This term 'fair price' is really another way of saying 'what do we think the customer is prepared to pay'. However, lets be realistic... its got nothing to do with what we 'think' the customer is prepared to pay. Its got to do with making and maintaining a profit margin. We should be looking at this from a business perspective and working out what we need to charge the customer for the business to make a PROFIT after owners wages have been taken into account. For reference, my cafe is based on the North Shore of Sydney. We charge: $2.80 Esp/Rist/Mac $3.00 Small (8oz) $3.50 Regular (12oz) $4.00 Large (16oz) 50c extra for soy, extra shot, syrups Almost all costs associated with running cafe businesses have gone up significantly over the past 6 months. Council outdoor seating, rates, rent, electricity, interest rates, petrol, raw material costs, etc etc etc... the list goes on. Nearly every supplier I deal with has had at least one price increase (some have had 2) this yr. Coca Cola was the latest (sorry folks, I sold my soul to the devil and let them put a fridge in!!) But customers dont wont to pay more than $2 for a can of coke either! From a customers perspective, there definately seems to be a psychological barrier in Sydney on charging more that $3.00 for a small coffee, regardless of "how good" the coffee is. As an independant owner/operator, I struggle to maintain profitability in the current economic climate while attempting to resist the need to increase prices from a $3.00 'entry point' on the key product that I sell. Instead, I am attempting to "squeeze" my suppliers. I asked one supplyer to scrap their "delivery fuel levy" if I got us down to just one delivery a week thereby saving them petrol - they agreed!. I scrapped my Detpak cups in favour of double wall cups imported from China which cost literally half the price, and surprisingly are just as good! I have also tried to 'hide' some minor price increases on food items which are less price sensitive or noticable than increasing the price of the coffee. None of this 'gets me ahead of the game' it just keeps me at the same financial point as last yr... Till the next supplier driven price increase, which will have to result in a coffee price increase as I have now almost exhausted all other cost cutting options I can think of. I dont blame my suppliers for this... they are being forced by external factors as well. I know I am constantly resisting the urge to break that $3.00 entry point, even though my MYOB reports are telling me I need to do something about it soon or risk my business moving from profitability back to a break even situation.
