A hot-dog: the cost of production

[ruthless29]

Hey,

I've always wondered how they sell Hot Dogs at Hot Dogs stands downtown for so cheap! Like 2 bucks... and at IKEA, hot dogs for 50 cents! What are the expenses, a bun, the hot dog itself, the toppings, the overhead costs (of running the shop, lights, cooling of drinks) and the labour cost.

How the hell do they make money. I understand that selling it on a mass scale (economies of scale i think it is...) helps, but even still... :confused:

I asked several hot dog vendors and some said its a secret and others re-directed me to City Hall... :)

[Badger]

For example:

IKEA: If you wanted to go there for a lunch, eventually, you will go in there and shop. They rather sell the hotdog and make no money from the food. That's marketing :razz:

Not sure about downtown, but I'm still sure they are making a little profit.

[hyperion]

Ikea probably makes very little, or might actually be losing money off those sales. However, it is a clever marketing strategy. The low food prices will bring people there, who will probably browse the store and maybe even buy something.

[TheBrain]

That 1$ cup of pop problably only costs 5¢ to make so they make a lot of their money there.

[Kerlo]

Ikea probably makes very little, or might actually be losing money off those sales. However, it is a clever marketing strategy. The low food prices will bring people there, who will probably browse the store and maybe even buy something.


Also clever placement since it's right in the middle of the store.

[Headhunter]

Ikea probably loses money on the hotdogs (supposedly Schneiders, as opposed to Genuine Rat at some places) and breaks even or loses a bit on the breakfast (especially on people like me, who get 3-5 coffees).

There's more and more people who go there just for the cheap food, and take off. Don't know how long the deals will last if this continues...

[Kommander_KornFlakes]

I'm acquainted with some hot dog vendors and they make over $700 clean a week-- after expenses.

[ZeroAquaduct]

Yep, some companies might be using this as a marketing strategy. Just look at printers (cheap printers, expensive ink) and game consoles (cheap consoles, expensive games). So they might not make money with the hot dog, but if you buy something from the store, they make $$$.

[guest913]

Ikea's main business is selling furnitures. =)

A company that makes billions in sales is definitely not going to lose money selling hot dogs for 0.50.

[UrbanPoet]

one time me and my friends were gonna watch a movie @ fairview mall.. .we were hungry, so we just went to Ikea and bought some $3 pasta dinners.
-pasta
-meat balls
-garlic bread

free water... you cant beat that!

[MrMoo]

i think the stores that the hot dog vendours set up infront of give them a commission becuase while buying a hot dog, the person is likey to stand in line and do a little window shopping.

[MrMoo]

one time me and my friends were gonna watch a movie @ fairview mall.. .we were hungry, so we just went to Ikea and bought some $3 pasta dinners.
-pasta
-meat balls
-garlic bread

free water... you cant beat that!

i bet it was cold by the time u got bak to the theater..

[B40]

There was a previous thread "How much do hot dog vendors make?" or something like that before,...search for it

[me!]

definitely the Ikea 2 dogs and a drink for 1.75 is a lost leader. so is their .99 pasta.

BTW: anybody can confirm if Ikeas pop in the 2 dogs and a pop is bottomless. I went back and refilled three times. :|

[Emancipated]

Ikea's main business is selling furnitures. =)

A company that makes billions in sales is definitely not going to lose money selling hot dogs for 0.50.


Certainly not on the grand scheme of things, but if you assume all the costs incurred in getting that hot dog from manufacturing to the register sale, it may be a marginal loss.

I would assume a smart and very profitable company like Ikea would not stand for a loss in any of the ventures; not even just break even.

Regarding street vendors, some years back I heard on a talk radio show that a busy location will easily get $100,000 a year in sale. And the dogs themselves cost as little as 7 cents per. You have to think of the discounts they get along the way for expired meats/buns as well. You think makers of Wonder bread is going to toss out stuff that gets sent back to them? If there are buyers, there are sellers. Bread pass their due date still look relatively fresh. I HIGHLY doubt that grease ball selling hotdogs is going to care if his customers are eating week old bread; or weiners for that matter.

[danfromwaterloo]

I'm pretty sure the parts of the cow that make the hot dog aren't very expensive (lips, ear lobes, *******s, etc). I'll bet the actual dog itself is probably about a nickel to make. The bun, maybe a dime or two. So they might make a quarter off it. The real expense is the server who has to do the preparation. That costs about a quarter a dog or so.

[me!]

I'm pretty sure the parts of the cow that make the hot dog aren't very expensive (lips, ear lobes, *******s, etc). I'll bet the actual dog itself is probably about a nickel to make. The bun, maybe a dime or two. So they might make a quarter off it. The real expense is the server who has to do the preparation. That costs about a quarter a dog or so.
:eek: eeeeeeeewww

[engo]

Ikea probably makes very little, or might actually be losing money off those sales. However, it is a clever marketing strategy. The low food prices will bring people there, who will probably browse the store and maybe even buy something.


Agreed. Ikea also make $ from selling drinks and other food items.

[PrimoTurbo]

It's because they pay very little for the hotdogs/buns/drinks.

[Blazin_Sunfire]

That 1$ cup of pop problably only costs 5¢ to make so they make a lot of their money there.


lol how do you figure?? silly quebecker.... 5c pop ;)

[str]

The cost isn't that high. 12 buns can be bought for a dollar. 12 sausages can be bought for 2 dollars. That's 3 dollars for 12 hot dogs. Add a dollar for whatever is being put in the hot-dog. That still means they can make $2 every 12 hot dogs. They don't just sell hot dogs though. They can make a lot on soda because the cost on soda is the concentrate (they don't buy the soda in liquid, they make it), water and carbonic gas. Together, it doesn't cost them much to produce a drink. Fries are also fairly cheap to produce. This probably covers their cost including equipment and employees, and get your familiar with the store if you want to buy anything else.

[i6s1]

I worked at a rather large brewery. It cost us roughly 3 cents per 355ml to make the beer and pipe it to the bottle-filling machine. That's labour, materials, maintenece on equipment, and everything else.

All the rest of the costs that bring it to $3-5 at a bar were packageing, taxes, transport, taxes, marketing, taxes, capital projects, profit, retail expenses, taxes and there were also some more taxes.

So cost of production is pretty small for pretty much anything.

[sumfunny]

Ikea = Loss leader, people show up, store losses 25c on the food makes $10 on that lamp you think will look good in your room.
Grocery stores do this too, lose money on their advertised items and make money on other stuff. Wal-Mart is the king of this what they do is they study purchase baskets and say during flu season they will advertise cold medicine super low but bump up the price of kleenex and chicken soup, and make their money on those two.

Ever wonder why milk is always at the back corner of the grocery store?