Weekend April 19 2014
CHipolte Mexican Grill CMG plans to raise prices. The CFO says the customers do not notice the difference between $7 and $7.75. But clearly that is a huge increase to CMG's bottom line.
It stuck me that SBUX is the same way. Coffee shops have been around for over one hundred years I would guess. But SBUX is the first mass upcale shop. I will take some photos of the drive in line later this morning.
Economics teaches the concept of price elasticity. As the CMG CFO puts it, our customers are not like MCD who are quite price sensitie. This is why the burger chains offered one dollar specials. SBUX really takes this to the next level by charging a dollar more for a larger portion. The marginal cost to SBUX is probably just a few pennies. And so SBUX continues to grow.
Having customers who do not notice price increases while costs are fixed is a real boon to the bottom line.
Professor Elam 
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