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This was an interesting read, but the aspect I am curious about (which was not discussed) is the Demand Curve [1], which describes how price and demand are rela

by dfdz 5y ago

This was an interesting read, but the aspect I am curious about (which was not discussed) is the Demand Curve [1], which describes how price and demand are related. The example graphic from the article [2] indicates that a Doner costs $11 and produces $1 profit with a labour cost of $2.50. If the business is priced to maximize profit, this seems to imply that if the price was raised to $12, the revenue would decrease by 1/2, which is surprising. Also, if the labour cost is 250% of the profit, then it is surprising that decreasing hours of operation to reduce labour costs would not increase profit. Does anyone have thoughts or references explaining this? [1] https://www.investopedia.com/terms/d/demand-curve.asp https://www.investopedia.com/terms/d/demand-curve.asp [2] https://miro.medium.com/max/700/1*BgXwk5MMwMxqgNGAIxtplA.png https://miro.medium.com/max/700/1*BgXwk5MMwMxqgNGAIxtplA.png

deleted 5y ago
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joshstrange 5y ago
> Also, if the labour cost is 250% of the profit, then it is surprising that decreasing hours of operation to reduce labour costs would not increase profit. Labor IS one of the most expensive things in running a restaurant but decreasing hours of operation is a dangerous game to play. I've seen it play out where a business says "Mondays and Tuesdays are slow so we are going to close/close-early those days" or "If it's slow we will close early". This is slippery slope that most places don't seem to notice they are on at all or if they do it might be too late. You can lose a customer forever by having non-standard hours just 1 time (even more so if you don't update online to warn people). There are places I have loved that I don't even think about any more because I was burned more than one time by trying to go there when they said they would be open and them not being open. Similarly if I need food/baked-good/etc on a Monday and you are closed because Monday's are slow then I might have to just go elsewhere and I might decide to keep going elsewhere in the future if I like it or if only because I can count on them being open when they say they are/when I need them. You do NOT want to have the reputation of "Great food but they have weird hours", that can disqualify you as a choice even if are currently open. Closing for a few days a week can sometimes work but you need to keep those hours and not deviate. Back when I worked in an office and we would talk about places for lunch you would regularly hear "Eh, the last time we tried, they were closed" or "I can't remember their hours, sometimes they close at odd times" followed by "lets try somewhere else". Right there you have lost out on 5-15 seats (again, even if you ARE open when those words are spoken) and you might never get them back.

by dfdz 5y ago

deleted 5y ago

[deleted]

joshstrange 5y ago

> Also, if the labour cost is 250% of the profit, then it is surprising that decreasing hours of operation to reduce labour costs would not increase profit. Labor IS one of the most expensive things in running a restaurant but decreasing hours of operation is a dangerous game to play. I've seen it play out where a business says "Mondays and Tuesdays are slow so we are going to close/close-early those days" or "If it's slow we will close early". This is slippery slope that most places don't seem to notice they are on at all or if they do it might be too late. You can lose a customer forever by having non-standard hours just 1 time (even more so if you don't update online to warn people). There are places I have loved that I don't even think about any more because I was burned more than one time by trying to go there when they said they would be open and them not being open. Similarly if I need food/baked-good/etc on a Monday and you are closed because Monday's are slow then I might have to just go elsewhere and I might decide to keep going elsewhere in the future if I like it or if only because I can count on them being open when they say they are/when I need them. You do NOT want to have the reputation of "Great food but they have weird hours", that can disqualify you as a choice even if are currently open. Closing for a few days a week can sometimes work but you need to keep those hours and not deviate. Back when I worked in an office and we would talk about places for lunch you would regularly hear "Eh, the last time we tried, they were closed" or "I can't remember their hours, sometimes they close at odd times" followed by "lets try somewhere else". Right there you have lost out on 5-15 seats (again, even if you ARE open when those words are spoken) and you might never get them back.