How should a wellness chain enter Mysuru?
Before the decision
The brand has a waitlist for weekend workshops but no weekday attendance history. The hotel has asked for a revenue share and can offer a trial without a long lease. Studio staff worry that hotel guests and local members would need different class schedules.
The problem
Should the team choose Flagship studio or Hotel partnership for the next 12 months?
Decision owner: The business unit lead.
An owned lease carries weekday idle time and a hotel partnership limits hours.
Option economics
Scroll the table to see all figures.
| Option | Volume (visits) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Flagship studio | 24,000 | 460 | ₹76 lakh | ₹34.4 lakh |
| Hotel partnership | 16,000 | 300 | ₹12 lakh | ₹36 lakh |
Make the call
- Calculate net contribution for Flagship studio and Hotel partnership. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer visits, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Hotel partnership. It contributes ₹36 lakh after fixed costs and leads by ₹1.6 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate demand you can reach from demand you can serve reliably. Test reorder behaviour before using the full-year forecast.
- Calculate both options
Flagship studio: 24,000 visits × ₹460 less ₹76 lakh in fixed costs gives ₹34.4 lakh. Hotel partnership: 16,000 visits × ₹300 less ₹12 lakh in fixed costs gives ₹36 lakh.
- Stress-test the forecast
Hotel partnership leads by ₹1.6 lakh in the base case. If Hotel partnership delivers 10% fewer visits (14,400) at the same margin and fixed cost, it contributes ₹31.2 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Hotel partnership needs at least 15,467 visits to match or beat it under the model. Track weekday return visits after the introductory offer ends.
An owned lease carries weekday idle time and a hotel partnership limits hours. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
Check whether your answer names the trade-off, cites a number from the exhibit and specifies a reversal condition.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Flagship studio | Hotel partnership | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹23.36 lakh | ₹31.2 lakh | Hotel partnership |
| Base assumptions | ₹34.4 lakh | ₹36 lakh | Hotel partnership |
| Both gain 10% of volume | ₹45.44 lakh | ₹40.8 lakh | Flagship studio |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.