Would more peak staff fix this café’s economics?
Compare the extra service contribution with staffing cost and the unit’s full result.
The question
Harbour Cafés, a fictional Australian operator, reviews one location. Values are weekly AUD. The site loses money, but some lease costs remain after closure. Tax, working-capital timing, closure costs and customer transfers are excluded from this first screen.
| Value | |
|---|---|
| Current weekly transactions | 1000 |
| Average revenue per transaction | 14 |
| Variable cost per transaction | 5 |
| Weekly fixed cost | 11000 |
| Additional peak staffing cost | 1200 |
| Forecast additional transactions | 180 |
| Fixed cost avoidable on closure | 9000 |
Invented inputs. Price and variable cost do not change when staff are added.
“Would more peak staff fix this café’s economics?”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Separate contribution from unit profit
What would you do here? Open the move you’d make.
Call the unit profitable because each sale contributes AUD9.
Tempting, but it misses something. Total contribution does not cover fixed cost.
Treat all fixed costs as variable per transaction.
Tempting, but it misses something. That obscures which costs change in the staffing decision.
Calculate total contribution and deduct fixed cost.
The strong move. This identifies the unit result.
See how a strong candidate says it
“Each transaction contributes AUD9. Current contribution is AUD9,000, below AUD11,000 fixed cost, so the unit loses AUD2,000 weekly.”
Why it works: Positive contribution per sale does not make the whole location profitable.
Step 2: Price the service investment
What would you do here? Open the move you’d make.
Distinguish the AUD420 improvement from the remaining loss.
The strong move. Both numbers matter to the decision.
Call AUD1,620 the net profit from hiring.
Tempting, but it misses something. That leaves out the added staffing cost.
Approve permanent staffing because the increment is positive.
Tempting, but it misses something. The forecast and the remaining unit loss still need review.
See how a strong candidate says it
“The forecast 180 transactions add AUD1,620 contribution less AUD1,200 staffing: an AUD420 improvement. The unit still loses AUD1,580. At least 134 extra whole transactions cover the new staffing.”
Why it works: An improvement is not the same as a complete turnaround.
Step 3: Set a bounded test and a fair closure comparison
What would you do here? Open the move you’d make.
Assume closure saves all AUD11,000.
Tempting, but it misses something. Only AUD9,000 is avoidable in this screen.
Compare a bounded staffing test with the costs that remain after closure.
The strong move. This uses feasible alternatives.
Ignore service measures if sales rise.
Tempting, but it misses something. A short-lived sales increase can conceal a service problem.
See how a strong candidate says it
“Test incremental transactions, service and quality at the relevant peaks. Immediate closure still leaves AUD2,000 weekly cost under the stated lease.”
Why it works: Closing the door does not remove costs that cannot yet be avoided.
Step 4: Revise after the trial
The trial adds only 100 weekly transactions instead of the forecast 180. Price, variable cost and added staffing cost are unchanged.
What would you do here? Open the move you’d make.
Keep the staffing because more customers came.
Tempting, but it misses something. The extra contribution does not cover the extra cost.
Close immediately and book all old fixed costs as saved.
Tempting, but it misses something. The lease cost remains in the supplied facts.
Stop or revise the shift and rework the unit options.
The strong move. This follows the observed economics without inventing closure savings.
See how a strong candidate says it
“Only 100 extra transactions add AUD900 contribution against AUD1,200 staffing. The change loses AUD300 relative to the current plan. Stop or change it, then revisit price, offer and lease options.”
Why it works: The trial fails the incremental staffing threshold; it does not by itself prove closure creates value.
The answer, in short
- Decision
- Stop or revise the peak shift and reopen the unit plan.
- Because
- The observed extra contribution is below the staffing cost, and immediate closure retains lease costs.
- What would change it
- New evidence changes incremental demand, service outcomes, lease exit terms or transferred customer contribution.
Common traps
- Calling a positive increment a profitable site.
- Treating all fixed costs as avoidable.
Check your answer
- What is profit before the change?
- What does the extra service earn after its cost?
- Which costs remain after closure?
- What does the observed trial change?
Last reviewed Nov 10, 2026