A few years ago I was staying at an AirBnB in Carlsbad/Oceanside. I wandered down to a little coffee shack/breakfast place across the street from the beach. As I sat out front, enjoying my cup of coffee, I thought, "this is exactly what I want to do with my retirement... I want to buy this shack and pay some 17 to 20 year olds to make people coffee and pancakes". While that sounded great in my vacationing mindset, the reality is far more soul-crushing. Upon returning home I started doing some back of the napkin math on what it'd actually take to run a place like that. 3 or 4 employees at $20 an hour (this is California), plus insurance, plus... well all the other stuff it takes to employ a human. That's before I even consider food and supplies. Coffee at 2 dollars a cup, pancakes at 8 dollars a plate. Could we sell enough even to make payroll? Forget any profit.
I believe this is why we're seeing the sunset on the little mom-n-pop businesses. There's no way these folks can pay living wages. Now if this were Reddit I'd be angrily shouted down and told, "then they deserve to be out of business!". Fine, let's put all those evil family-run donut shops out of business. But let's not complain that we only have even more evil McDonalds-style franchises that own everything.
All this to say, I wish there were some middle ground. The truth is, I'll probably have to figure out how to like Starbucks.
I remember a discussion quite a while back about how SE Asia lacks a vibrant startup culture and people were going back and forth about how companies should just bring in Silicon Valley tech workers to get the industry going. Upon mention that Cambodian and Vietnamese simply can’t pay the wages SV techies would want, commenters seemed confused as to why—these struggling countries should just do it and quit making excuses. It’s simply obvious that a country where people are getting maybe $2000 a year should have companies with enough free cash to bring in thousands of Americans who want at least 300k but would settle for 250k if they can get a luxury condo thrown in. Bizarre to witness these statements sometimes—frustrating when it’s crowds.
It’s good when people do, at the very least, a passing glance at the data and consider troubles that could occur.
That said, mom and pops run by just mom and pops do exist. If you’ve got savings and just want to socialize and mitigate some of the costs with a little side income, running a tiny cafe next to your home on weekends is something that isn’t unreasonable if you’re very comfortably settled.
If you want to know a man’s character, give him a little power.
Let’s say Vietnam found the money to do it anyway. Now you’ve got a bunch of people making minor warlord money compared to the locals. They can now afford to do just about anything their little hearts desire.
Silicon Valley may be many things, but a paragon of ethics is not one of them. When you can bribe people half a year’s salary that changes the dynamic quite a bit, and for the worse.
And you didn’t bring these people over to run everything, you brought them over to mentor the people you want to run everything. What great role models you’ve provided for them. What could possibly go wrong?
> Now you’ve got a bunch of people making minor warlord money compared to the locals. They can now afford to do just about anything their little hearts desire.
Isn't this already happening when an SV company pays an eastern European developer 1/2 a typical SV salary which is 10x the employee's average local salary?
It might be, but how many 0.5x bribes are you handing out at “only” 10x normal salary?
Also locals at least are socialized to think about their community to some extent. You don’t get that when you bring in outsiders who can annd probably will other most of the population from day 1.
Not that many people from EE work remotely for SV. The time difference (9 hours) is just too much, and you can make similar money ($120k-$150k) remotely working for european companies as well.
Working with India from the west coast: can we just fucking not? 11.5 or 12.5 hour difference, you're wrecking someone's day every time you have a meeting.
At least on the East coast it's about the same as EE vs West Coast. If you're a night owl on one end or an early bird on the other you can make it work.
I mean if you're really crazy about money, then sure. But really, contracts within EU pay similar money, and you don't have to become a vampire. The biggest downside is that contracts aren't always extended.
If you're thinking about this, then you have to consider how those business you mention make money with a similar model.
Starbucks: they don't charge $2 a coffee. I would only ever get a drip coffee and I think it's around $3, most people who are going there get drinks in the >$5 range. Plus they have a lot of traffic - more customers = less wages required for each drink
McDonalds: They charge less than $2/coffee. They charge less than $8 for a breakfast. They make their money on super high volume.
Your vision: you're enjoying lingering, enjoying the sun. You're enjoying the floor (patio) space, which means you can't have high volume unless you have a huge space, which wouldn't work with your "little shack" concept. Unless there's a nearby park or beach with free barely limited space, while also still having enough traffic to stay busy. Very limited spots that can work.
(so as with most issues regarding our urban spaces in north america, what we need to make them better is more density. :)
Or, to put that another way: the true cost is real estate. Don’t try to run a cafe. Find a pretty outdoor area where some property developer kindly built commons seating on their own dime, and drive a coffee food truck up to it.
> Find a pretty outdoor area where some property developer kindly built commons seating on their own dime, and drive a coffee food truck up to it.
Most places with high demand like this also have prohibitions (or limited parking/operating permits) on things like coffee trucks, in my experience. Another issue with our prohibitive land use practices in north america.
I don't know about other cities, but in Washington, DC, the pandemic lockdown essentially destroyed the food truck business. A few operate along the edges of the National Mall, where the customers must be tourists. But McPherson Square, Farragut Square, and L St. NW used to have a lot of food trucks and have none now.
So maybe find a pretty outdoor area where there are lots of tourists.
> (so as with most issues regarding our spaces in north america, what we need to make them better is more density. :)
Then we raise the problem that this is not longer some simple, happy little shack where I get my coffee and relax. Higher density, higher volume means I wait in a potentially long line, have my personal space violated both considerately and inconsiderately by total strangers, feel the anxiety of being in a potential fire hazard area, etc. Arguably, none of this is better. I am more willing to pay a premium on the coffee than to deal with all of that.
The longest lines I've ever been in for coffee have been at suburban Starbucks drive-thrus, which are far from dense. My experience is small coffee shops in cities don't really get that crowded. There's plenty of room for those small coffee shops where you can get your coffee and relax in a nice little lounge spot. (I've seen more of them by far in cities than outside, honestly.)
Starbucks can negotiate way better deals on rent than mom and pops.
IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays rent to itself.
For many small businesses - especially mom and pops, the majority of the surplus value is captured by property owners, and the amount has increased over the years. This is partly how Piketty's r > g came about.
Yes, and historically, mom-n-pop style shops (not specifically coffee) made the property costs work by living in the same building or property. But if you own a house and want to turn the ground floor into a cafe: surprise, modern zoning laws don't allow it. Which brings it around to a similar issue as my original comment: strict zoning is holding back what our cities could be.
Planning decisions tend to be made by municipal staff not by elected Council. Regardless, if every city council/staff is causing the same issue, then I think that's a pretty reductive argument. We need to look at places that are doing planning/zoning "right", figure out what we're doing wrong, and improve it.
(And actually, all that has been done, but action isn't being taken, so now we have to solve that problem)
> IIRC McDonalds even went as far as to become a landlord many of its franchisees, so it pays rent to itself.
I read somewhere that McDonald's makes more money from their real estate holdings than anything else they do. Can't vouch for how accurate that is, but it seems very plausible.
> About 85% of the company in 2016 was represented by franchisee-run locations—people who agree to operate individual McDonald’s restaurants with a licensed privilege to the branding. But rather than collect a lot in royalties or sell its franchisees cooking equipment, McDonald’s makes much of its revenue by buying the physical properties and then leasing them to franchisees, often at large mark-ups.
> Today McDonald’s makes its money on real estate through two methods. Its real estate subsidiary will buy and sell hot properties while also collecting rents on each of its franchised locations. McDonald’s restaurants are in over 100 countries and have probably served over 100 billion hamburgers. There are over 36,000 locations worldwide, of which only 15% are owned and operated by the McDonald’s corporation directly. The rest are franchisee-operated.
Don’t try to understand how a company works by looking at the loss leaders. A cafe despite the name is not making its money off of coffee. Drip is probably selling at cost, especially once you include the cream and sugar. It’s probably not the pancakes either, with whipped butter and syrup. It’ll be the orange juice, the bacon, or omelettes.
You have that exactly backwards. All the money is in coffee, which is so cheap it might as well be free. It's just like a restaurant which makes all its money on diluted caramel-colored sugar syrup. Or 12 dollar mixed drinks.
I can’t recall the last time I saw $2 coffee. I don’t drink drip except my own, probably not for decades, and the last time I remember looking it was more like $2.50, and in towns with lower standard of living. If you’re charging $2 for coffee today you should probably raise the prices if you can’t work out how to make a profit. Fifty cents on two dollars is a 25% profit margin.
Edit: I just looked up the local 50’s diner. $2.79 for what is probably bottomless but burned drip coffee. That definitely makes them money. But That’s 39% more than $2.
To reiterate: if someone tells me they’re planning to sell coffee for $2 I believe them. And then ask where they think they’re making their money because it’s not going to be on the coffee.
> If you’re charging $2 for coffee today you should probably raise the prices [..]
Just for everyone's interest, (and based on 2022 pricing) you can get an espresso in an Italian bar for $1.33 (Trento) all way way down to $0.96 (Naples).
Having tried the US and the Italian versions, I'd take the latter every single day of the week and twice on Sundays over the US version.
I’ve been watching that British coffee critic whose name I can’t recall looking at different coffee making means.
I’ve watched just enough of his stuff for him to sell me on the idea that maybe manual espresso presses produce a more consistent cup with just a little practice. Also they seem to be cheaper. Is that what they were using in Italy?
They're using the big industrial-looking espresso machines, since throughput is everything.
You pay at the (separate) till first, then take your paper receipt to the bar, hand it over, and 90s later you're handed your drink.
I've ordered a lot of coffee in Italy and have never ever heard a discussion about drink size, flavours, soy, or skim milk. That stuff is apparently irrelevant.
If you are being paid to launder money, isn't the fee about 20%? My source on that is the Netflix series Ozark. Assuming that 20% is within the realm of reality, I assume that the margin on drip-coffee is substantially higher. Maybe 60% margin on coffee?
Just an anecdote;
I spoke to a manager at a small coffee shop and he said that they make all their money on coffee alone by 9am (and surprisingly, they licensed Starbucks coffee). Everything else was a pain and barely covered costs because of time, equipment, and effort. But coffee was cheap and easy.
Around 2 dollars US for a medium coffee that cost them pennies. According to him, the other things they sold were there just to bring people in. Money was in the coffee because it was cheap and easy.
Medium is what, 12 ounces? Yeah I could see that. You're mostly paying for cup.
But I think you/he should look around. If you're not a fast food restaurant coffee costs a bit more than that these days, and charging 'a bit less' craters your profit margins.
> what we need to make them better is more density
I'd love to hear more about this, and how one defines "better", because it doesn't sound like this is going to work for everyone.
Full disclosure: I've spent the pandemic being amazingly grateful that - by chance - I happen to live in a low-density part of the world. It has its downsides, but on the plus side, from my home I can walk to open countryside in pretty much any direction in a few minutes.
> I'd love to hear more about this, and how one defines "better"
Sure! The discussion was about enjoying small independent coffee shops, and how to run one profitably, so my description of "better" is w.r.t. that issue - for persons who want to run such a coffee shop, or who want to visit one. The identified issue is that per-purchase margins are fairly small, and to sustain a business it requires a lot of these small purchases. As property (mortgage/rental) costs are also high, having a small space is also important. So to get a lot of customers despite being a small space, you want to be either near a natural attraction (park, beach, etc), or near a lot of people (office building, metro station). Density helps with the latter.
> I happen to live in a low-density part of the world. It has its downsides, but on the plus side, from my home I can walk to open countryside in pretty much any direction in a few minutes.
And how many independent coffee shops can you walk to in a couple minutes?
(Increased) density doesn’t have to mean an absolute lack of any open fields, does it? Doesn’t density offer a probability that countryside can be closer to one’s home?
> Doesn’t density offer a probability that countryside can be closer to one’s home?
