Why is it that some Foodstalls/Cafe’s sell out of their product everyday, but never decide to get more stock for each day?

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This confuses and infuriates me, lots of Food vans/stalls where i live have special niche’s such as selling croissants etc, and these places make an absolute KILLING and run out of stock so very early in the day, yet they never seem to decide to just have more ready for the day?

It doesnt make sense to me, it would increase profit, only difficulty i see is that its a risk that they dont need to take.

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As you said, they sell out and make a killing, so as a vendor it makes sense to make an limited amount to what they are comfortable in committing to each day than having to worry about left overs. demand is there. And with limited supply people will likely be more proactive in getting it early. They make a profit they are comfortable with and get to call an early day. Makes sense for a small business owner.

“Just have more ready for the day”

Making a croissant/food is not easy and takes more than 5 minutes.

So, unless tomorrow’s forecast is cloudy with a chance of meatballs, places that sell food will run out from time to time.

As much as you hate not getting what you want, I hate to throw good food away. The places you mentioned sound like zero shelf life products. Those aren’t supermarkets, not goods that keep “fresh” for days. Get up earlier, pre order? I ran my own from scratch food business and understand your need but still hate throwing food away.

The risk with food trucks would be if you order 100 extra burgers, and it rains for the next 3 days, you’ve wasted 100 burgers and not made the extra money.

Trying to estimate the amount of consumers you will have turn up is super difficult, even with all the data you can analyse.

Many people just stick to stock levels that they know and trust 😁

Not sure if this applies to everyone, but I overheard the owner of a new BBQ spot in my town yesterday. He was talking to a friend and mentioned that he physically can’t produce enough food to sell so sometimes he has to close early. Scaling up production also increases overhead. To a new/small business minimizing overhead also keeps risk of failure at a lower level.

3 KEY POINTS-
1. shorting inventory to run out reduce waste due to loss.
2. customers that know a product will be scarce will tend to buy earlier and pay more.
3. It’s sets an end to the business day that is more rewarding than a never ending grind.

A variety of reasons. Here are a few.

One: food trucks and small shops have very limited space. Things like croissants have to be prepared waaaay in advance and have an appropriate place to rest for hours before they are baked. The owner may be prepping as much as they possibly can in the space they have.

Two: If their profit margin per croissant is pretty small, it makes more sense to always sell out than have their profit destroyed by a dozen unsold croissants.

Three: scarcity increases demand. If people have to be one ofn the first few hundred customers in order to get one, then it makes it seem more valuable and desirable.

Four: if they were up late prepping croissants and up early baking them, the owner probably very much wants the afternoon off. Sticking around to make money in the afternoon doesn’t seem worth it if you work late into the night and start super early. People need time to themselves.

Look at the kitchen space they have on hand. There’s not a 500 square foot wall in freezer behind them. Either they have to have back stock in their car or there’s an on-site cooler situation they’d need to stock more. Also there’s a manpower situation that doesn’t work great in most small kitchen scenarios.

It may not be worth having to pay more workers and buy more ingredients to then end up with waste at the end of the day. Especially if a stall or small spot, they may have limited access to a prep kitchen or have a order/delivery system that doesn’t accommodate multiple orders/refills of product throughout the day.

Like others have explained, there are many practical reasons why this may be a good business decision. I want to focus on your assumption that ” it would increase profit” to increase their production. It’s not that simple, unfortunately…

This is what econometrists call the “Newsboy problem” (https://en.wikipedia.org/wiki/Newsvendor_model): the vendor needs to estimate how many items they will sell tomorrow, and they can’t adjust that number easily throughout the day. Because demand is a stochastic function (it is not the same everyday; there are some regularities and expectations, but the actual demand per day is quite random) it’s not possible to perfectly match production to demand. Selling fewer items than possible leads to missed profits, but having excess items that must be thrown away comes at a huge cost.

Let’s do some maths as an example. Suppose a vendor sells croissants for $1.00 and it costs $0.70 to make one (labour, ingredients, electricity, storage, transport). If they sell 100 units, they make a profit of $30, which is nice. If they sell out everyday, they may try to increase production to 120 units, making them $36 profit, which is even nicer. However, if they make 120 units (costing $84) and they only sell 110 units (gaining $110), their new profit is $26. More work for less profit, that’s not so great. The vendor actually has to almost sell out whatever they produce to make more profit, and wasting an item is much more costly than missing out on an additional sale.

So, in summary: they only make more profit by making more product if they can reliaby sell (almost) all of that extra product, and the additional profit is small compared to the loss they would suffer from unsold product, so scaling up is likely not very attractive. Only if production can be increased with little effort, demand is quite constant and predictable, and the profit-to-cost ratio is quite high, does it make sense to scale up production.

Hope it now makes more sense to you!