Gentlefolk,

One of the factors contributing to the price of restaurant food is the cost of money. osuche touched on the subject when she mentioned how the size of her mortgage constrained her discretionary spending. So too can the cost of money place lower limits on the product price.

The greater the debt load, the larger the profit that must be made to pay the interest and principle on the loan. Few commercial loans (the type which are made for business property purchases) can be secured on terms as favorable as those of a mortgage, and the amounts can be quite substantial.

The cost of financing a start up loan will not be the only operating expense which must be factored into the selling price of the merchandise, but it must be accounted for. Depending on the amount of the lease, the cost of supplies and labor, etc. the cost of borrowed money can have a substantial impact on the profit margin.