I was responding to someone suggesting that increased density would help with retail profitability.
If we were to make housing more dense but use the extra space as countryside that's not going to provide any more customers within the catchment area of the OP's coffee shop, is it?
> If we were to make housing more dense but use the extra space as countryside that's not going to provide any more customers within the catchment area of the OP's coffee shop, is it?
If your current area has 400 residents but you can still easily walk to open fields, increasing that to 1200 residents in the same area would triple potential coffee customers while maintaining the same access to countryside.
They also ruthlessly overwork employees with just in time scheduling. And the urban starbucks that have cafe-like atmospheres are subsidized by the suburban ones that do all or most of their business through the more-labor-efficient-but-enjoyed-by-no-one drive thru.
The Starbucks near ex-urban me always has a line of cars wrapped around the building for the drive-through--something I've never really understood. If I go to a coffeeshop except maybe when I'm traveling it's to hangout with a coffee and maybe grab some food.
Yes, but that's less convenient. At home, anyway, you have to make it. That's more effort at a time when many are in a rush to begin with. You can have it at work, but many prefer to have some coffee a bit sooner than that and not have to make a trip to the break room.
Convenience is a very powerful motivator, and these people are prioritizing it over minimizing monetary expense.
I guess. If it's in the morning, I'll make some coffee at home and put it in a go cup. Otherwise I mostly don't drink coffee during the day unless it's on a long drive and I certainly won't wait in a 10-15 minute line of cars.
But I think it's something that becomes a habit/ritual for a lot of people.
I worked in the restaurant and bar business for a long time as an employee. Not losing your shirt in a food business takes a LOT of experience. According to the National Restaurant Association, 60% of restaurants fail within the first year and 80% fail within five.
Most people realize they don't know enough to open a small lab or IT consulting firm, but drastically overestimate their knowledge of the food business. It makes sense-- these businesses must hide the mountains of back-breaking low-pay manual labor from customers lest they become uncomfortable and patronize somewhere that makes it all feel calm, relaxed and easy. And for all that, particularly successful restaurant owners get a margin of maybe 5% after a few years when you really nail down your expenses and processes, though the numbers for coffee shops are a bit different.
Particularly, white collar people who pride themselves on knowing about their local restaurant scenes are prone to this hubris. I bristle at their misguided confidence when discussing the business but will take the time to empathically but forcefully discourage any considering it professionally. A few years ago, an old friend contacted me in a panic because she'd invested her entire retirement in her brother's dream brew pub which was failing before it opened. I couldn't help them. Anybody with experience could immediately see how hare brained their ideas were, but they were just in too deep. Months later, they opened and quickly closed, and she'd lost everything. Tragic.
A company I worked back in the dot com boom days... one of the sysadmins was a bit on the grumpy side. He had been there from the start and had some nice options to be able to cash out on and try something. So he cashed out and pursued his dream of being a chef - finished up some certificates and such... and became a chef.
About a year later, he came back to working as a sysadmin no where near as grumpy. He got a job as a chef... and realized that as much fun as the cooking is he really didn't like being a chef.
I worked in a kitchen and it is intense grueling work. Everyone drank a lot at a minimum and had plenty of other vices. My coworkers were much more interesting and fun though than most people I’ve worked with in software development since. Even so, I’d probably be an absolute mess today had I stuck with cooking. I’m impressed with anyone who can make it in that biz without going insane.
Working as a cook and the art of cooking have very little connection for the first 5 or 10 years of your career and most 30 year olds, even, probably aren't willing to put in what it takes, physically, to work their way up in the food business. Even as a chef, you'll spend 95% of your time managing a highly complex production line that can crank out identical units on demand and if you're lucky, 5% on creativity. You'll rarely, if ever, want to cook for pleasure. It's kind of a meme among cooks how most of them end up eating hot pockets and microwaving frozen pizza on their days off.
There are some people who I usually encourage to become line cooks. People in their early twenties who are toughened up a bit by life, intelligent, passionate about food, don't have skills that will yield them a financially viable but less punishing career path, kind of lost, and seem capable of self-regulating around alcohol and other substances. That's a rare bird, especially in the HN crowd.
Having known many hundreds of service industry workers, I do know one person who got into restaurant cooking as a fully-matured adult and didn't dejectedly leave it within a year or two. Importantly, he graduated culinary school in his twenties, worked in other service industry jobs for a few decades after, and despite also being a professional musician, didn't drink or use hard drugs. It's hard to emphasize to most people how important that last part is. I briefly worked at a well-respected, fun, vibrant, relatively pricey restaurant with an open kitchen that did 100 covers per hour on Saturdays. They wanted the customers to think the cooks were having a ton of fun, so a six pack was part of our station prep and customers could buy beer for the line at a discounted price. I have no idea how that line afforded so much cocaine on such a small salary but that was some scarface shit. Uppers are borderline a safety requirement when you're drunk and always seconds away from permanent disfigurement. A guy I know who cooked there for like 5 years went in kind of dorky and is still a slurring-every-night drunk decades later. The first night I worked there I saw my boss passed out drunk sleeping on the floor of a nearby ATM. A few years before that, a good friend and consummate drinking buddy was looking for a big change so I connected him with a third shift job cooking at a 24 hour restaurant. The most consequential things he picked up from it was an intravenous drug habit and a new career as a drug dealer.
I love Kitchen Confidential but I do think he glamorized that grittiness to some extent. From the outside it seems a little exciting and everybody likes to think they're just dangerous enough to ride it or upstanding enough to stay above it, but that's pretty naive thinking. I just don't think most folks used to living in polite society can grasp the negative implications of that lifestyle. For many of those people, those coping mechanisms are all they've got, and sadly, these jobs will let people rely on them until they're dead.
> Now if this were Reddit I'd be angrily shouted down and told, "then they deserve to be out of business!".
You'll get very much the same response if you are to suggest that some companies aren't able to get $200k/year of value out of a software developer.
