Re:The economics of all-you-can-eat buffets
by imtringued on Monday January 27, 2020 @07:37AM
(#22158734)
>Why fight all day long for a 5% margin when you could put your money in index funds?
Are you serious? You're making such a critical mistake. The business owner isn't paying for the products. The customers are. Every time a customer spends $100 you get $5 in pure profit after paying all the salaries (including your own) and all other costs. The 5% margin is applied on the money your customer is spending, not your own money. If you have $100 and get a 10% ROI then you would have to wait a year to get $10. If you have 10 customers each paying $20 for the all you can eat buffet then you have $200 * 5% = $10 profit.
Let's assume you spent half a million on your fancy restaurant. How long does it take to pay that back? You don't pay it back from the profit. The cost has already been taken into account and therefore lowered the margin which means the margin clearly doesn't influence the ROI. The final profit is $1 per customer with 300 customers per day which translates to $75k of pure profit per year or a ROI of 15% in the first year. The real numbers probably look completely different. 300 customers is probably a below average day. The restaurant may be more expensive or cheaper to set up (especially if they are renting instead of owning).
Are you serious? You're making such a critical mistake. The business owner isn't paying for the products. The customers are. Every time a customer spends $100 you get $5 in pure profit after paying all the salaries (including your own) and all other costs. The 5% margin is applied on the money your customer is spending, not your own money. If you have $100 and get a 10% ROI then you would have to wait a year to get $10. If you have 10 customers each paying $20 for the all you can eat buffet then you have $200 * 5% = $10 profit.
Let's assume you spent half a million on your fancy restaurant. How long does it take to pay that back? You don't pay it back from the profit. The cost has already been taken into account and therefore lowered the margin which means the margin clearly doesn't influence the ROI. The final profit is $1 per customer with 300 customers per day which translates to $75k of pure profit per year or a ROI of 15% in the first year. The real numbers probably look completely different. 300 customers is probably a below average day. The restaurant may be more expensive or cheaper to set up (especially if they are renting instead of owning).