The coffee shop – an analogy

Day 1

WENT down to my favourite coffee shop for my morning coffee. I noticed prices had gone up by 20% overnight. I queried this with the owner as inflation was currently at 5%. He explained that he had implemented coffee shedding and as a result had lost revenue that he needed to make up.

Day 2

Went down to my favourite coffee shop for my morning coffee. I noticed that prices had gone up by another 20%. I queried this and the owner explained that he had 5 employees compared to 3 employees 10 years previously.

These 5 employees produced less coffee than the 3 previously did but they were all due their annual increase and performance bonuses that he would be unable to pay unless he put his prices up.

I asked him why he did not reduce the number of employees but he said he could not do that because they would all go on strike.

Day 3

Went down to my favourite coffee shop for my morning coffee. The owner told me that he could not serve me as he had implemented Stage 1 coffee shedding and taken one of his 5 machines offline. I saw coffee being delivered to the coffee shop across the road and asked why he was doing this if he was unable to service his own customers. He replied that he had to supply the coffee shop across the road in terms of a contract even though the other coffee shop had not paid in a long time because it did not have the money to do so.

Day 4

Went down to my favourite coffee shop for my morning coffee. The place was packed but the owner told me that I could not be served due to coffee shedding. He told me I could come back in 4 hours when my time on coffee shedding would be over. I asked about all the people in the shop and he told me that coffee shedding was not applicable to them at that time. He also confided in me that a number of people enjoying their coffee would not pay for it because they never did. I asked if it cost the same to supply the nonpaying customers as it cost to supply the paying customers. He told me that it did. I asked why he did not coffee shed the defaulting customers before the paying customers such as me. He told me that he could not do that because coffee shedding had to inconvenience every one equally. If he applied it to the nonpaying customers before the paying customers, the non-paying customers would organise mass action, prevent access to his coffee shop and, in all likelihood, start a riot with the attendant damage to property.

Day 5

Went down to my favourite coffee shop for my morning coffee. It was gone. There was just a hole in the ground. I had always thought the owner’s business plan seemed a bit flawed. It seems the shareholders in the business could no longer support it.