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> Every [software business] is a snowflake. As much as I appreciate this comment, it's less limited to software than you paint it to be. When you start diggin

> Every [software business] is a snowflake. As much as I appreciate this comment, it's less limited to software than you paint it to be. When you start digging into how businesses actually make money, you quickly realize it's rarely what it seems. Many gas stations that are wildly successful, such as Sheetz and Wawa, don't make their money selling gas, they make it selling food using gas as a commodity to get the customer in the door. Likewise, McDonald's doesn't really make its money selling food either, although this is a lot more complicated and heavily involves real estate and franchising. In other words, nothing is really as it seems when you peel back the veneer. Software just happens to be relatively new and is poorly understood by most people.

iamacyborg 6y ago
IKEA is another great example of a business that uses food to get people through the door.
- gizmodo59 6y ago
  I have never been to IKEA to get food and then bought furniture as an afterthought. It kept me in once I’m there but it did not get me in the first time. Granted I live 40 mins away from IKEA.
  - AussieWog93 6y ago
    I don't think it's meant as a primary attraction, but given the choice of going to the furniture store with a hot dog at the end, or a furniture store with nothing, you'll choose the hot dog one every time.
    - SanFranManDan 6y ago
      But that is significantly different from the gas station example. The parent said that the gas stations primary income is selling food not gas. Ikea primary income is selling furniture. It would be much more interesting if they actually made more money selling food than gas.
      - AussieWog93 6y ago
        I think his comment was about the food in IKEA being a loss leader, like petrol at the petrol station.
        ekianjo 6y ago
        Certainly not sold at loss based on how much they charge.
        AussieWog93 6y ago
        Not sure where you are, but in Australia the hot dogs cost $1 ea. The staff working at the stand would be paid something on the order of $25/hr, plus paid breaks, annual leave, sick leave, long service leave and superannuation. There would have been at least a solid minute of marginal labour in the hot dog I ordered today - asking me for my order, accepting payment and putting the sausage/condiments in the bun. This doesn't even consider the amount of labour required to boil the sausages, cut the buns, clean the kitchen at the end of the day, manage the orders from head office etc. I'm also ignoring slack time, where the queue is empty and the staff are not serving any customers. In terms of raw ingredient cost, the meat they use is a cut above your bog standard Frankfurt and I suspect would be something like $5/kg in bulk. Assuming each sausage contains 100g of meat, that's 50c per sausage plus another ~10c for the bun. Even assuming the condiment cost is negligible, there'd be another 10c of cost in the little cardboard tray they give you. Already we're getting up around $1.20 per hot dog, and I'm ignoring rent, power bills (which would not be insinificant in a commercial kitchen) payment processing fees and probably more things I haven't even thought about. Not a chance they turn a profit on these. Tune in next week where I give a detailed analysis of the economics of their 50c soft serve cones!
        Talanes 6y ago
        Yeah, rent and labor alone make up most of the cost involved in restaurant food, the food cost itself is usually marginal. I'd imagine the rent for the space used up by the cafe is decently under what it would be to lease a comparable space on it's own.
  - Talanes 6y ago
    The whole IKEA experience is designed to get you to leisurely browse through their showroom, so that later when you're at home thinking about getting a new TV stand you're picturing the one you saw at IKEA. The food is less to draw you into the store and more to keep you in there longer. Though I have also tagged along with friends on IKEA trips way more than any other retail shopping, and the meatballs are definitely part of that.
  - iamacyborg 6y ago
    This article sheds some interesting light on the topic. https://www.hartman-group.com/newsletters/1541318916/ikea-s-bold-vision-rearranging-furniture-to-make-room-for-food https://www.hartman-group.com/newsletters/1541318916/ikea-s-...
- ekianjo 6y ago
  Probably only on places where you dont have restaurants. Never seen Ikea using food to bring people in the countries I have been to.
- jmchuster 6y ago
  I don't know so much about Ikea, but that's definitely a known strategy for Costco, with it's $1.50 hot dogs in the food court, and also $5 chickens.
surround 6y ago
> McDonald's doesn't really make its money selling food either I would like to learn more about McDonald's business model. How is this possible?
- Judgmentality 6y ago
  Admittedly I haven't actually read this article, but the title suggests it's accurate. https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chain-its-a-brilliant-30-billion-real-estate-company/ https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...
  - jldugger 6y ago
    I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out. It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.
    - chii 6y ago
      I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.
      - Talanes 6y ago
        But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.
      - jldugger 6y ago
        Well yea, in the same way that McDonalds employees aren't all billionaires.
- mraza007 6y ago
ekianjo 6y ago
McDonalds started to make money selling burgers but then along the way they found a more profitable way to invest their money for long term profits.
dalbasal 6y ago
>> nothing is really as it seems when you peel back the veneer Technically true, but I think this misses my point. Big businesses are complicated. Clever business people often compliment burger cooking businesses with franchising, real estate investing or crypto to make better businesses. I'm not saying that a profitable business model for a restaurant is trivial. It's not. What I'm saying is that restaurants have a default mode. Software generally doesn't. There are software business that operate mostly by selling software on (eg) the Apple App store. That is more exception than rule though. You're right that software business models aren't novel. Sandwich-4-cash has never been the only business model, even if you do sell sandwiches. That said, "Restaurant" is still a bad model for understanding a software business. A lot of the objections of OS specifically have very little relevance to most software "business models." Look... Apple refused to sell OSX and it's hard to say that was a bad choice considering how things proceeded. IDK if Apple ever considered open sourcing it, but either way... "How do you sell iphones when iOS is free?" is a hyperbolic question. You can sell iphones whether or not iOS is OSS. That doesn't mean it's a good or bad business choice. It just means it's a possible, non absurd business choice.

