Question

Millennials are renting offices sharing costs to reduce their overhead expenditures and overall efficiency. What are the disadvantages and advantages of economies of scales? Give examples of your local establishments that use shared locations to decrease costs, i.e., Taco Bell and KFC. Include a minimum of one reference.

Answer 1

In our locality, there is a burger king which shares its restaurant with other local bakeries like an open court restaurant.

Advantages are:-

• Reduction and splitting of fixed costs like rent, taxes, insurance etc.
• Lower fixed costs allow for more competitive pricing
• Enables higher profit margin attainment
• Splitting of other variable costs like electricity usage, water usage, etc.

Disadvantages are:-

• Lack of authority
• Need of consensus in major decisions related to expansion, repair etc.
• Problems related with seating and other arrangements