Problem Definition
FusionKitchen operates 45 ghost kitchen locations across 8 U.S. cities, running 12 virtual restaurant brands from shared kitchen facilities. Founded in 2021 during the cloud kitchen boom, the company raised a $90M Series C at a $600M valuation on the promise that shared infrastructure and data-driven brand creation would unlock restaurant-level margins without restaurant-level overhead. The company generates $185M in annual revenue but is losing $22M per year, translating to a negative 12% EBITDA margin. Despite strong topline growth, FusionKitchen has never achieved profitability, and the board has signaled that further funding is contingent on a credible path to breakeven.
The root causes appear structural rather than cyclical. Average kitchen utilization sits at just 35%, concentrated during peak lunch and dinner hours while kitchens sit nearly idle during breakfast, afternoon, and late-night dayparts. Food waste consumes 18% of total food costs, driven by the complexity of managing 12 distinct menus with overlapping but perishable ingredient lists -- each brand requires its own prep workflows, inventory, and quality checks. Most critically, third-party delivery platform commissions consume 28% of every revenue dollar, a cost structure inherited from the company's early growth phase when it prioritized order volume over margin.
The COO has engaged your team to develop a turnaround plan. She has outlined four potential levers: consolidating the brand portfolio from 12 to 5 concepts, renegotiating delivery platform fees, launching a proprietary direct ordering app, and converting underutilized kitchen capacity to catering and corporate meal prep services. The board expects a plan that can be executed without additional equity raises. What combination of initiatives should FusionKitchen pursue to reach EBITDA breakeven within 12 months?
Exhibit 2Annual Cost Structure
| Cost Category | Amount ($M) | % of Revenue |
|---|---|---|
| Food & Ingredients (COGS) | 60.0 | 32.4 |
| -- of which: Food Waste (18% of COGS) | 10.8 | 5.8 |
| Delivery Platform Fees | 51.8 | 28.0 |
| Kitchen Labor | 42.0 | 22.7 |
| Facility Rent & Utilities | 22.0 | 11.9 |
| Marketing & Technology | 16.0 | 8.6 |
| Corporate Overhead | 15.2 | 8.2 |
| Total Costs | 207.0 | 111.9 |
| EBITDA | -22.0 | -11.9 |
Source: FusionKitchen case file
Additional InformationAsk for more dataHide data
Provided to the candidate when they ask relevant questions during structuring:
- Average order value across all brands: $24
- Customer overlap: 40% of customers order from 3 or more FusionKitchen brands
- Customer retention: repeat order rate is 55% within 30 days; highest among Korean BBQ and Sweet Treats customers
- Each kitchen can efficiently support a maximum of 4 brands simultaneously; beyond that, order error rates double and average prep time increases 35%
- Catering and corporate meal market in FusionKitchen's 8 cities: $12B annually, growing 8% year-over-year
- Corporate catering margins in the industry average 35-45%, significantly higher than delivery
- Competitor direct ordering apps typically capture 15-25% of order volume within the first 12 months of launch
- FusionKitchen employs 1,800 kitchen staff at an average hourly wage of $17; turnover is 90% annually
- 60% of kitchen leases are up for renewal within the next 18 months; average lease cost is $41K per month per location
- The company's delivery platform contracts contain a volume-based renegotiation clause triggered at $150M+ annual GMV
- FusionKitchen's data team has built demand forecasting models but they currently operate at brand level, not ingredient level
Question 1Structuring
Prompt: "The COO wants to reach breakeven within 12 months. How would you structure your analysis of FusionKitchen's path to profitability?"
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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A structured approach with three workstreams:
-
Revenue quality (which brands generate real margin?)
- Rank brands by contribution margin dollars, not revenue or ratings
- Identify portfolio consolidation targets
- Assess customer migration risk between brands
-
Cost structure reset (where are the biggest leaks?)
- Delivery fees: direct channel vs. renegotiation vs. hybrid
- Food waste: SKU reduction from brand consolidation plus process improvement
- Utilization: off-peak capacity conversion to catering and meal prep
-
Implementation sequencing (what hits P&L fastest?)
