Thursday, May 31, 2012

Racing Can Learn A Lot From A Coffee Shop

I read the morning headlines today and came across this gem. A ubiquitous Tim Horton's coffee shop - a franchise moneymaker for everyone who owns one - lost $260,000 last year at a Newfoundland hospital. How does that happen? Because by paying people $28/hr to pour coffee, and charging $1.94 for one cup, the math doesn't add up.

We've done pretty much the exact same thing in racing. We are supplying coffee to people who may want to drink it, but we're charging 22% margins. Meanwhile, we can buy a coffee at a card table, or sports betting place down the road and pay 5% margins.

Who wins? It's pretty obvious.

In the Tim Horton's case the public sector union (the supplier) is catered to, no matter how silly it is to pay someone $28 an hour to pour a coffee. To make it work at a profitable level (on paper), they'd have to charge $8 a cup. No one will pay $8 a cup, of course, so with no customers (the demander) there is no business; i.e. there is actually no profitable level. They have no choice but to go bankrupt.

There is only one customer, and that's the end user.

Until racing wants more demanders, they must stop catering to only suppliers, to try and make that whole supply/demand thing work. But don't hold your breath.




2 comments:

Pacingguy said...

There's one problem with your analogy. Racing doesn't consider the end union their customers' they consider the owners the customer.

Maybe with racinos possibly ending in Ontario, things may change. Of course, the question is if it is too late.

Pull the Pocket said...

Actually it is a proper analogy, Alan. When the costs for supply are too high, and they ask for more and more and more instead of fixing their own backyard, the demand must go down as prices go up.

There are no cost controls in racing, and when there aren't, you are left with half the end business that you started with. That's about exactly what has happened.

PTP