iamacyborg 6y ago

IKEA is another great example of a business that uses food to get people through the door.

gizmodo59 6y ago
I have never been to IKEA to get food and then bought furniture as an afterthought. It kept me in once I’m there but it did not get me in the first time. Granted I live 40 mins away from IKEA.
- AussieWog93 6y ago
  I don't think it's meant as a primary attraction, but given the choice of going to the furniture store with a hot dog at the end, or a furniture store with nothing, you'll choose the hot dog one every time.
  - SanFranManDan 6y ago
    But that is significantly different from the gas station example. The parent said that the gas stations primary income is selling food not gas. Ikea primary income is selling furniture. It would be much more interesting if they actually made more money selling food than gas.
    - AussieWog93 6y ago
      I think his comment was about the food in IKEA being a loss leader, like petrol at the petrol station.
      - ekianjo 6y ago
        Certainly not sold at loss based on how much they charge.
        AussieWog93 6y ago
        Not sure where you are, but in Australia the hot dogs cost $1 ea. The staff working at the stand would be paid something on the order of $25/hr, plus paid breaks, annual leave, sick leave, long service leave and superannuation. There would have been at least a solid minute of marginal labour in the hot dog I ordered today - asking me for my order, accepting payment and putting the sausage/condiments in the bun. This doesn't even consider the amount of labour required to boil the sausages, cut the buns, clean the kitchen at the end of the day, manage the orders from head office etc. I'm also ignoring slack time, where the queue is empty and the staff are not serving any customers. In terms of raw ingredient cost, the meat they use is a cut above your bog standard Frankfurt and I suspect would be something like $5/kg in bulk. Assuming each sausage contains 100g of meat, that's 50c per sausage plus another ~10c for the bun. Even assuming the condiment cost is negligible, there'd be another 10c of cost in the little cardboard tray they give you. Already we're getting up around $1.20 per hot dog, and I'm ignoring rent, power bills (which would not be insinificant in a commercial kitchen) payment processing fees and probably more things I haven't even thought about. Not a chance they turn a profit on these. Tune in next week where I give a detailed analysis of the economics of their 50c soft serve cones!
        Talanes 6y ago
        Yeah, rent and labor alone make up most of the cost involved in restaurant food, the food cost itself is usually marginal. I'd imagine the rent for the space used up by the cafe is decently under what it would be to lease a comparable space on it's own.
- Talanes 6y ago
  The whole IKEA experience is designed to get you to leisurely browse through their showroom, so that later when you're at home thinking about getting a new TV stand you're picturing the one you saw at IKEA. The food is less to draw you into the store and more to keep you in there longer. Though I have also tagged along with friends on IKEA trips way more than any other retail shopping, and the meatballs are definitely part of that.
- iamacyborg 6y ago
  This article sheds some interesting light on the topic. https://www.hartman-group.com/newsletters/1541318916/ikea-s-bold-vision-rearranging-furniture-to-make-room-for-food https://www.hartman-group.com/newsletters/1541318916/ikea-s-...
ekianjo 6y ago
Probably only on places where you dont have restaurants. Never seen Ikea using food to bring people in the countries I have been to.
jmchuster 6y ago
I don't know so much about Ikea, but that's definitely a known strategy for Costco, with it's $1.50 hot dogs in the food court, and also $5 chickens.

surround 6y ago

> McDonald's doesn't really make its money selling food either I would like to learn more about McDonald's business model. How is this possible?

Judgmentality 6y ago
Admittedly I haven't actually read this article, but the title suggests it's accurate. https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chain-its-a-brilliant-30-billion-real-estate-company/ https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...
- jldugger 6y ago
  I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out. It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.
  - chii 6y ago
    I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.
    - Talanes 6y ago
      But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.
    - jldugger 6y ago
      Well yea, in the same way that McDonalds employees aren't all billionaires.
mraza007 6y ago

ekianjo 6y ago

McDonalds started to make money selling burgers but then along the way they found a more profitable way to invest their money for long term profits.

dalbasal 6y ago

>> nothing is really as it seems when you peel back the veneer Technically true, but I think this misses my point. Big businesses are complicated. Clever business people often compliment burger cooking businesses with franchising, real estate investing or crypto to make better businesses. I'm not saying that a profitable business model for a restaurant is trivial. It's not. What I'm saying is that restaurants have a default mode. Software generally doesn't. There are software business that operate mostly by selling software on (eg) the Apple App store. That is more exception than rule though. You're right that software business models aren't novel. Sandwich-4-cash has never been the only business model, even if you do sell sandwiches. That said, "Restaurant" is still a bad model for understanding a software business. A lot of the objections of OS specifically have very little relevance to most software "business models." Look... Apple refused to sell OSX and it's hard to say that was a bad choice considering how things proceeded. IDK if Apple ever considered open sourcing it, but either way... "How do you sell iphones when iOS is free?" is a hyperbolic question. You can sell iphones whether or not iOS is OSS. That doesn't mean it's a good or bad business choice. It just means it's a possible, non absurd business choice.