The Good Old Hot Dog Stand Story
Jeff Swystun — May 17, 2011
I was first exposed to this parable in university and have heard or seen interpretations at conferences, meetings and in articles over the years (apologies to the original author who I would gladly give credit if I knew who you were). It is a great icebreaker for presentations offering up cool lessons depending on what is emphasized.
So the tale goes that there was a man who had ran a roadside hot dog stand known from miles around. He had started with nothing but through hard work built an incredibly successful business. So successful that people would travel great distances for his hot dogs. The man was most proud that the hot dog stand could provide a university education for his son, an education he himself had never received. He was doubly proud that his son was studying economics and business.
One day his son graduated, came home, and after surveying the hot dog stand proclaimed, “Dad you need to improve your business to be more competitive and successful.” His father was perplexed. Business was great, in fact, both sales and profits had never been better. But it was his son and he had a college degree in business. He asked his son, “How?”
His son explained that his father could make more margin on his high volume sales if he sold a hot dog of lesser quality. Off his son went back to his new management job in the city and his father went back to selling hot dogs, albeit cheaper ones, producing a fatter bottom-line.
But soon the father noticed a slight drop in sales. He son visited a few weeks later and suggested that raising prices would offset, if not, improve the sales decline. So the father changed his prices and his son went back to the city. The father was pleased his son had learned so much in university.
A few more weeks went by and his customer traffic was dropping off. On his son’s next visit, the father asked him if he had any ideas. Immediately the son suggested reducing staff to save on salaries because they were obviously not as busy as before. This crushed the father having to say goodbye to people who had helped build his business. But it made sense and, of course, his son had the benefit of a fine education.
Sales continued to decline. And with less staff, the stand and its restrooms were not kept as clean and the food took longer to make it to the customers. On subsequent visits, the son suggested reducing operating hours and scaling back the range of condiments. Soon the father was running the stand by himself just as he had when he started out. Not long after that a competitor established themselves across the road. Shortly thereafter, the stand closed.
Most versions of the Hot Dog Stand Story are premised on a recession while the one I provide is more about general management and common sense. No matter what version you come across, the poor son and his university education is derided. Clearly a big lesson is still to respect formal education but recognize the benefits of real world experience and hard work. There are tons of lessons in the parable and it can be crafted in different ways.
I remember a professor who referenced this tale was consulting to a chain of service stations. He recommended they invest in and become known for the cleanest washrooms in the business. The argument being clean washrooms would bring in more customers who, in turn, would buy more than enough gas, drinks, snacks to offset the upkeep of the restrooms. In other words, they would clean up (pun intended).
The Hot Dog Story is simple, yet layered and reminds me of a quote from Henry Ford, “The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed.”