At first, you relate to the customer and are appalled that she has been charged £2 ($2.87) for hot water and a lemon wedge. Really? Water and a lemon wedge for $2.87? But look how well the manager explains the charge by breaking down the costs. The following is the restaurant manager’s retort.
“I’m sorry that you feel that you were ripped off, and I’ll try to explain why you weren’t.
“You entered the café and the waiter showed you to your seat, gave you a menu, waited for a time, and then he took your order. He entered it into the till, collected a cup, saucer, and spoon and took them into the kitchen. There, he selected a knife and a chopping board, got a lemon from the fridge, cut off a slice, and put it in the cup. He then washed and dried the knife and the chopping board, and put them and the lemon away. Then he returned to the dining room, poured the necessary hot water into the cup, and carried the cup, saucer, and spoon to your table. After you left the café, he restacked the cup, saucer, and spoon, wiped down your table, and replaced the menu, awaiting the next customer.
“That’s at least 2-3 minutes of work for the waiter.
“The cost of overhead for the business, i.e., rent, business rates, electricity costs, bank charges, etc., works out to £27.50 per business hour. I pay my people a decent living wage and, after taking into account holiday pay, national insurance, and unproductive time prior to opening and after closing, the waiter who served you costs me £12.50 per hour. Together, the cost is £40 per hour, which means that the cost of providing you with 2-3 minutes of service was between £1.34 and £2.00.
Then the government adds on VAT of 20% which takes the cost of that cup of fruit infusion to between £1.60 and £2.40 irrespective of whether you had a teabag costing one and a half pence or a slice of lemon costing five pence. I have to pay my suppliers, otherwise, the facilities won’t be available to other people who use them in the future. I accept that it makes the price of a cup of tea in a city center café look expensive compared to the one you make at home but, unfortunately, that’s the cruel reality of life. It’s actually the facilities that cost the money, far more so than the ingredients.
“Perhaps, the rudeness that you perceived in me was triggered by the disrespect that I perceived in you due to your presumption that you could use our facilities and be waited on for free.”
At first, when you read the customer’s review, you think … really? water and a lemon wedge for £2 ($2.87)? That seems extreme. It’s very similar to how society winces when they see that 30% of the funding for a nonprofit went to overhead and admin costs. But, after reading this response, we quickly realized that they were talking about true costs—the indirect costs that have to be identified as part of the TRUE COST of service to equal the total costs. Yet, it seems that more times than not, society expects nonprofits to perform irrespective of costs, and a lack of staff and other resources. Though it sometimes requires rolling up your sleeves to make short-term objectives, it is never a good long-term strategy to ignore costs if sustainability is the goal.
Recognizing true costs is crucial to maintaining mission-critical services. For the café, knowing what it costs to serve every customer is essential to maintaining their business. The same is true for nonprofits and government—big picture commitments require short-term discipline. Understanding costs, the true costs of a service, is the only way you can predict future success, meet expectations, and make a real impact.
30 CAPTURE. COSTTREE 2016 Q2 ISSUE