If there's a company that can only get $100k/year of revenue out of a developer and pays them $70k in a low cost of living area (forget about remote work for someone in California) you'll get laughed at for "poverty wages" and that the skills that they have are worth more while at the same time complaining about how hard it is to find a job that pays "what they are worth" (which is the top 10th percentile).
The middle ground seems like business owners pricing their product appropriately to actually sustain their business. $2 for coffee seems ridiculously low. Is that normal in California? Maybe such under-pricing is part of the problem?
But McDonalds sells coffee for $1, and many of those customers who are deeply invested in living wages and local businesses are also not fools who can be charged 4x for the same thing they can get faster at McD’s.
So yeah, pricing is the problem, but IMO mostly on the “willingness to pay” side. These businesses are squeezed between the real costs of inefficient small biz (where are you going to store 50 pallets of coffee needed to get great pricing, and it’ll go bad anyway) and consumers’ unwillingness to pay for the things they say they want.
Same thing as airlines, really. Everyone hates cramped seats and coin-op toilets, but enough people will always buy the cheapest ticket that it’s not economically viable to provide a good quality product at a price that will sell.
I see what you mean, but as a consumer I'd much rather pay extra for a good coffee than $1 for a crappy one and I'm fairly sure this is not an uncommon sentiment. If I opened up a coffee shop, it wouldn't be to attract the kind of crowd who get their coffee exclusively at McDonald's, so McDonald's pricing wouldn't be that relevant, right?
Tangentially, I'm also curious how McDonald's in the US can charge $1 if they also have to pay a living wage. Does their size mean they get cheaper materials from suppliers and can drive costs down or that they make up that loss by selling some of their other products? I've never gotten coffee from McDonald's in my country, but I'm _pretty_ sure it's not that cheap.
Even _more_ tangentially, I noticed a popular local chain driving their prices higher and higher to ridiculous amounts. It's not even great coffee--it's like Starbucks in my country (Starbucks apparently didn't get a good footing here because this other chain is just so established). Their usually mediocre coffee costs more than one at a boutique high-end roastery! I suspect it's because they're pushing people to instead sign up for their monthly subscription, that lets you get a coffee every 2 hours. I've begrudgingly signed up, because I like using their cafes as a work space and this way I do not feel guilty about sitting around there all day. When I want legit good coffee, I still go to a good place and get one. As annoyed as I was to see how much they charge for a mediocre cappuccino, I've got to hand it to them on the interesting monetization shift.
No way. My home coffee is 14 oz. for $5 and lasts like 25 cups. That's $0.20 a cup. At McDonald's scale, their filter cost is 0 and I'm sure their coffee bean price is half of that, at $0.10 a cup. They're also really automated. If you've ever seen how automatic their soft drinks get poured in the drive-thru, it's like a factory.
1$ is probably at cost. And everything else have extremely good margins. Probably outside the cheapest items on menu. And those are there to build brand loyalty.
That's nearly always the most important factor, and it always has been. But you also have to recognize that there are different markets even for the same product.
McDonald's is selling their coffee and pancakes to a customer base that is looking for a specific benefit: something hot, fast, low-investment and inexpensive that will fill their bellies on their way to do something else.
A business such as what nobleach is talking about isn't trying to serve people with those needs. It's satisfying a completely different set of needs: relaxation, a pleasant atmosphere, a place to pause for a while. Luxury. They'll want higher quality food and drink, an "experience", and such.
It doesn't matter that it costs more than McDonald's because both of those sorts of businesses are selling different things. Comparing them is apples-and-oranges. Isn't really about the coffee and pancakes.
Airlines do often have some gradations of seats and service within economy but, yeah, I don't think BA is even running its LCY to JFK business class-only service these days. (And if business class on a mixed class plane is going to be a luxury good, you might as well charge a big premium on it (as well as making it a perk for very frequent flyers).
> but enough people will always buy the cheapest ticket that it’s not economically viable to provide a good quality product at a price that will sell.
That kind of sounds like everyone involved would be better off if airlines were allowed to collude to raise the ticket price floor, but regulated to cap profits, forcing them to spend the gains on improvements.
That’s what we had before deregulation, when flying was very nice and extremely expensive. What we need is to realize people are super cheap and even many who can afford it will choose the cheaper option every time.
The idea that all jobs should provide enough compensation to live off of is just not possible. Face it now or later, but a charade which requires financial support will eventually crumble.
I think the idea is that these jobs will be taken by teenagers whose parents will provide most of the cost-of-living.
Or people working two jobs.
The former seems OK, although there’s clearly a lot of demand for coffee shops workers, and a thin slice of the population (what, like 16-20 year olds or so) can’t serve all of it (and also they should really be prioritizing education at that age, so their overall availability should be very low).
Having a bunch of people work two jobs is just failure of society.
I don’t really buy the teenager theory. In that case, it’s just their parents subsidizing below-cost business operations. I don’t think it’s all that different from government subsidies at the macro scale.
I don’t buy the theory itself, but I’m pretty sure that this is what people are thinking of when they say that below living wage jobs should exist. At least — when people say “below living wage jobs should not exist” I think they are not arguing for massive expansion of the social safety net, but for some more cutthroat version of capitalism, consequences be damned.
The needs of a single teenager or young adult are different than those of a middle aged adult with a house to maintain and dependents.
If a teenager has a job, are they paying rent to their parents and paying for meals at the family table?
This is already subsidized - job or no. The average teenager's job supports the things they want beyond that basic level of support that parents are expected to provide.
This really boils down to the set of questions:
1. What value can a company realize with an unskilled worker?
2. What are the financial needs of an unskilled worker without dependents?
3. What are the financial needs of an unskilled worker that needs to support a household?
2 & 3 are likely not the same. And 1 will more closely match 2 than 3... and a lot of the arguments about a living wage are about case 3.
Which is all fair and well and good… but how would you feel if your employer calibrated your wages to what they think you need, rather than the value you bring?
So unless we’re going to a “…to each according to their needs” society, which I think most of us oppose, we have to decide whether we want jobs that don’t pay enough for an average person to live. Calibrating wages for everyone to the needs of teenagers doesn’t seem terribly sustainable.
