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Subway is a franchise. Costco can spread the loss of the 1.50 hot dog over membership fees, and marginal markup of products from across the country. A Seattle S
by lykr0n 9y ago
Subway is a franchise. Costco can spread the loss of the 1.50 hot dog over membership fees, and marginal markup of products from across the country. A Seattle Subway franchise can not, as they are not charging a membership fee nor do they have other business areas that they can spread the cost over.
Oversimplification and False Analogy.
- dragonwriter 9y ago> Costco can spread the loss of the 1.50 hot dog over membership fees, Costco is profitable before membership fees, though that profit is less than the amount of membership fees. It's not covering any loss with membership fees, it's piling them on top of a small profit to make a bigger profit.
- stevenwoo 9y agoIf we are going to be pedantic, Costco doesn't subsidize anything with the membership fee, the average and median spending by a member in a month is way more than the annual membership fee. About half the stores near me have the food court outside the store - they don't care if one is a member or not at those stores. In addition, Costco doesn't use loss leaders according to interviews I've read.