Monday, 22 August 2016

Three breakfasts with an economics buff.

Economics is the study of life. Politics is what we say we are doing. Religion is what we believe we are doing but economics is what we are actually doing.

The best economics lecture in the world is a stroll around town with the eyes open.
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Some breakfasts are better (and cheaper) than others. Why?

This is Gregg's, who offer a breakfast roll with a coffee or an orange juice for £2.25 which is a great deal cheaper than McDonald's. How do they do this?

The first reason is that they use the Value Added Tax rules to their advantage. They force most of their customers to eat in Bow Churchyard. This means that the food is no longer a luxury item and therefore it no longer attracts VAT.
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This is Abokado who do not charge for coffee but ask for a donation to homeless charities instead. There is no obligation to buy food so how does this work?

Most customers will buy food even if not obligated to do so. The chain gets favorable publicity and the production cost of coffee is quite modest.

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This is Leon. My favorite of the three. They offer healthy fast food with good ingredients. I had a salmon, egg and rocket bun with a cappuccino for £3.95. Compare this with McDonald's who charge £3.59 for a McMuffin, coffee and hash brown. The McDonald's item is a little more filling and a few pennies cheaper but most of the time I leave McDonald's feeling worse than I went in.

The secret of Leon is speed of service. It is not just fast- it is instant. This results in a high turnover and economies of scale.

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