Why does profitability incerease with scale



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Hi Sir,

In this following question what is the meaning of scale?
In a retail business like Dominos, Big Bazaar or Lifestyle, profitability increases with scale because?

1 Answer(s)


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Scale means growing a business to be a HUGE business. It is the difference between having 1 Dominos outlet versus having 1,000 Dominos outlets. At scale when you have 1,000 outlets you are buying everything is bulk and initial investments on infrastructure are spread out over these 1,000 stores. Therefore since revenue increases at a faster rate than expense, profits increase. Is that clear?