- Month 1-3: Renegotiate platform fees (contractual clause exists at $150M+ GMV), launch waste reduction program
- Month 3-6: Begin brand consolidation (requires customer migration planning), start direct app development
- Month 6-12: Scale direct ordering channel, launch catering operations in pilot locations
- Guiding principle: prioritize initiatives with the lowest upfront cost and fastest time-to-impact first; defer capital-intensive moves until quick wins fund them
What the interviewer is looking forShow guidanceHide guidance
Good Candidate: Identifies the three main cost buckets (delivery fees, COGS/waste, underutilization) and proposes analyzing each independently. Mentions brand consolidation as a lever. Structures the analysis around revenue versus cost.
Strong Candidate: Builds a framework around the $22M gap specifically, sizing each lever's potential contribution to closing it. Recognizes that brand portfolio optimization drives multiple benefits simultaneously (reduces waste, simplifies operations, improves utilization). Distinguishes between quick wins (renegotiation, waste reduction) and structural changes (brand consolidation, direct app).
Excellent Candidate: Structures around the unit economics waterfall: revenue per order, delivery fee per order, food cost per order, labor cost per order, contribution per kitchen-hour. Recognizes the interdependence of levers -- brand consolidation reduces food waste AND improves kitchen efficiency. Sequences initiatives by implementation speed and capital requirement. Flags that some initiatives (direct app) require upfront investment before payback. Asks about the 12-month constraint and whether partial breakeven milestones exist.
Question 2Numeracy
Prompt: "FusionKitchen is evaluating two initiatives. First, launching a direct ordering app that would capture 20% of order volume at a 10% delivery cost, while enabling renegotiation of platform fees from 28% to 25% on remaining orders. The app would cost $3M per year to operate. Second, a food waste reduction program targeting a decrease from 18% to 8% of COGS, at an implementation cost of $2M per year. Calculate the combined annual EBITDA improvement and determine whether these two initiatives close the $22M gap."
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
Key DataAsk for more dataHide data
| Item | Current | Projected |
|---|---|---|
| Total Revenue | $185M | $185M (held constant) |
| Delivery Fee Rate (Platform) | 28% on 100% of orders | 25% on 80% of orders |
| Delivery Cost (Direct App) | N/A | 10% on 20% of orders |
| App Operating Cost | N/A | $3M/year |
| Food COGS | $60M | $60M (held constant) |
| Food Waste Rate | 18% of COGS | 8% of COGS |
| Waste Program Cost | N/A | $2M/year |
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Step-by-Step Solution
Initiative 1: Direct Ordering App
| Step | Calculation | Result |
|---|---|---|
| Current delivery fees | $185M x 28% | $51.8M |
| Direct channel revenue (20%) | $185M x 20% | $37.0M |
| Direct channel delivery cost | $37.0M x 10% | $3.7M |
| Platform channel revenue (80%) | $185M x 80% | $148.0M |
| Renegotiated platform fees | $148.0M x 25% | $37.0M |
| App operating cost | -- | $3.0M |
| New total delivery cost | $3.7M + $37.0M + $3.0M | $43.7M |
| Net savings | $51.8M - $43.7M | $8.1M |
Initiative 2: Food Waste Reduction
| Step | Calculation | Result |
|---|---|---|
| Current waste cost | $60M x 18% | $10.8M |
| Target waste cost | $60M x 8% | $4.8M |
| Gross waste savings | $10.8M - $4.8M | $6.0M |
| Implementation cost | -- | $2.0M |
| Net savings | $6.0M - $2.0M | $4.0M |
Combined Impact
| Initiative | Annual Savings |
|---|---|
| Direct ordering app | $8.1M |
| Food waste reduction | $4.0M |
| Total EBITDA improvement | $12.1M |
| EBITDA gap | $22.0M |
| Remaining shortfall | ~$9.9M |
Key Insight: These two initiatives close only 55% of the gap. The remaining ~$10M must come from brand consolidation, off-peak kitchen conversion, or a combination of both. A strong candidate identifies this shortfall proactively and sizes additional levers.
