Hot Air posted a story today about a pizza place in Boston that has gone bankrupt. That in itself is probably not all that unique, but there are some special circumstances here.
The article reports:
In the Roxbury neighborhood of Boston back in 2015, the people at the nonprofit organization Haley House came up with a novel idea. They would open a pizza shop based on the principles of economic justice and fair wages to support the community. Named Dudley Dough, the shop would pay wages far above the minimum which many people in that industry earn, with added incentives for training and community development. It was an inspiring idea.
Unfortunately for them, only two years later the place is closing down. It turns out that operating a for-profit business on the principles of a nonprofit social justice operation results in an undesirable side-effect. They were literally not producing a profit.
One of the most difficult parts of starting and running a business is balancing the cost of doing business with the cost of the product. There has to be enough of a gap between those two things to earn the money to keep you in business. The people who started this pizzeria started it with a noble goal in mind. Unfortunately, they did not start it with sound business practices.
The article concludes:
Labor costs are a major driver in the business model of any such operation. Once you’ve accounted for the standard expenses of kitchen equipment, ingredients, utilities and the cost of your site (which are fairly standardized), labor costs may turn out to be the margin of error which makes or breaks you in terms of profitability and controlling your prices. Everyone in the neighborhood may love your social justice oriented, woke attitude, but if your pizza costs three bucks a slice when everyone else is selling them for two, you’re not going to last long.
Dudley Dough may prove to be a cautionary tale for everyone engaged in the debate over minimum wage rates and so-called “economic justice.” What they experienced was the sort of justice which the real world administers to the overly idealistic in a capitalist system.
It’s called reality.