Comment by dalbasal | Hacker News Reader

Comment by dalbasal | Hacker News Reader

Kind of Meta: The meaning of "business model," in a software/startup context is somewhat quaint:

“All it really meant was how you planned to make money.”

"Model" seems grandiose for a word that could be simplified to "income source." Comparisons to restaurants tend to be strained. Restaurant "business models" are not generally that complicated: People pay restaurants for food. Some deliver. The reason software people contemplate business models and restaurateurs don't is that "software," regardless of licensing, doesn't come with a standard business model. Every one is a snowflake.

In software, "business model" is a wide range of possibilities. Most of them failing. Many quitely succeeding. A few explosively winning. Is AirBnB a software business model? Is Adwords? Even MSFT, which does literally exchange software for money... MSFT's "business model" is a complicated, impossible to replicate thing.

The majority of software that's literally exchanged for money is done with some sort of services/support bundled in... and the customer is a business. If I give it away then why do people buy it?" is not even a sensible question. What does that question mean for Google, Apple or Amazon? There are plenty of exceptions: Photoshop, MS office... but even these are becoming online services and the "business model" is less directly "software for cash."

TLDR, software doesn't have a standard business model regardless. Weighted by revenue share, the vast majority of software revenue comes from advertising, luxury electronics, web services or some other "business model" that isn't contradicted by OS in any way. "Selling software" in a sandwich-4-cash comparable way is surprisingly rare, regardless of license.

> Every [software business] is a snowflake.

As much as I appreciate this comment, it's less limited to software than you paint it to be. When you start digging into how businesses actually make money, you quickly realize it's rarely what it seems.

Many gas stations that are wildly successful, such as Sheetz and Wawa, don't make their money selling gas, they make it selling food using gas as a commodity to get the customer in the door. Likewise, McDonald's doesn't really make its money selling food either, although this is a lot more complicated and heavily involves real estate and franchising.

In other words, nothing is really as it seems when you peel back the veneer. Software just happens to be relatively new and is poorly understood by most people.

IKEA is another great example of a business that uses food to get people through the door.

I have never been to IKEA to get food and then bought furniture as an afterthought. It kept me in once I’m there but it did not get me in the first time. Granted I live 40 mins away from IKEA.

I don't think it's meant as a primary attraction, but given the choice of going to the furniture store with a hot dog at the end, or a furniture store with nothing, you'll choose the hot dog one every time.

But that is significantly different from the gas station example. The parent said that the gas stations primary income is selling food not gas.

Ikea primary income is selling furniture. It would be much more interesting if they actually made more money selling food than gas.

I think his comment was about the food in IKEA being a loss leader, like petrol at the petrol station.

Certainly not sold at loss based on how much they charge.

Not sure where you are, but in Australia the hot dogs cost $1 ea.

The staff working at the stand would be paid something on the order of $25/hr, plus paid breaks, annual leave, sick leave, long service leave and superannuation. There would have been at least a solid minute of marginal labour in the hot dog I ordered today - asking me for my order, accepting payment and putting the sausage/condiments in the bun. This doesn't even consider the amount of labour required to boil the sausages, cut the buns, clean the kitchen at the end of the day, manage the orders from head office etc. I'm also ignoring slack time, where the queue is empty and the staff are not serving any customers.

In terms of raw ingredient cost, the meat they use is a cut above your bog standard Frankfurt and I suspect would be something like $5/kg in bulk. Assuming each sausage contains 100g of meat, that's 50c per sausage plus another ~10c for the bun. Even assuming the condiment cost is negligible, there'd be another 10c of cost in the little cardboard tray they give you.

Already we're getting up around $1.20 per hot dog, and I'm ignoring rent, power bills (which would not be insinificant in a commercial kitchen) payment processing fees and probably more things I haven't even thought about.

Not a chance they turn a profit on these. Tune in next week where I give a detailed analysis of the economics of their 50c soft serve cones!

Yeah, rent and labor alone make up most of the cost involved in restaurant food, the food cost itself is usually marginal. I'd imagine the rent for the space used up by the cafe is decently under what it would be to lease a comparable space on it's own.

As far as I know you dont only buy a dog a call it a day. You are basing your argument on the commodity product appeal which unlocks more expensive products with no labor involved such as drinks and already prepared pastries.

Also rent is very cheap wherever ikea is located.

I can’t be sure as to the veracity of the statement but there are plenty of articles out there quoting that IKEA’s strategy is to have the cheapest food in a 30 minute radius around the store.

The whole IKEA experience is designed to get you to leisurely browse through their showroom, so that later when you're at home thinking about getting a new TV stand you're picturing the one you saw at IKEA.

The food is less to draw you into the store and more to keep you in there longer. Though I have also tagged along with friends on IKEA trips way more than any other retail shopping, and the meatballs are definitely part of that.

This article sheds some interesting light on the topic.

https://www.hartman-group.com/newsletters/1541318916/ikea-s-...

Probably only on places where you dont have restaurants. Never seen Ikea using food to bring people in the countries I have been to.

I don't know so much about Ikea, but that's definitely a known strategy for Costco, with it's $1.50 hot dogs in the food court, and also $5 chickens.

> McDonald's doesn't really make its money selling food either

I would like to learn more about McDonald's business model. How is this possible?

Admittedly I haven't actually read this article, but the title suggests it's accurate.

https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...

I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out.

It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.

I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.

But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.

Well yea, in the same way that McDonalds employees aren't all billionaires.

Hey you should watch The Founder basically explains how McDonald got started and how it went international

I have. It was very interesting, but I don't think it mentioned that McDonald's doesn't make most of its money from food.

I agree with you. I believe mcdonalds makes most its money from franchising and royalties earned by mcdonalds franchises rather than food.

McDonalds is cheap in US but some countries it’s considered a luxury

The article I originally read was years ago and was about Burger King, but I'd imagine the same idea holds. You'd buy up land that wasn't worth much yet, build a restaurant on it in the meantime, and 40 years later it's way more valuable. There's also a nice little synergy that building fast food causes more surrounding to retail to be built, increasing your land value faster.

Here's one I was able to find on McDonald's:

https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...

McDonalds started to make money selling burgers but then along the way they found a more profitable way to invest their money for long term profits.

>> nothing is really as it seems when you peel back the veneer

Technically true, but I think this misses my point. Big businesses are complicated. Clever business people often compliment burger cooking businesses with franchising, real estate investing or crypto to make better businesses.

I'm not saying that a profitable business model for a restaurant is trivial. It's not. What I'm saying is that restaurants have a default mode. Software generally doesn't. There are software business that operate mostly by selling software on (eg) the Apple App store. That is more exception than rule though.

You're right that software business models aren't novel. Sandwich-4-cash has never been the only business model, even if you do sell sandwiches. That said, "Restaurant" is still a bad model for understanding a software business.

A lot of the objections of OS specifically have very little relevance to most software "business models."

Look... Apple refused to sell OSX and it's hard to say that was a bad choice considering how things proceeded. IDK if Apple ever considered open sourcing it, but either way... "How do you sell iphones when iOS is free?" is a hyperbolic question. You can sell iphones whether or not iOS is OSS. That doesn't mean it's a good or bad business choice. It just means it's a possible, non absurd business choice.

This does not consider b2b at all, where selling software in a sandwich-4-cash comparable way happens on the orders of many, many billions of dollars per year.

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