LogFAQs > #963847511

Rasmoh posted...

I wouldn't consider it bad. In almost every scenario, you are still likely just reducing the profits of a business rather than causing them to incur a loss.

The general rule of thumb in food service is to have ingredient costs and labour costs each make up about 30% of the sale price of an item. That's quite variable (the main reason fast food places push combos so hard is that burgers are like 50-60% food cost while fries and drinks are like 5-10%, so combining them to reduce the average is a big deal), but you generally won't see more than ~30-40% of the sale price of any food item left to cover overhead (including the utility costs to make it) and provide profits, and the overall profit margin for food service rarely exceeds 5%. $10 off a $30 order pretty much eats all of the individual items' margins; they're basically giving all of that away for publicity's sake, and that does constitute a loss.

Now, that becomes less true for larger orders, and in the grand scheme of things, the vast majority of people aren't going to abuse the offer and they will most likely recover their loss from the new business it brings in. That's why I say it doesn't matter for larger businesses (who can absorb the small-scale loss quite comfortably and still come out ahead) but does for small businesses (for whom the loss will be a greater percentage of their overall revenue even if it's only a couple of people abusing it).