An employer will attempt to pay as little as possible to an employee and then move the potential wage up to the value that an employee in that position would bring.
This is further adjusted to the cost to train an employee in that spot as they'd need to spend that again if they are to replace that employee.
For unskilled works, working in a coffee shop, where training can be done in an afternoon... the teenager has very little bargaining power to move the wage closer to "value they bring".
And that's where the minus wage gets in (I support raising the minimum wage though note that this will have second order effects of making some local coffee shops that are staffed by teenagers unprofitable).
The existing subsidies that are in place regardless of a teenager's employment by virtue of having parents with a place where you can eat and live... and health care (can be on parents' plan until 26) enables the low margin service sector to take advantage of / give employment to people who teenagers and young adults who lack skills to get other jobs (and desire flexibility for school or being a care free young adult).
If you take those subsides away, the service sector won't be able to bargain down / offer jobs at those levels anymore.
If you were to calibrate the amount you need to pay to someone at a coffee shop to the living wage needed by the person who brings in the majority of the income for a household... very few service sector companies could afford that.
The less than living wage, unskilled work, bringing in supplemental income for an individual or household is something that is needed in the overall economy.
I’d suggest simply reminding people that if they don’t want to be homeless they need to learn a skill that pays a living wage. This is how it’s been forever.
A coffee shop is absolutely possible as long as nobody is interfering in the wage agreed on between employer and employee. We’ve had coffee shops forever and they have done fine. It’s only the modern expectation that they should pay more that is threatening that model.
Or, as many Silicon Valley startups have shown, there are lots of services that people want but it turns out that a critical mass of mainstream consumers aren't willing to pay the cost of providing them.
A fair wage represents an exchange of equal value. This does not speak to the viability of repeating that exchange as profession; only that reasonable compensation has been given for a reasonable amount of work.
No. I’ve probably had 20+ jobs in my lifetime and only expected to make enough to live with maybe half of them . The idea that working fast food, which I’ve done and anyone with a pulse could do, should pay enough to pay all of an adults living expenses is preposterous and makes no economic sense at all.
There are plenty of other jobs that anyone with a pulse could do and make more than fast food. But of course those jobs make total economic sense, right?
Not sure what those jobs are - generally the less skill needed the lower the compensation. If there are some easy jobs like you say that pay better and employer and employee are both in agreement that’s great.
OP mentioned that the coffe shop show was staffed with 17-20 years olds. They don’t need to earn 20 bucks per hour, they don’t need to be able to afford mortgage, or even rent apartment by themselves (they can have roommates). No one would work such job their whole life anyway. It’s temporary almost by definition
And that’s if your employees show up. People quit last minute and need someone to cover their work. Anything you hire someone else to do as part of a labor industry you’ll need to be prepared/willing to do it too.
I'm in Riverside California and I think your retail prices are a bit too low. There recently have been quite a few mom and pop coffee shops opening up and the prices are higher than Starbucks but they're also packed because each place has a unique take on coffee shops. Maybe this trend will change in a near future recession but right now it seems people pay more for a unique "authentic" experience.
I did a very similar thing. I love the experience of coffee shops and neighborhood-style bars. I really want to produce a particular experience for others to enjoy.
So I started modeling the business and.. holy shit. At BEST I'm clearing 40-60k/y with a single shop. But that ain't no 40h work week with health insurance.. probably it will fail and I'm out 200k.
The main way you make the math work is that it’s a family run business where you and your spouse are owners and workers. That takes two FTE off the table, paying you out in profits instead. But as the article describes, you’ve signed yourself up for a full-time job mopping at a high-risk low-margin business.
You can sustain if your rent is low (low revenue, and low expense) or your location gets you heavy traffic or you serve a community that really wants your product—like a bar near a university. You don’t need the most ideal real estate next to the university, just within the community—(high revenue, high expense). So, to make money you need something that lowers your cost or increases your revenue.
That’s where survivorship bias clouds the picture and you drink your coffee, and not realize they guy owns the building. Haha
There would be a lot more room to pay people a living wage if we didn’t ALSO have to pay the government a living wage. I wonder, when you look at the cost of all the various required benefits, would employees rather not just get that in cash instead?
Genuine question: when you looked at the costs of “plus... well all the other stuff it takes to employ a human,” what did that add up to in CA?
In the US, even in CA, the government taxes are quite modest compared to other developed countries. Healthcare on the other hand is ruinous unless you can afford the almost equally ruinous health insurance.
Yeah. That’s pretty unrealistic pricing these days. Maybe if you’re in Italy charging €1 for an espresso. In North America you gotta charge more. People pay $7-8 for a cup of sugar milk (with a shot of burnt espresso) from Starbucks. As a small café owner you should be comfortable charging $5-6 for a decent coffee.
You have described my Starbucks experience perfectly. I actively seek out the mom-n-pop shops just because I believe (perhaps erroneously) that they get in the game because they're artisans (like this post mentions) and their coffee is going to be head and shoulders above Starbucks. I'd rather tip a barista 10 additional dollars for making me a pour-over or French Press.
My experience unfortunately is that in those nice, cozy places where I would expect good coffee they sometimes don't even know what coffee beans they have. Solutions to that is going to roasting company (most of them also have small coffeeshop or sth) they will gladly tell you about their coffee and also make you one while often explaining how to do it best with your setup at home.
(And Starbucks is so dark and burnt I can't drink it nowdays)
I drink black coffee, usually an Americano, drip or even cold brew, and what I've realized is that I am NOT in the majority. It's real hard to hide a bad cup without milk and sugar to cover it up. I love mom-n-pop shops, but I get some of the worst cups of coffee sometimes from these places. At least Starbucks is fairly consistent. I still avoid then when I can though.
Yes, one of the core things that Starbucks (and McDonald's and so forth) sells is consistency. Their products may not be great, but you can go to one anywhere and know exactly what you're going to get.
