How pennies can really add up

I like to occasionally get a coffee at the Canadian fast food chain Tim Hortons (akin to Dunkin Donuts in the US). Some people hate their coffee, but others, like me, are addicted. I like a large, with one cream. I used to buy the coffee for $1.40, and this is one thing you can count on at TH- you always know the price of what you are getting, it is reasonable, and you can usually buy it with pocket change. Forget a fancy no whip double skinny extra hot virgin latte for $5.00 this is coffee cheap and simple.

Sometime last year Tim Hortons decided to increase coffee prices, just a little, not so much as to scare anyone. But I immediately started noticing something strange: when I would buy 1 coffee, it would cost $1.50, but when Mr W and I each bought a coffee, it would cost $2.99. Clearly someone in management had the brainwave to increase prices by a certain percentage (somewhere around 5-7%), but I am not sure by how much, since the prices I am quoting you include taxes. The % increase resulted in the new price being $1.495, which they rounded to $1.50. This meant that on every sale they were making $.05 above what their till was ringing in.

They must have had some complaints, because now coffee is the ridiculous price of $1.49, resulting in a lot of pennies being given as change. I have noticed though that they have started asking if you want your penny change, if, for example, you give them $1.50. I feel pretty cheap but I always say yes!

Aside from the obvious that after 149 trips this one penny would equal the cost of one coffee (I don't go that often in a year, don't get me wrong), it is the principal of thing. They are potentially making quite a bit of money off of people who are willing to give up their pennies.

Yesterday I approximated how many large coffees a TH would sell on any given day, coming up with about 2000 (it is boring to explain how I figured this out, and I can't believe I did). If even half of those said no to their penny, then each store in Canada would be making 1000 x 0.01 x 365 days = $3,650 a year, not accounted for by their sales. I have no idea how many TH's there are in Canada, in our sleepy town there are 3. But if there were, say 1000, that is $3,650,000 across Canada!!! Perhaps they are being good citizens and giving the extra $ to charities, I have hope this is true.

Mr W pointed out that this is how embezzlers sometimes operate (I am not suggestion TH is embezzling, it is just the same concept). Someone shaves of half a penny here and there in sales, so little an amount that no one notices. This can quickly add up with high volume sales over a reasonably short period of time.

Point is I don't feel bad about accepting my penny as change. Maybe I should ask, and if they are donating to charity then I can, in good conscience, say keep the penny, at least once in awhile :)

1 Comment:

  1. nancy (aka money coach) said...
    oh man -- I think that may be an example of a CFO (see money relations' blog for a great definition) not fully checking in with the practical implications of a number-crunching decision. It's funny! And I wonder how many of us do similar things with our finances, on a micro-level?

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