Case Statement:
Your client is a premium restaurant chain in a metro city in India. The client wants to enter the cloud kitchen business. During the pandemic, the client considered this decision, but seeing other restaurant chains fail, didn't go ahead with the idea. You need to evaluate if the client should enter the market or not.
C : Sure, before I deep-dive into the problem, I would like to understand the client's situation better.
I : Sure, go ahead.
C : Can you share more about the client, which metro city it is present in, what cuisine does it offer, what all dining options are available?
I : Gurugram, all kinds of cuisine, dine-in and delivery - to answer you very crisply.
C : Also, what is the objective of the case? Is it to figure out the mode of entry, profitability of the idea or something else too?
I : Yes, you have to let me know if the market is lucrative or not.
C : Sure sir, my approach would begin with looking at the quantitative aspects like market size, Break-even analysis, followed by a qualitative analysis.
I : This sounds good.
C : To begin with, I would like to size the market, the formula for which goes like this:
Number of outlets X Area served per outlet X Target population in area served/family size X frequency of order X avg order size. Can you provide me with the number of outlets and the radius served?
I : Sure, so we have 6 outlets, 4 in each part of Delhi, 1 in Gurugram, 1 in Noida. The radius served is 10Kms.
C : Assuming population is equally distributed, we can find out the # of people residing in the area we will arrive at using the radius above. The area served will be nearly 1900 Km square.
Since this is approximately equivalent to whole of area of Delhi and Gurugram and Noida, we can safely assume that the serviceable population will be the population of Delhi and the other two cities, i.e. 2.5 crores.(Facts: The population of Delhi is 2 crores, Area is 1500 km square. Combined population of Gurugram and Noida is 50 lacs and Area is 500Km square)
I : Yes, sure
C : Of the population arrived to figure out the target, I will use the income class filter of the people who can afford premium dining. Consequently, we arrive at the market size. I would want to divide the population first using rural-urban divide. Will it be safe to assume that of the 2.5 crores population, 20% belongs to rural area and 80% urban?
I : Yes, sure
C : Now, I would eliminate the rural segment because of them being disassociated with dining, in general, and shall only consider the urban population. I would want to divide the population into 3 segments: LC, LMC, UMC+UC. For premium dining, it will be only the urban middle class + urban class segment which shall account for nearly 30% of the population. Does the number seem fine to you, sir?
I : Yes, sounds good
C : So, sir, we now have a target population of 60 Lacs. At this point, I would also want to confirm if it is okay to assume that average family size is of 4 and dining frequency is once a month?
I : Yes, go ahead. For the average order size, you can assume it to be 2000 Rs.
C : Sure sir, using all this information, we can arrive at the market size in monetary terms for the cloud kitchen industry in the target area for a year, which will be equivalent to 3600 crores (60Lacs/4*12*2000)
I : The calculations were quite comprehensive, we can close the case now.
Background Information:
Premium Restaurant Chain – Cloud kitchen business
Food– All cuisines
Geography– Gurugram
Type – Cuisine, Dine-in, Delivery
6 outlets: 4 in each part of Delhi, 1 in Gurugram, 1 in Noida
Case Recomendations:
Focus on upper-middle-class and upper-class urban populations, as these consumers are more likely to order premium dining via cloud kitchens.
Perform a qualitative assessment by analyzing competitors in the cloud kitchen space, especially those serving premium and mid-market segments.
Case Tips:
Always seek clarity on the client's objectives (growth, profitability, or market entry strategy). This ensures the analysis aligns with their goals.
Break down the market sizing calculation methodically