Mom-and-pop places don't have that certainty. There are both great and terrible ones.
If you're in an unfamiliar place and just want a coffee, Starbucks can be just the ticket. It's not a gamble. And if you enjoy coffee and want something above "adequate", you'll also be keeping an eye out for promising mom-and-pop places to switch to.
I don't really understand why people pay a premium for literally the easiest way to make coffee. Pour overs are fast and easy to clean. French presses the only work is in cleaning the press.
Any idiot can throw a filter and some grounds into a V60 and then pour hot water over it but really great pour-overs aren't easy. You need a high-end grinder and fresh, top-quality beans. You need practice dialing in. There's even a bit of an art to making the pourover itself, with blooming and stirring, weighing the output, and timing the draw-down. People pay to see a skilled barista going through the ritual.
To be fair I think the average specialty latte at Starbucks is more like $6. $6 seems to be the going rate in the Bay Area for a latte at a local coffee shop too although I have seen some going even higher recently.
I was scootering through Venice CA and there was a small storefront. Very small. Less than 100 sq ft. I called and rent was $8500/mo.
I was watching a YouTube video on UpFlip about a guy with three coffee shops. Monthly revenues are around $80K for his main shop. His margin is less than 4%.
If you can't afford the things that a business needs, you go out of business. If you can't afford coffee, cups, electricity, water, rent or taxes, you don't get to keep your coffee shop long.
I want a gardener and house keeper, but I don't get to have them because I don't want to pay for those things. If someone can't pay three employees what their time is worth, why are they entitled to have those employees? Replace a person with a computer if you can't afford a person, or scale back in other ways. Don't punish employees for lack of business acumen, maybe unless you plan to compensate them extra when times are less lean.
There was a time in the UK where many small grocery shops were owned and run by Asian families. They would typically be open everyday 'till late.
The economics were simple, everyone in the family worked for free and there were no benefits, sick pay or everyday rules to worry about.
Eventually the big grocery chains took over because it was easy to open up a prime local site and run it at a loss for as long as it took. Any stubborn competition remaining could easily be brought to the attention of the authorities.
Some of those Asian shopkeepers became quite successful though which, I think, goes to show that every kind of business has its golden era where anything is possible but nothing lasts forever.
Other countries around the world have this figured out somehow? Singapore, portugual, thailand, spain all have local food places, amazing food culture and somehow it seems sustainable. I dont think theyre being propped up by rich tourists
In my part of the US, there are more mom-and-pop coffee shops than chain shops, and they're thriving. I think that one of the reasons they're thriving is that they charge a lot more than $2 for coffee and $8 for pancakes.
If wages had risen appropriately then people wouldn't have trouble paying the kinds of prices necessary to keep small places like the ones you're talking about running.
Do you think there are easy answers to all these questions? The point is there are various intractable problems, the outcome of which is less mom and pop shops.
you need 3 or 4 people to run a _little_ coffee shack? I'd say 2 are sufficient with proper organization and expectation management.
and why 17 to 20 year olds? that's so oddly specific. I don't like being served by teenagers.
also you write that's what _you_ want to _do_ with your retirement? what are you doing there? the dishes? the book keeping? sit around sipping coffee feeling very important?
and as I posted a pic of their menu board elsewhere in the thread, they really are/were charging under 3 dollars for drip coffee. I'll admit, the ambience was really the selling point, the coffee was just okay.
Scale, and low profit coffee is sold alongside higher profit items. Similar to a gas station, where the gasoline losses are offset by the store purchases.
> Fine, let's put all those evil family-run donut shops out of business.
They are not entitled to be in business and if the alternative is keeping society in a condition where people are forced to work for non-livable wages then fuck them.
Now if we had a UBI, non-livable wages become reasonable.
Summarized as "making a hobby your job might make you no longer enjoy your hobby".
Hobbyists photographers quickly discover this when they do a paid shoot for a wedding for example.
It turns out that running a business involves a lot more of "running a business" than the creative hobby part you thought it would involve. Doing Sales, marketing, accounting.. dealing with suppliers, employees, landlord.. etc. All the things that have nothing to do with the hobby you thought you enjoyed & were good at.
Not really! My uncle is a wedding photographer, it is a side gig he does on weekends. He has no sales, marketing..all based on recommendations. Accounting is dead simple. It is actually pretty good compared to his other gigs (taxi driver, plumber).
I think key is to have realistic expectations. Trying to scale it up into "real" business, or insert some artistic stuff would be mistake.
As a pretty decent hobbyist photographer this runs through my head every time someone suggests I do it for a living. The only happy wedding photographer I know is by his nature more business oriented and I don't have that edge.
Even back in the day when photography was far less democratized, being a pro photographer almost certainly did not mean being a staff photographer for Life Magazine or even working for AP. It meant working for some school's news office and shooting pictures of alumni receiving awards or various small town newspaper stuff.
Yes. And with weddings, it's not just making 'sales'. It's managing complicated families and personalities on the day. E.g. getting them all together for a group shot, and a lot of group shots.
I think the hardest part for a creative amateur going pro would be bringing client after client through the same poses and scenes, albeit in various shooting locations. You innovate here and there but generally you'll need a lot of repetition. It's more like being a pianist than a composer.
Also see the E-myth, which is the idea that being good at something means you should make a business out of it. People who are good at business should start them, and you should be creating a business instead of buying a job.
I think it could help startup founders avoid burnout if they realized that they're not much different from the person who tries to open a restaurant because they like to cook.
I wish that book had a better title. I skipped it for a long time because I had no idea what it was trying to convey.
part of the book is an exhortation for introspection, to ask yourself what you really want out of a business (lifestyle, cash flow, money, etc.), and to realize that starting a business involves working ON your business, not IN it. There's a chapter too on the different personality types (entrepreneur, manager, technician) and how they relate to starting a business. All these together informs the reader on if they should start a business or not. It's a great book and really helped me--as a technician/tinkerer type--understand what sacrifices I'd have to make to start a business.
