Four types of businesses that make horrible profits from their main product
At first thought, the notion that a store or business named for a product would make money off that product seems universal. If I’m running a store called “Evan’s warm melons with pre-drilled holes,” you’d think for sure that I’d hit upon some insanely awesome product and that I’m taking a profit. However, for a variety of reasons, there are things that don’t make money, despite their entire industry being centered around them:
Gas is being rasied to such high prices that risky people are actually making it themselves. Don’t make gasoline, yourself, because you’ll inevitably store it wrong because you are crazy enough to make it yourself. You might say that’s a cyclical argument, to which we respond, “you’re crazy.” Because of this fervor, it is notable that almost all of that expensive gas money is not going to the people who own the pump.
At most, the people who own the gas stations make pennies of profit on the gallon. Most of their money comes from selling snacks and useless items like cheap sunglasses, t-shirts, and maps made out of paper.
Another interesting reason why gas station prices have to stay low is cutthroat competition. Gas stations have the unique characteristic of advertising their prices with huge outdoor signs. With multiple gas stations in the same area, the cheaper one will inevitably get the most business. So, there is a constant unwilling price war going on between gas stations near each other. This is why we’re going back to work on our nuclear car idea:
Movie theaters have the power to get hundreds of millions of obese Americans out of their seats at home, joining together to sit silently while eating junk food. The junk food is the key component, as it can represent most of the movie theater’s profits. They do make some money off of the ticket sales. Usually, a movie theater will giv anywhere from 75-100% of its profits to the movie studios for the first week or two a film is showing. So, they can make a small profit. However, in the case of some blockbusters, movie theaters are forced to give every dime over to theaters the first [week]. So they were showing the film at a loss.
This is why movie theaters have, over the decades, slowly found ways to increase their profits through ways other than the ticket prices. First, of course, it was by maximizing the size of snacks and candy so that no one could finish a whole one in one serving unless they were trying to complete a Paula Deen recipe. Previews are another way that movie theaters get money, and we have to say one of the least grating methods of garnering ad dollars in history. More annoying, however, are those bizarre ads which appear for half an hour before the previews. Sometimes they’ll have horribly outdated or just plain wrong trivia questions, to make you forget you’re being subjected to a shitty pandering experience and make you think you’re in a shitty entertainment experience.
3. Burger King
Certainly the word “King” would imply someone who derives royal riches from selling hamburgers. Of course, we’re being way too literal, but our point is that Burger King should at least be turning a buck on its flame-broiled chunks of grey something. However, Burger King prices its burgers so low that franchises sued them for forcing burgers to be sold at a loss.
Most of the profit comes from potatos and salt marked up 300% as french fries, and cups of soda which are marked up literally 10,000 %. Burger King, who runs a very stodgy and confusing business model, figures its franchises can sell the burgers at a loss with margins like that. However, they also market themselves towards young men, who at this point in the economic recovery can barely afford to order from the cheap menu.
4. First-run TV shows
For television producers, the main product is shows. The notion of having a hit, or even mildly successful show, is tied to the notion of copious riches and fame. However, for almost every network TV show on the air, the people funding it are losing money faster than it can burn.
Most of the money from commercials goes to cover the TV network that airs the show. If the TV network that airs the show also makes the show, well then the money gets to production. But if, as is the case in most instances, the company producing the show isn’t the same as the company that airs it, then the fees are only so much. With show costs usually ballooning into the millions, rarely are these fees enough for a producer to recoup the costs. It’s not until syndication, selling reruns to other stations to air, that producers cash in. But, this can sometimes reach figures in the billions of dollars, as was the case for Seinfeld.
So, next time a movie seems crappy, or your fast food burger order was messed up, or you hate tv… rest assured that those who make it aren’t making that much money and are at least as depressing and miserable as you are. Feel better?Speak Your MindTell us what you're thinking... and oh, if you want a pic to show with your comment, go get a gravatar!