Question Completion:
Existing Store  Revenue 2nd Store Cannibalization Revenue Net Revenue
                                         Revenue         Estimate      Drop         Increase for
                                                                                                       Market
 
Los Angeles   1,450,000  1,570,000         10%           145,000    1,425,000
Houston         1,400,000   1,475,000        25%          350,000    1,125,000
Orlando         2,100,000   2,155,000        30%          630,000   1,525,000 
Atlanta           1,600,000   1,780,000         55%         880,000     900,000
Chicago         1,950,000   1,730,000         40%         780,000     950,000
San Diego    3,400,000  3,090,000          10%         340,000  2,750,000
Portant          1,000,000   1,075,000         25%         250,000     825,000
Dallas           2,000,000   1,850,000         60%       1,200,000    650,000
Boston         2,300,000  2,200,000         50%        1,150,000  1,050,000
1. Ignoring cannibalization rates for now, what two markets have the highest net revenue increases when adding a second store?
San Diego and Orlando
Atlanta and Dallas
Orlando and Dallas
San Diego and Portland
Dallas and Portland
2. What two markets should be chosen for a second store based on management's criteria that the cannibalization rate for the existing store should be less than 30%
Note: Cannibalization rates and net revenue increase amounts need to be considered when making this determination.
San Diego and Orlando
San Diego and Los Angeles
Chicago and Los Angeles
Chicago and Portland
San Diego and Portland
Answer:
Better Beans Coffee Company
1. San Diego's $2,750,000 and Orlando's $1,525,000 presented the highest net revenue increases when adding a second store.
2. Based on management's criteria that the cannibalization rate for the existing store should be less than 30%, San Diego with 10% and Los with 10% Cannibalization rates should be chosen.
Explanation:
Cannibalization Rate is a measure of the impact of new products or the presence of new stores on sales revenue for existing products or stores.  Cannibalization happens when a business, like the Better Beans Coffee Company, opens a new store in a town where there is an existing store. It can also happen when Better Beans releases new coffee products.  Consumers' attention and demand for existing products can decrease, as a switch to new products or new stores takes place.