Software engineering, at least for the lucky ones (a not-small percentage), is the inverse coffee shop fallacy: people imagine it to be boring and it's not.
(Note: the following is relative to other jobs, not relative to some ideal.)
First of all, coding is pretty fun. If you end up bored, it's probably because you are being too repetitive and in many places you can find new challenges. Technical debt is not great, but mostly because it disrupts you from the fun.
Second, software engineers are in demand. More perks, like opportunities for travel, relocation (an underrated opportunity), etc.
Third, it's inherently a cooperative thing. This is hugely underrated. You and your colleagues and boss all pretty much want the thing to work and are excited when it does. Lots of jobs are very competitive where people are always working against each other in political games, which is not a recipe for happiness.
I absolutely love coffee. I love drinking it, trying all the different preps, roasting my own beans, all of it. I started and ran a coffee shop in college. 2 friends and I basically convinced our business school to foot the bill and pass it off as a learning experience for us and have various classes do final projects helping (marketing plans, web site, etc). Even removing the need to turn a profit, it was a slog. Getting to the shop at 530a multiple times a week to get it opened, dealing with employees, dealing with shitty customers, dealing with suppliers, even simple things like managing cash. It was a great learning experience about business and I often want to open a shop again to get away from software development, but it's really not glamourous.
Yeah, with a business that size people say that you own the business, but it's as least as true that the business owns you. My mom got sick of real estate sales. A deal to sell an adult foster care home fell through at the last minute, so she ended up buying it. For the next few years, that was her life. She never really got a day off, because the margins were too thin to afford a manager.
I often try to explain this concept to people that want to work in IT engineering jobs. They see qualities like: high salary, work from home, no physical labor, no college degree. I explain to people that read less than one book a year that you have to read a lot, every day. Or that you're going to have to change your lifestyle to balance out the negative health effects of sitting for 9+ hours. Then they ignore me and get Security+ and complain no one wants to hire them. I should just send this article in the future.
This article has almost nothing to do with what you're talking about; the people you're talking to want to get into IT specifically for the attributes of the job itself, not because they enjoy consuming IT products. They're much closer to the mark than the aspiring coffee shop owners are.
A common thread of conversations I've had with craft brewers is that you spend a significant part of your day cleaning.
This line from the article struck a chord:
> The founder of a cafe becomes a mopper and accountant.
To me, the takeaway is that there's a lot of upkeep that's needed to keep things running smoothly, and especially in smaller operations, you'll end up doing a lot of things that you wouldn't expect to be part of your job description.
Exactly right. If you own the business, all of the jobs in it are yours. You can hire people to help you do them, but they're yours in the end.
The other thing people often fail to take into account (particularly in software) is that outside of VC-backed startups, the smart owner will spend a significant period of time making little to nothing from their business.
In my last successful startup, I made minimum wage computed on a 40 hour workweek (although I worked twice that much) for about 4 years. I was the lowest-paid person on the payroll by a significant margin.
You make up for it in the long term if the business succeeds, but you have to be willing and able to weather a period of little to no income in the meantime.
As a brewery owner, yes there are some people who like to drink beer and started a brewery but those are very few. More common is homebrewers who like making beer and decided to go pro.
Still the same thing. Doing some brewing for yourself and friends in your spare time is quite different from having to brew all the time and having to produce something good in order to have anything to sell. Not to mention marketing expenses, taxes and the general overhead of running a food-related business.
Scaling particularly is hard for tech employed home brewer turned pro. It's one thing when you can babysit five gallons at a time, but making quantity takes a commitment to process improvements that few appreciate before they get into it. Not to mention when one beer gets popular, then consistently reproducing it over time.
Or you just sell your IPAs that have such a high IBU that only other brewers can taste all the cultures you didn't mean to be growing in there.
Have you written about your journey from homebrewer to pro somewhere?
Would love to read about it! Especially about the initial sizing of the equipment ..
Nah, it isn’t anything all that impressive. I actually just sold a majority of my ownership to pursue other interests. Retained a small stake just in case it goes regional.
I worked full time as a software engineer(remote since 2016) while opening and running the production side of my brewery for about 3 years before I could afford to hire help. Hired a brewer, got him up to speed then Covid hit. We kept him on full time during Covid and I didn’t spend much time there.
Once covid calmed down I still didn’t do much reengaging on production and just managed brew schedule and ordering shit.
Went from pulling 70-80 work weeks prior to Covid to a standard 40-45 hours.
Covid basically made my wife and I realize that our kids learned more with us driving their education for 2-3 hours a day than they were getting in 8 hours at school.
Sold most of my ownership as we plan to move onto a sailboat and travel the world with our kids until they go to college. My wife and I both have remote jobs and plan to continue working.
I've never thought that I want to own a coffee shop, but I've sometimes thought about being a barista (i.e. "Barista FIRE"). I make my wife a latte every morning, and it can be fun and satisfying. I imagine being focused on perfecting a simple craft, and then being able to turn it off at the end of a shift. My work, in comparison, feels like I'm trying to solve impossible problems, and it never ends.
However, I suspect that the reality of being a barista is dealing with lots of demanding and angry customers, frustrating corporate management practices, and more cleaning than making coffee.
I self-publish fiction in my spare time and this article reminded me of that. In my dreams, I would be typing away at my computer in some cozy coffee shop or something, crafting my next awesome book.
That _does_ happen, but I'm also spending a ton of that time communicating with cover designers, booking editors, fighting with figuring out marketing, writing blurbs, hosting a website, running a newsletter, writing bonus scenes for newsletter magnets.
If I didn't care about the business side of it I'd just be sitting there writing with not a care in the world, putting it out there with no proper planning and crappy covers. But while I don't _enjoy_ doing a bunch of that other stuff, the success of the thing and seeing royalties come in is part of the fun, so I'm compelled to do it.
In the end the other parts may not be _fun_ for me, but they sure are satisfying when a launch comes together (or, alternatively, sad if the book flops).
