Your grandfather was an active member in the community. He was involved in all kinds of community events from fairs and concerts to book clubs and school boards. One of his community events was a local coupon book fundraiser for schools, sports teams, and charities around the district that has been in practice for 30 years. Each participant could purchase coffee coupon books for $15 which they could sell for $20 netting a $5 profit per coupon book.
When customers return the coupons for coffee they are not given change. For example, if their bill was $2.75 and they used $3 coupons the cafe would keep the $.25 change. If the cafe gave customers change for fundraising coupons it would be easy to estimate that each coupon book cost the cafe $5 in lost revenue. However, since each order using fundraising coupons is for a different amount, it is impossible to tell how much money the cafe is losing on fundraising coupons. It is somewhere between $0 and $5 per coupon book.
You have determined that losses per coupon book must be below $3.50 or else the fundraising campaign is putting the business at risk of losing too much money. You want to continue to collaborate with local schools, sports teams, and charities to help raise money and maintain goodwill in the community. However, you are not sure if the fundraising coupon books are the right tool.
- What can you do to continue collaborating with the community without losing revenue or goodwill for the cafe?