Question 3Judgement & Insights
Prompt: "Refer to Exhibit 1. The COO proposes keeping the top 5 brands ranked by customer rating to protect brand equity. Using the data, evaluate this proposal and recommend which 5 brands FusionKitchen should retain."
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Exhibit 1Brand Performance Dashboard
| # | Cuisine | Annual Revenue ($M) | Contribution Margin (%) | Customer Rating (/5) | Avg Daily Orders per Location |
|---|---|---|---|---|---|
| 1 | Classic Burgers | 28 | 28 | 4.1 | 42 |
| 2 | Mexican Street | 22 | 26 | 4.3 | 38 |
| 3 | Artisan Pizza | 25 | 34 | 3.9 | 45 |
| 4 | Indian Curry | 12 | 22 | 4.5 | 18 |
| 5 | Poke Bowls | 14 | 30 | 4.2 | 22 |
| 6 | Wings & Things | 20 | 25 | 4.0 | 35 |
| 7 | Korean BBQ | 18 | 8 | 4.8 | 48 |
| 8 | Fresh Salads | 10 | 32 | 3.7 | 15 |
| 9 | Italian Pasta | 11 | 24 | 4.1 | 16 |
| 10 | Thai Kitchen | 9 | 20 | 4.4 | 14 |
| 11 | Sandwich Shop | 8 | 18 | 3.8 | 12 |
| 12 | Sweet Treats | 8 | 15 | 4.6 | 20 |
| Total | 185 |
Source: FusionKitchen case file
Exhibit 3Kitchen Utilization by Daypart (Average Across 45 Locations)
| Daypart | Hours | Avg Utilization (%) | Revenue per Kitchen-Hour ($) |
|---|---|---|---|
| Breakfast (6-10am) | 4 | 15 | 45 |
| Late Morning (10am-12pm) | 2 | 30 | 85 |
| Lunch (12-2pm) | 2 | 75 | 210 |
| Afternoon (2-5pm) | 3 | 18 | 55 |
| Dinner (5-9pm) | 4 | 70 | 195 |
| Late Night (9pm-12am) | 3 | 10 | 30 |
| Weighted Average | 18 | 35 |
Note: Utilization is defined as the percentage of available kitchen stations actively preparing orders during each daypart. Revenue per kitchen-hour represents gross revenue generated per operating kitchen per hour across all brands.
Source: FusionKitchen case file
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The COO's proposal would be value-destructive. The correct lens is contribution margin dollars, not customer ratings.
Top 5 by contribution margin dollars (recommended):
| Rank | Brand | Revenue ($M) | Margin (%) | Contribution ($M) |
|---|---|---|---|---|
| 1 | Artisan Pizza | 25 | 34 | 8.50 |
| 2 | Classic Burgers | 28 | 28 | 7.84 |
| 3 | Mexican Street | 22 | 26 | 5.72 |
| 4 | Wings & Things | 20 | 25 | 5.00 |
| 5 | Poke Bowls | 14 | 30 | 4.20 |
| Total | 109 | 31.26 |
Top 5 by customer rating (COO's proposal):
| Rank | Brand | Revenue ($M) | Margin (%) | Contribution ($M) |
|---|---|---|---|---|
| 1 | Korean BBQ | 18 | 8 | 1.44 |
| 2 | Sweet Treats | 8 | 15 | 1.20 |
| 3 | Indian Curry | 12 | 22 | 2.64 |
| 4 | Thai Kitchen | 9 | 20 | 1.80 |
| 5 | Mexican Street | 22 | 26 | 5.72 |
| Total | 69 | 12.80 |
The margin-optimized portfolio generates $18.5M more in annual contribution. Pursuing the COO's approach would deepen losses, not solve them.
What the interviewer is looking forShow guidanceHide guidance
Good Candidate: Notices that Korean BBQ has the highest rating but a low contribution margin. Suggests using margin percentage instead of ratings as the primary filter. Recommends keeping Pizza and Burgers.
