If you haven’t yet read the response from a cafe owner to a negative TripAdvisor review left by a customer outraged at being charged £2 for a lemon water, read it immediately. The explanation of the economics of the service industry is brilliant.
In short, the owner explained how business overheads total £27.50 per trading hour, while the waiter costs £12.50 with national insurance and holiday pay. This brings running costs to £40 per hour or 67p per minute.
But retailers have to pay suppliers regardless, otherwise the facilities won’t be there for others to use in the future
If all tasks involved with making, serving and clearing away the drink took three minutes, the total cost to the business is £2.40 including VAT. The lemon might only cost 5p, but it is the facilities that cost far more than the ingredients.
I have seen two damning local paper headlines recently portraying retailers as villains for charging to use PayPoint or insisting on a purchase. The accusation is that retailers are capitalising on society’s poorest for what should contractually be a free service.
I wasn’t the only one to see a parallel between charging for the time taken to produce a lemon water and being expected to offer a service at a cost to your business, especially if a terms cut has tipped the balance.
Retailer Mike Grundy pointed out in a discussion on the PayPoint Pay Fair Facebook group that, using the same equation, the cost of processing a payment transaction is roughly 67p.
The service may well bring footfall and customers might sometimes make purchases. But, then, the customer who expected a free lemon water may have been dining with more profitable guests, or might buy a cake next time.
But retailers, like the cafe owner, have to pay suppliers regardless, otherwise the facilities won’t be there for others to use in the future.