My kids were thinking of having a lemonade stand, and in the past I've said that if they're doing it as a fundraiser we'll cover the cost of ingredients, but if they're doing it for their own money then they need to reimburse us. But how much should that be?

The recipe they're using is approximately:

  • 2C lemon juice
  • 2C sugar
  • Water
  • Ice

Plus cups to serve it in. Makes about one gallon, or sixteen 8oz servings.

The water is basically free and the ice is below the rate that our icemaker replenishes: also effectively free. At our local grocery store 32oz of lemon juice is $3.50, sugar is $0.85/lb, and cups are ~$0.10/each. So each 8oz serving of juice is:

  • 1oz lemon juice: $0.11.
  • 1oz sugar: $0.05.
  • cup: $0.10
  • total: $0.26

If they sell until they run out of lemonade, call it a quarter a cup. They usually sell each cup for a dollar, so that's a gross margin of 75%. Not bad!

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Note that this also assumes free (or even negative-cost, if you think the life lessons are positive-value, which I do) labor and free rent for commercial space.  

But it's still a GREAT example of why you need to look at both absolute and relative measures when making decisions.  

free labor

I don't mind mixing up the lemonade with them; that's a fun project to do together. Or do you mean that this doesn't count their labor, and so I shouldn't say "gross margin"?

free rent for commercial space

They sell the lemonade outside, along the bike path, so no specific space. Preparation is in our kitchen, which would be an issue if other people wanted to use it at the same time, but ideal lemonade making time doesn't conflict with meal prepping time, so also not an issue.

I enjoy these reports/thoughts, and don't mean to say you should do anything differently.  I was merely riffing on the financial analysis, which left out the largest cost drivers for many low-cost food establishments (rent and labor).  

And by doing so, pointing out that the monetary aspect is close to irrelevant - the activity itself is the value.

Waffles from a waffle maker are also easy things for kids to sell.