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Comment by brookst | Hacker News Reader

Yes, that’s the problem.

But McDonalds sells coffee for $1, and many of those customers who are deeply invested in living wages and local businesses are also not fools who can be charged 4x for the same thing they can get faster at McD’s.

So yeah, pricing is the problem, but IMO mostly on the “willingness to pay” side. These businesses are squeezed between the real costs of inefficient small biz (where are you going to store 50 pallets of coffee needed to get great pricing, and it’ll go bad anyway) and consumers’ unwillingness to pay for the things they say they want.

Same thing as airlines, really. Everyone hates cramped seats and coin-op toilets, but enough people will always buy the cheapest ticket that it’s not economically viable to provide a good quality product at a price that will sell.

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I see what you mean, but as a consumer I'd much rather pay extra for a good coffee than $1 for a crappy one and I'm fairly sure this is not an uncommon sentiment. If I opened up a coffee shop, it wouldn't be to attract the kind of crowd who get their coffee exclusively at McDonald's, so McDonald's pricing wouldn't be that relevant, right?

Tangentially, I'm also curious how McDonald's in the US can charge $1 if they also have to pay a living wage. Does their size mean they get cheaper materials from suppliers and can drive costs down or that they make up that loss by selling some of their other products? I've never gotten coffee from McDonald's in my country, but I'm _pretty_ sure it's not that cheap.

Even _more_ tangentially, I noticed a popular local chain driving their prices higher and higher to ridiculous amounts. It's not even great coffee--it's like Starbucks in my country (Starbucks apparently didn't get a good footing here because this other chain is just so established). Their usually mediocre coffee costs more than one at a boutique high-end roastery! I suspect it's because they're pushing people to instead sign up for their monthly subscription, that lets you get a coffee every 2 hours. I've begrudgingly signed up, because I like using their cafes as a work space and this way I do not feel guilty about sitting around there all day. When I want legit good coffee, I still go to a good place and get one. As annoyed as I was to see how much they charge for a mediocre cappuccino, I've got to hand it to them on the interesting monetization shift.

>how McDonald's in the US can charge $1 if they also have to pay a living wage.

They probably sell coffee at loss to upsell them on burgers

You can't lose money making and selling coffee. Coffe literally costs $0.05-$0.2 to make.

1$ is probably at cost. And everything else have extremely good margins. Probably outside the cheapest items on menu. And those are there to build brand loyalty.

No way. My home coffee is 14 oz. for $5 and lasts like 25 cups. That's $0.20 a cup. At McDonald's scale, their filter cost is 0 and I'm sure their coffee bean price is half of that, at $0.10 a cup. They're also really automated. If you've ever seen how automatic their soft drinks get poured in the drive-thru, it's like a factory.

> IMO mostly on the “willingness to pay” side.

That's nearly always the most important factor, and it always has been. But you also have to recognize that there are different markets even for the same product.

McDonald's is selling their coffee and pancakes to a customer base that is looking for a specific benefit: something hot, fast, low-investment and inexpensive that will fill their bellies on their way to do something else.

A business such as what nobleach is talking about isn't trying to serve people with those needs. It's satisfying a completely different set of needs: relaxation, a pleasant atmosphere, a place to pause for a while. Luxury. They'll want higher quality food and drink, an "experience", and such.

It doesn't matter that it costs more than McDonald's because both of those sorts of businesses are selling different things. Comparing them is apples-and-oranges. Isn't really about the coffee and pancakes.

McDonalds coffee costs $1, seaside specialty coffee costs $5 - the difference is negligible if you are not buying it twice a day

People usually ok with having to suffer in cramped seats given that slightly less cramped seat price difference is often more than they earn in a day

Airlines do often have some gradations of seats and service within economy but, yeah, I don't think BA is even running its LCY to JFK business class-only service these days. (And if business class on a mixed class plane is going to be a luxury good, you might as well charge a big premium on it (as well as making it a perk for very frequent flyers).

> but enough people will always buy the cheapest ticket that it’s not economically viable to provide a good quality product at a price that will sell.

That kind of sounds like everyone involved would be better off if airlines were allowed to collude to raise the ticket price floor, but regulated to cap profits, forcing them to spend the gains on improvements.

That’s what we had before deregulation, when flying was very nice and extremely expensive. What we need is to realize people are super cheap and even many who can afford it will choose the cheaper option every time.

McDonald’s is our society’s revealed preference.

But then I’m having cheap coffee in a McDonald’s.

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