Many years ago my wife started a small business creating customer-designed exercise outfits and accessories. At one point she brought me a small piece of artwork she had been working on for an entire day. “Do you like it?” she asked.
“I do,” I said, “how much will you sell it for?”
“Two dollars,” she decided. “Houston, we have a problem,” I said.
I’ve written in this space before about a Jersey Mike’s franchise that has good sandwiches, but the waits can be quite long because they are so laboriously assembled. (They insist on freshly slicing everything, which doesn’t taste to me any different from something pre-sliced a few hours before. And they place on the lettuce, tomatoes and so forth as if they’re assembling Legos.) And I’ve noticed fewer and fewer people in Jersey Mike’s which is good for me in terms of less waiting, but not good for them in terms of making money.
You can only make so many sandwiches in a day. You can’t compensate for a loss per unit by increasing volume! You either have to raise your prices or determine how to make more sandwiches if there’s demand in less time. But even then, how many sandwiches can you make?
Subway seems to have figured this out. Good sandwiches, very little waiting. Well trained staffs.
I remember the old “I Love Lucy” episode where Lucy and Ethel create a tremendously popular salad dressing. They are receiving thousands of orders. Finally, Ricky says to them, “How much do you sell this for?” They tell him something like a dollar. Then he asks about the ingredients, packaging, and shipping, and realizes they are losing $1.50 on every sale!
“Lucy, you’ve got a lot of explaining to do!”