Economics Questions

Re: Food Services Industry 40% Growth in profits in 1 year

Sieben — Wed, 24 Mar 2010 20:46:40 GMT

Stranger:
If you make a profit of 10$ one year and 14$ the next year, you've had a 40% growth in profits.

But food-services is hardly a fledgling industry. The rapid growth in profit suggests an abrupt change in the market.

I talked to a friend who owns a couple of restaurants... food is a minimal cost compared to labor and overhead. Maybe labor got cheaper...? But I thought most got paid min wage already. Who knows. Maybe the animal spirits are *depressed* so they eat more fast food to try and stay happier.

Re: Food Services Industry 40% Growth in profits in 1 year

abskebabs — Wed, 24 Mar 2010 18:54:42 GMT

Snowflake:

http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/fastgrowers/profit1yr.html

Note that the growth in revenues was only like 9%, but the growth in profits was much higher, suggesting that there's been some recent event which allows restaurants to cut costs significantly.

Why? How? Starting your own restaurant is easy. Everyone would be doing it if profits were so high. Its free money.

Seems to make a little sense to me, especially if you look at the chart in detail. Top performer being Mcdonald's makes a lot of sense, with Starbucks making and Brinker making significant percentage drops in profits. Consumer staples tend to fair better in recessions, though of course what is considered a staple is subjective. For the conglomerate groups it would be interesting to find ot which of their chains are making more profit.

Also, perhaps there's been a drop in demand form other parts of the food sector, due to decreased consumption in other areas, e.g. less home cooking with expensive organic ingredients. Entrepreneurial appraisement is an interesting challenge!

I think it's important to avoid being overbearish. One can certainly be bearish for the economy as a whole, but there are always sectors that do better in recessions and less so in booms and vice versa, and these depend on fundamentals, consumer preferences and expectations. The prudent investor can always make money in recessions, and many even prefer to do so!

Re: Food Services Industry 40% Growth in profits in 1 year

Giant_Joe — Wed, 24 Mar 2010 18:49:18 GMT

Stranger:

If you make a profit of 10$ one year and 14$ the next year, you've had a 40% growth in profits.

That's right.

Likewise, if the entire food industry profited $1 last year, and $1.40 this year, their profits would be up 40%.

Now saying "40% of revenue is profit" is an entirely different thing.

The devil is in the details. This is just MSM trying to spin people's perception of the economy as recovering.

Re: Food Services Industry 40% Growth in profits in 1 year

Stranger — Wed, 24 Mar 2010 18:41:46 GMT

If you make a profit of 10$ one year and 14$ the next year, you've had a 40% growth in profits.

Food Services Industry 40% Growth in profits in 1 year

Sieben — Wed, 24 Mar 2010 18:34:57 GMT

http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/fastgrowers/profit1yr.html

Note that the growth in revenues was only like 9%, but the growth in profits was much higher, suggesting that there's been some recent event which allows restaurants to cut costs significantly.

Why? How? Starting your own restaurant is easy. Everyone would be doing it if profits were so high. Its free money.