If anything you should be surprised such a thing is profitable, it's a textbook case of "the free market should have squeezed profits to zero".
Slightly pedantic comment here, but in economic theory, even in a perfectly competitive market, profits never drop to zero. Profits need to be high enough that owners of an enterprise don't decide to do something else with their time and money. These businesses may not make enough in profits to attract venture capital, but that doesn't mean they aren't more lucrative to the people running them than their other option…
Economics includes opportunity cost, so yes, in competitive markets profits will drop to 0.
The problem is that dividing owning the capital (of the machines) and performing the service doesn’t really make sense in this circumstance. This isn’t a situation where you’re creating efficiency by specializing. What does the servicing company need you for? If all you do is own the machines, they can do that themselves without complicating their business at all.
there's no capital risk for the servicing company.
I get that there’s some value-add on the owner’s part by taking on the capital risk, but in this case it seems like it’s mostly an illusion. After all, the servicing company’s business (assuming they don’t own any of their own machines) is entirely dependent on having access to other people’s machines. Your risk might as well be theirs, plus they don’t have assets to leverage.
I think the difference here vs something like say owning a building and hiring a property management company is the negligible value of the machine compared to operating costs. The capital portion is such a small piece of the puzzle that just owning the capital and contracting out everything else isn’t going to be competitive. I think this is borne out by TFA, which doesn’t describe any owners working the way that parent suggests.
Because the barber wants to go home after a long day of cutting hair not go restock the machine. Better to get a small profit on an unused corner than deal with inventory management.
Except someone else sees the machine taking in cash, and says to the the barber “I’ll give you a 20% cut to swap out to my machine”. When the economics wake up, it’s a race to zero.
Given that the barber has limited resources and time, perhaps he might think twice about constantly changing his partners for a couple of hundred dollars more per change,no? Remember, there are switching costs for these sort of things.
Personally ,I tend to weigh the (hard) benefits of cash and the (soft) costs of switching things before making a decision.
I’m not sure what you refer to as early dawn, but here in the Midwest all Dunkin’ Donuts and many Starbucks are open at 5am. Side note: it blows my mind each time I’m in California and I have to drive forty five minutes or more to find a Dunkin’.
Dunkin’ Donuts donuts are an abomination, unedible, atrocious. It’s no surprise to me you don’t see them as much, I’ve been waiting for that particular chain to die for quite some time.
It’s for coffee, not donuts. They even rebranded to drop the latter from their name.
It's not really $200k in income. That number ignores the initial investment (and thus its associated cost of capital) as well as the economic depreciation of the machines (since you have to replace them after, say, 25 years). As I calculated in a different comment, the actual economic profit is negative.
If you're considering depreciation then you don't need to account for the initial imvestment, just the financing costs thereof. You're adding an asset and depreciating it, rather than considering it as 'money spent'.
The initial investment (and its associated cost of capital) is quite separate from economic (as opposed to accounting) depreciation: if you could get a valuable asset for free (doesn't matter how) whose market value falls every year thereafter, you have no initial investment and thus no cost of capital. However, you have economic depreciation. On the other hand, if you buy a valuable asset that maintains its value forever, you have a cost of capital, but no economic depreciation. In real life, you have both for most assets.
As an aside: the financing cost of the initial investment is irrelevant. What matters is the opportunity cost: what profit (or return) could you have made by investing the money in a different asset of the same risk instead (which is the cost of capital)?
They do require a "tobacco passport" to operate, which aims to make it harder for kids to buy them: https://en.wikipedia.org/wiki/Taspo Then again, this is the same country where it's sufficient to self-certify by tapping a button that you're over 18 when buying hard liquor at the 7-11.
Is underage drinking a problem in Japan? Genuinely curious, I know salarymen feel obligated to drink with their bosses but have never heard about unruly drunk Japanese teenagers
Drinking is allowed over 20 years old but some university students tend to drink on eighteen on party. It's illegal but not thought as serious problem.
For high school student or below, smoking is problem (So vending machine must have authenticate feature like card(Taspo) or face age recognition) but drinking is looks like not popular but still considered as problem.
This is a bit myopic - $200k for two people for what's basically a no-skill gig is a pretty decent income in most of the country. At that scale it's not a side gig anymore, it's your primary income, and I can imagine the hours are probably comparable to a normal job. And really, I can think of way less appealing jobs that pay worse with less flexibility.
It's not really $200k in income. That number ignores the initial investment (and thus its associated cost of capital) as well as the economic depreciation of the machines (since you have to replace them after, say, 25 years). As I calculated in a different comment, the actual economic profit is negative.
No, the initial investment is negligible. Article has the high end of brand-new machines at $8k.
It's not $200k in income because you have to stock the machine.
I’m not sure what you refer to as early dawn, but here in the Midwest all Dunkin’ Donuts and many Starbucks are open at 5am. Side note: it blows my mind each time I’m in California and I have to drive forty five minutes or more to find a Dunkin’.
> ...it blows my mind each time I’m in California and I have to drive forty five minutes or more to find a Dunkin’. It blows my mind that anybody would drive 45 minutes to find a Dunkin' in CA when local donut shops are everywhere and they are so much better (granted, Dunkin' is a pretty low bar).
Not for donuts. Guaranteed minimum viable coffee. Starbucks and McDonalds are undrinkable (opposite ends of the spectrum).
I’m not sure what you refer to as early dawn, but here in the Midwest all Dunkin’ Donuts and many Starbucks are open at 5am. Side note: it blows my mind each time I’m in California and I have to drive forty five minutes or more to find a Dunkin’.
It blows my mind that someone would want to find a Dunkin’ in CA where there’s far better options, but to each their own!
Known viable option for coffee for someone from out of town, whereas a local brand is an unknown quantity and McDonalds and Starbucks are undrinkable.
This line doesn’t line up with the data also in the article. The gross margin on each product is about 40%, you then lose 15-25% on stocking the machines, plus have to pay for gas, a car, insurance, repairs, initial outlay of machines etc. You’re getting maybe 5% net margin.
Why do you have to be running around town stocking these machines yourself? Surely there are service companies who do this for you, just like US vending machines.