Overcharging – Lemonade Stand
My brother and I opened a lemonade stand and charge $1 a cup. This is actually about three times what each cup actually costs us to make. Is that allowed?
The Aish Rabbi Replies
Good luck on your business!
Now regarding the price, there is one main rule to keep in mind. The Mishna (Baba Metziah 4:3) teaches us that we may not overcharge by 1/6th (~16.67%) or more. (Similarly, a buyer cannot offer a price to an unknowing seller which is 1/6th or more below the going rate.) However, the 1/6th is not counted from the base cost to the seller but from the typical retail price of the item. It is of course acceptable for a merchant to make a profit on his sales. The concern is rather in taking a greater profit than typical, taking advantage of unsuspecting purchasers.
Based on this, what would be problematic for you is not selling at 1/6th more than your own cost, but at 1/6th more than the going rate – what people typically charge for a product like this. When it comes to lemonade, there seems to be a wide range of prices charged, depending on if you’re using freshly-squeezed lemons or working from a mix, the size of the cup, the typical clientele, the weather, etc. But $1 for a cup seems completely reasonable in almost all situations.
(Sources: Mishna Baba Metziah 4:3-4, Shulchan Aruch C.M. 227:2,27.)