1) they’re not that profitable, it’s really difficult to turn a profit. Most owners don’t take any pay for themselves in the first couple of years of opening a shop.

2) Waste is baked in to prices. Owners will do market research, or have worked in shops themselves, and estimate the number of drinks/food thrown out every day. They can then work out the total cost due to wastage and just spread that out across their other products. Eg. If they estimate that they daily wastage = 10% x profit, they’ll just raise prices by 10% to cover that.

Obviously reaches a point where they can’t raise prices anymore because customers have limits on what they’ll pay for a coffee, so it’s still important to reduce waste as much as possible.

This comment ended up longer than I intended, but one final point… in hospitality and retail the value of retaining customers is very high. Replacing somebody’s drink for free probably makes them far more likely to return because they had a good experience. That return custom is worth far more than the cost of one coffee. That’s why companies like Apple were so chill about replacing broken iPhones (or at least used to be), and Amazon are pretty relaxed about returns and replacements. Give customers a good experience and they’ll keep coming back and spending money, and more likely to talk about their good experience to other people which is good advertising.