By John F. Di Leo -
On the way in to the office today, I made my first retail food purchase in Cook County since the new Democrat Tax kicked in. I stopped at a fast food place for a sausage biscuit for breakfast.
I usually order a drink with it, but not today; I was in Cook County. A simple drive-through order that’s normally about two bucks, or maybe three (depending on the size of the drink) was just a dollar plus tax.
Most Cook County residents are making the same kind of decision nowadays, as we switch to making our grocery purchases, fast food stops, and restaurant dining options take place on the other side of the border, in Lake, Kane, DuPage, or Will, or even in Indiana.
These changes will sometimes move a fifty or hundred dollar order across the line, but sometimes just a little two dollar order like mine this morning. Big or small, they all make a difference. If I had been thirsty, I would’ve waited, and stopped on the DuPage end of my commute. But I wasn’t especially thirsty, so I stopped in Cook County and just had the sandwich.
The Shrinking Order
People on the periphery – those of us close enough to the county line, or those of us whose commute crosses that line – have choices to make. We always have, but it didn’t make as big a difference before.
Back when the only difference was a couple points in sales tax on the whole order, we may not have paid much attention. We could’ve, and maybe we should’ve, but if one or the other store had a better sale, or was more convenient, that didn’t sound like a big enough difference to matter.
But that was before Toni Preckwinkle’s new Democrat Tax kicked in; the one-penny-per-ounce tax on most non-alcoholic beverages served or sold in Cook County.
Now we see a huge difference, much greater than the couple percent range in the standard sales tax.
Now, a one dollar 32-ounce drink carries an additional 32 cents of tax, on top of the ten cents already there. Now, a two-dollar bottle of cranberry juice drink carries an additional 67 cents of tax, again, on top of the twenty cent sales tax already assessed. Now, a six dollar 24-can case of pop carries another $2.88 in beverage taxes, on top of the sixty cents already assessed as sales tax.
And how about a one-dollar two-liter bottle of pop, either diet or regular? After you add the 67 cents for the beverage tax to the ten cents for the sales tax, we now have a 77% tax rate on that one dollar bottle of pop.
This brings the total tax burden on most non-alcoholic beverages in Cook County to somewhere between thirty and eighty percent. This is unprecedented.
So people are changing their orders.
Instead of getting a soda or juice box with a muffin, or pancakes, or cinnamon roll, or breakfast croissant… we bring our own drink from the fridge when we leave the house, and we just buy the food at the drive-through window.
Our fast food place sees an immediate drop in business, even when customers don’t abandon them.
What does it cost to stay in business? There’s a reason why customer service folks try to upsell you… asking if you’d like a drink, if you’d like a dessert, if you’d like fries with that. It’s because even when the margin is low, a larger order will help make it profitable.
If they make a dime on everything they sell, then selling two things doubles their profit versus selling only one thing.
If I usually buy a sausage biscuit and a soda; now I’ll just buy the sausage biscuit. That means that even if they don’t lose me as a customer entirely – which is still possible – even while they keep me, they will profit less from me…
All thanks to Toni Preckwinkle and the Democratic majority Cook County Board of Confiscators.
The Reality of Margins
We just estimated the possibility that the place might make a dime on everything they sell, but we know that’s not true. In fact, the profit margin varies from product to product, sometimes wildly.
Some products are very low margin, some incredibly high. Each sandwich takes a different amount of time to prepare, includes a different array of ingredients, requires different advertising, and is made available in different combos.
The relative costs to each of those inputs are all calculated into their product pricing.
And which item on the menu tends to have the highest profit margin?
If you guessed “the drink”… you’re right.
The most popular drinks are made in soda machines. Minimal labor, inexpensive ingredients. For most fast food places, that three foot long soda dispenser is the most profitable piece of real estate in the store. The cost is so relatively low, they are able to stay in business just by selling a lot of drinks.
If they can convince every customer to buy a drink, then even if their food is incredibly cheap, they can make money. Did you ever think about what it costs a Wendy’s, Burger King, or Taco Bell to sell a couple of their basic junior burgers or tacos? These are cheap sandwiches; they don’t stay in business on these things.
The drink is their gold mine. No matter what you order, a drink makes your order profitable.
A drink keeps them in business.
And Toni Preckwinkle and the Democrat majority of the Cook County Board just took those drinks away from them, by creating an outrageous new tax that has infuriated the public.
Even if these places don’t lose all their customers… even if their customers just adjust to the situation by reducing their purchases of the products hit by this tax… it will hurt the fast food places as hard as it would have hurt if customers abandoned them entirely… because what’s been taken off the table is the profit-engine that kept them in business all along.
If Toni Preckwinkle and the Chicago Democratic Party had just issued an order that all the fast food places in Cook County have to shut down tomorrow, leaving their tens of thousands of employees unemployed, they’d have been taken to the Supreme Court for it immediately.
So they just did the next best thing.
Toni Preckwinkle and her Democrats just chose to put tens of thousands of poor people out of work – to rob our youth and our part timers and our senior citizens of their jobs as cashiers or drive through order takers or fry cooks – by creating a new tax.
The Cook County Board can create massive unemployment with the stroke of a pen. It’s their specialty.
Don’t ever accuse the Democrats of being inefficient. They’re very efficient. The problem is their motives… and their economics… and their greed.
Copyright 2017 John F. Di Leo
John F. Di Leo is a Chicagoland-based trade compliance manager, writer, and actor. His columns are regularly found in Illinois Review.
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