Let’s say you went into a little seaside diner feeling peckish, and saw that they had a menu item that read: “2 slices of buttered toast”.
Sounds okay, yes? (I’m going with “normal-person peckish” and not “American peckish” which would apparently require the entire loaf to satisfy that hunger pang.)
Then you see the price: $5.00 for the two slices of buttered toast.
Ripoff? Let’s analyze the thing.
I’m going to give the diner the benefit of the doubt here, and allow their claim that this isn’t Wonderbread and store-label butter, but a “premium” offering. I’m also, for the purpose of the analysis, going to allow that they purchased the ingredients thereof at retail prices (they didn’t).
Our diner, by the way, would be located in the equivalent of coastal Florida, up in the Redneck Riviera.
So using my local gourmet store (Central Market) as a price guide, let’s look at the thing:
Let’s see what the unit cost is. Assuming you’re doing thick-ish (e.g. “not-quite-Texan”) slice size, you’re going to get about 16 slices out of that loaf, assuming that we discard the ends, of course. So: $5 / 16 = 31.25 cents ($0.3125) per slice; or 62.5 cents in total for the two.
Now the butter: even assuming you slather the butter on like I typically do, you’re still going to use about 1/32oz per slice, ergo ending up with (8x 32 = 256; 398 / 256 = about 1.5 cents per slice or 3 cents for the menu item.
Total “cost”: (31.25 + 1.5) x 2 = 65.5 cents ($0.655) for the two slices of buttered toast.
Now for the tricky bit.
Restaurants, from back when I still managed one, typically have had to mark up “cost” by 600% just to break even. (Don’t even get me started on whether that’s the case in NYfC or Califuckingfornia: it isn’t.) This takes into account fixed overhead like salaries, supplies & equipment, utilities, real estate and so on (i.e. what it costs your diner each day before you get a single customer in the door).
So the extended cost of that 2-slice item works out to (errr carry the six) $3.93, before adding a single penny for gross profit. (And just so we’re clear: $5 from $3.93 represents about 27% gross profit — I know, don’t make me laugh.)
Is $5, therefore, a total ripoff?
Not from where I stand, and this kind of analysis explains why you have to take your bank manager along to 5 Guys every time you visit them to get you and your wife a burger.
Here’s the article that prompted this post.
And Fuck Joe Biden, because about three years ago that $5 loaf of bread at Central Market used to cost $2.85, and the $4 butter about $2.75 (because I keep track of this kind of thing, even though the Gummint would prefer that I forget that the chocolate ration used to be 5 grams and not three).
[/Orwell]
I go to the store about every 6-8 weeks and each time it is shocking the number of things I’ll not buy any more cause I just can’t justify the cost.
One of them is wheat bread. I prefer wheat over white. Well, the other day the least expensive wheat bread in this particular store was almost $6. I didn’t buy it. Butter? Off-name brand was $6 too and Land of Lakes was close to $7. Didn’t buy any of them neither.
If this keeps up I’ll eventually go to the store and not buy anything…
You may be shopping at the wrong store if you can’t find wheat bread for much less than $6. I paid $2.28 for a 20-ounce loaf yesterday, at Meijer in Grand Rapids, Michigan – and consider that an appallingly high price.
Kim
I thought you had enough of a marketing background to know that cost and price are NOT related. The price being determined by the market place and demand. Not cost plus markup. Using your example we need to add in the factors that this is a ” Little Seaside Diner” and the lost opportunity cost of you only ordering a cup of coffee and a slice of buttered toast instead of a full breakfast. The proprietor may also be actively trying to discourage the practice of that type of order. Order the full breakfast special and the buttered toast is part of the package. Take up booth/Table space during peak hours and only order Coffee & Toast, it’s going to be priced accordingly.
GT,
If I were to wander that far (and even further) into Marketing Dorkdom — of which I am easily capable — we’d be here all day, and you’d all be asleep.
Trust me on this.
As an aside, I actually have to stop myself short when writing posts like these, because I’d be as boring as one of those Olde Pharttes who ramble on about the merits of the various Cuban vs. Honduran vs. Guatemalan etc. cigars.
Talking costs, tc. I likes me a cup of Swiss Coco in the morning. I’ve been buying a box of 50 packets at wally world forever. (That’s roughly a box every two months.) Before the pedo was elected the stuff cost ~ $4.00 per box. Okay so now I’m paying $7.00 per box of 50.
So yesterday I go into store cause I’m running low. Right – same price – only the box now only has 30 packets. That’s from about two months ago and works out to a 40% increase in price. Thanks joe.
I would find it difficult to refer to 1/256 of that package of butter as “slathering it on”. This may explain the distance I am from having six-pack abs.
I’m glad I’m not the only one who does that. Some random thing pops up and I start doing mental math like how many hoes would I have to pimp to make the Michael Keaton Henry Winkler Night Shift movie thing really work? How many rack of ribs does a bbq joint have to move in a day to break even? Etc and so forth.