[SanFranManDan]

But that is significantly different from the gas station example. The parent said that the gas stations primary income is selling food not gas.

Ikea primary income is selling furniture. It would be much more interesting if they actually made more money selling food than gas.

[AussieWog93]

I think his comment was about the food in IKEA being a loss leader, like petrol at the petrol station.

[ekianjo]

Certainly not sold at loss based on how much they charge.

[AussieWog93]

Not sure where you are, but in Australia the hot dogs cost $1 ea.

The staff working at the stand would be paid something on the order of $25/hr, plus paid breaks, annual leave, sick leave, long service leave and superannuation. There would have been at least a solid minute of marginal labour in the hot dog I ordered today - asking me for my order, accepting payment and putting the sausage/condiments in the bun. This doesn't even consider the amount of labour required to boil the sausages, cut the buns, clean the kitchen at the end of the day, manage the orders from head office etc. I'm also ignoring slack time, where the queue is empty and the staff are not serving any customers.

In terms of raw ingredient cost, the meat they use is a cut above your bog standard Frankfurt and I suspect would be something like $5/kg in bulk. Assuming each sausage contains 100g of meat, that's 50c per sausage plus another ~10c for the bun. Even assuming the condiment cost is negligible, there'd be another 10c of cost in the little cardboard tray they give you.

Already we're getting up around $1.20 per hot dog, and I'm ignoring rent, power bills (which would not be insinificant in a commercial kitchen) payment processing fees and probably more things I haven't even thought about.

Not a chance they turn a profit on these. Tune in next week where I give a detailed analysis of the economics of their 50c soft serve cones!

[ekianjo]

As far as I know you dont only buy a dog a call it a day. You are basing your argument on the commodity product appeal which unlocks more expensive products with no labor involved such as drinks and already prepared pastries.

Also rent is very cheap wherever ikea is located.

[Talanes]

Yeah, rent and labor alone make up most of the cost involved in restaurant food, the food cost itself is usually marginal. I'd imagine the rent for the space used up by the cafe is decently under what it would be to lease a comparable space on it's own.

[iamacyborg]

I can’t be sure as to the veracity of the statement but there are plenty of articles out there quoting that IKEA’s strategy is to have the cheapest food in a 30 minute radius around the store.