
• Increased customer satisfaction
• Increased tips for our staff, among others.

Moreover, the chain would be able to break even within 4 years.”

RISKS AND NEXT STEPS

“Possible risks include variations of the estimates, which rely on the fact that we would serve more people in the same amount of time, making less mistakes. However, changes in this data may impact on the outcome of this analysis. We recommend if possible trying out this solution in one restaurant first, before using it in all stores, in order to identify possible problems.”

Recommended score calculation: starting from 2, decrease the score by 0,5 points down to 0 for any of the following: 

• The candidate did not have an answer-first approach
• The candidate did not mention all the key reasons supporting the investment
• The candidate presented the analysis in a disorganized way
• The candidate did not conclude the recommendation proactively, mentioning the next steps