Ancillary Revenue

You own a soup restaurant. As such, you earn most of your money selling soup. However, watching your customers one day, you figure out a way to earn a little extra. The next day, you institute a spoon-rental fee.

The spoon-rental fee falls under the category of “ancillary revenue,” which covers any source of revenue outside the main revenue stream. In the soup example, it may end up driving customers to make their own bisque at home. (But then again, if the charge is low enough (a nickel a spoon, for example) you might get away with it).

The practice is relatively common. A good real-life example comes from airlines. These companies make most of their money by flying people around, but earn ancillary revenue with luggage charges and by selling Bloody Mary mix and tiny bottles of vodka. Or think about banks, with their late fees and overdraft charges.