I wasn’t 100% naive going in, but I wish someone had sent me this article before we opened an arcade bar. The economics of retail small businesses that pay living wages is break even at best unless you’ve somehow hit the jackpot on rent/location. Markup on alcohol is 3-500% and we still barely covered expenses. Games made just enough money to cover their repairs. I’d probably do it again, but it’s definitely irrational.
There’s a danger for first-time founders buying into this 100% — having special knowledge in a subject gives us a big advantage, we can’t all just hire experts like Levchin and other successful repeat well-funded founders can. We have to be the experts (or team up with them). That expertise is probably coming from either a love of (or at least a familiarity with) a subject.
> You you can’t be in love with a particular idea or business. You have to be in love with the idea of running a business.
I'm saving this quote. I'm a career Army officer and the application to my world is that newly minted officers compete like mad to get into their preferred career fields / communities, because some like "Aviation" (e.g. flying helicopters) are hot and others like "Ordnance" (e.g. managing the lifecycle of ammunition and hardware) are not, but then find that 90% of their careers end up being the same HR and logistics middle-management with attendant meetings and paperwork and bureaucracy. The result is that the hot career fields actually tend to have the worst rates of retention, as officers become disillusioned when reality doesn't meet expectations, among a few other reasons. So prospective officers should really be in love with the idea of leading organizations of all various types.
Warrant officers, not NCOs. But yes, this is the crux of it. New lieutenants go to flight school alongside new warrant officers, and then their day-to-day responsibilities rapidly diverge. The lieutenant becomes an administrator who, at best, struggles to keep up with the warrant officers in the cockpit for a few years. At worst, the lieutenant ends up in jobs (as a captain and major) where they don't even have flight-hour minimums anymore.
This reminds me of every cute little store I've lived near that is frequently closed due to the owner(s) being on vacation.
I'm not sure how many others have experienced it, but when I see this, it's clear to me that the owner/operator is not truly interested in the business, at least not in some sense that this is a do-or-die investment for them that they feel the need to see through to the end. No, it's a hobby for them. So they never get past the coffeeshop fallacy, as they're just going to keep on with their normal lifestyle and eventually close up shop as they realize this business endeavor is more of an inconvenience than a necessity for them.
When I was an undergrad, in a major city, essentially nothing was open on a Sunday--including chain stores although there were fewer of those at the time. Which meant if I had sports on a Saturday as I often did, getting shopping done could be awkward. Over the next decade or so, the blue laws started to get relaxed.
Great points - I've worked in many areas where the end result is "cool" though the work is just a hard grind (like most work) but there's an extra penalty because the coolness attracts people who will put up with worse conditions in exchange for pursuing their passion, which really sucks when you discover how quickly your passion can dry up once the grind begins. On the other hand, if what you like is being around (at least formerly) passionate people, that's a huge perk. So start the coffeeshop, if you like the community it'll make you a part of. That's usually what makes people happy, in the end.
I'm working in a team doing ML and ML-ops, and every time we open a position we get a flood of applications.
Some have masters degree in ML but many are regular devs who want to move into the ML space.
I always try to convey that, ML or not, this is still a dev job. You still need to do all the boring, down to earth stuff, like hunting down bugs, fixing broken builds, or battling poor APIs. The supposedly "fun stuff" (modeling, etc.) is but a tiny part of the job.
I'll add the Coffeeshop Fallacy to my vocabulary to explain this point better.
Honesty I always thought ML would have the opposite problem. Numerics folks tired of the grind of being a scientist, looking to cash out and sell GEMVs and linear fits at a premium.
I have to believe this contributes to the growing number of mediocre coffee shops I've been to over the years. I love coffee and can see the allure of owning a shop, but I go to a shop because I stink at making a good cup myself.
Was dropping a grand on new Michelin AS4s and overheard the NTB managers talking in the office about paperwork - specifically TAXES. These guys know cars and wrenches and tires and batteries and oil changes. They are not bookkeepers by trade, and that used to be a reasonable job. A facility that size with the revenue overall, and others like it, might benefit from a centralized resource where bookkeepers keep the books and shop employees stay in the shop.
All this middle working class stuff cut out by the Baby Boomers just to jack up prices on college degrees to be a Secretary ahem Office Assistant or whatever, and basically business processes suffer. Taxes are necessary and their own problem. Also, reformed drug dealers make really good bookkeepers.
I agree with the premise but not the prescription, which boils down to "Find any profitable business at all, even if you find the product you're selling intensely dull or harmful." This is stoicism applied to the worst kind of Roundheaded/Puritanical, market-worshipping capitalism. It winds up teaching you that the needs of people are irrelevant, and only the needs of the market matter.
I wasn't totally clear on the prescription. But yeah. Loving coffeeshops isn't really a great reason for starting one. On the other hand, if you despise coffeeshops and the people who frequent them, you almost certainly don't want to start one even if they were good business opportunities.
Well, the needs of people include food and shelter, so if they can't meet those (because they followed some "passion", which for many young people is a BS fashion "lifestyle" thing that they don't even fully care for and don't really want to pay their dues to get there, just want it because it looks "cool") capitalism wins even more...
Wifi encourages people to sit in your limited number of chairs for hours a day, all for the same few pennies of profit as a customer who walks out immediately or drives away from your drive through immediately and leaves all the resources available for the next customer at the register. Even wifi users who are regular customers and great tippers make for terrible business, simply because of the resources they occupy.
If your customers use Windows, you can generally get a decent fraction of them to cycle out by just hiding the power outlets, but Mac battery lives tend to be long enough that that trick doesn't work with Apple using customers.
I believe this is why we're seeing the sunset on the little mom-n-pop businesses. There's no way these folks can pay living wages. Now if this were Reddit I'd be angrily shouted down and told, "then they deserve to be out of business!". Fine, let's put all those evil family-run donut shops out of business. But let's not complain that we only have even more evil McDonalds-style franchises that own everything.
All this to say, I wish there were some middle ground. The truth is, I'll probably have to figure out how to like Starbucks.