Strong Candidate: Calculates contribution margin dollars for each brand, not just percentages. Recognizes that high-revenue brands with moderate margins outperform low-revenue brands with high margins in absolute dollar terms. Identifies that the top 5 by rating (Korean BBQ, Sweet Treats, Indian, Thai, Mexican) would generate only ~$12.8M in total contribution versus ~$31.3M from the top 5 by contribution dollars. Quantifies the $18.5M difference.
Excellent Candidate: Builds the full ranking by contribution dollars AND considers strategic factors. Notes that the 40% customer overlap means dropping popular brands risks losing multi-brand customers entirely. Proposes a hybrid approach: retain the top 4 by contribution dollars (Pizza, Burgers, Mexican, Wings) and add Poke Bowls -- which combines strong margin (30%) with solid ratings (4.2) -- rather than a fifth purely margin-driven pick. Flags that Korean BBQ's 8% margin on $18M revenue may indicate a fixable pricing or sourcing problem given its 4.8 rating, warranting investigation before a final cut. References Exhibit 3 to note that fewer brands would improve off-peak utilization.
Question 4Synthesis
Prompt: "The CEO asks for your final recommendation. What should FusionKitchen do to reach breakeven within 12 months, and what risks should the board monitor?"
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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Recommendation: Four-lever turnaround plan targeting $24M in annual EBITDA improvement ($2M buffer above the $22M gap).
| Initiative | Timeline | Annual Impact | Mechanism |
|---|---|---|---|
| Brand consolidation (12 to 5) | Month 1-4 | $7.0M | Labor savings, procurement simplification, lower error rates |
| Direct ordering app launch | Month 2-8 | $8.1M | Reduced platform fees, renegotiated rates |
| Food waste reduction program | Month 1-3 | $4.0M | SKU rationalization, demand forecasting |
| Off-peak kitchen conversion to catering | Month 4-10 | $4.9M | Incremental revenue during underutilized dayparts |
| Total | $24.0M |
Key risks and mitigations:
- Customer attrition from brand cuts -- 40% of customers use 3+ brands; mitigate with loyalty credits, migrate popular menu items (e.g., Korean BBQ's top sellers) into retained brands, and communicate changes through targeted campaigns
- Direct app adoption shortfall -- if adoption falls below 20%, deepen platform fee renegotiation using the $150M+ GMV clause as primary leverage; consider partnering with a single platform for preferred economics
- Catering operational complexity -- catering requires different fulfillment capabilities than on-demand delivery (batch cooking, advance scheduling, corporate account management); pilot in 5 high-density office locations before committing to full rollout
- Lease inflexibility -- use the 60% renewal window strategically to exit the 5-8 lowest-performing kitchens rather than locking in new 3-year terms; redirect that capital toward direct app development
- Execution sequencing risk -- running four major initiatives in parallel strains management bandwidth; assign a dedicated P&L owner to each lever with monthly milestone reviews
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
Good Candidate: Recommends a combination of brand consolidation, direct app launch, and waste reduction. Provides a rough timeline. Mentions customer churn as a risk.
Strong Candidate: Sizes the full bridge to breakeven: direct app ($8.1M) + waste reduction ($4.0M) + brand consolidation savings (labor, procurement simplification, error reduction) + kitchen conversion to catering. Sequences by speed of impact. Identifies risks: customer loss from brand cuts, execution complexity, and potential platform retaliation.
Excellent Candidate: Presents a phased plan with specific financial targets per quarter. Addresses the tension between short-term profitability and long-term growth. Notes that Korean BBQ's poor unit economics might be fixable through menu simplification or a 15-20% price increase (the 4.8 rating suggests pricing power). Recommends piloting catering in 5 high-potential locations before a full rollout. Flags the 60% lease renewal window as a strategic opportunity to exit underperforming locations. Observes that reaching breakeven is necessary but not sufficient -- the board should be planning for sustainable 8-12% EBITDA margins.