Car Raffles - Good Business Model?

whitfords on 29/06/2023 - 13:05

My Facebook is feeding me ads for a bunch of different companies that run these car raffles that have the format of:
Buy 1 entry for $50
Buy 3 entries for $100
etc.

The prize is an expensive or souped up car.

Have seen some bad news recently about these types of companies (i.e. the car they won still has money owing on it), and it makes me wonder: what are the risks in having this kind of business model?

It seems to me that as long as you sell enough tickets to cover the cost of the vehicle, and any other marketing/operational costs, you can profit quite easily as in some cases I don't think there's even any enforcement on how many tickets can be sold.

As a very basic example, my head is telling me something like:
Buy a $100,000 car
Sell 5000 tickets @ $50 = $250,000
Spend $50,000 on marketing/legalities/etc
Profit?: $100,000

I think a lot of people are willing to spend $50 for a chance to win a $100000 car at 1 in 5000 odds.

There's a very real possibility that I'm missing something which makes this not as lucrative so please enlighten me.

Financial

Comments

  • localhost on 29/06/2023 - 13:13
    +3

    Draw award ticket with the same number of your wife's ticket +$100k.

  • Crow K on 29/06/2023 - 13:14
    +11

    There's a ton of gambling regulations that vary state by state that you have to comply with.

    Also, what happens if you don't sell 5,000 tickets? (answer: same thing that happens when your new cafe doesn't sell 50 cups of coffee a day, you make a loss)

    • JimmyF on 29/06/2023 - 15:18
      +4

      Also, what happens if you don't sell 5,000 tickets?

      A lot have clauses saying it isn't drawn or can be extended if not all tickets are sold.

      • Crow K on 29/06/2023 - 15:34

        Sure, but even a get-out-of-jail clause like that just makes the prize an older and older car, if anything, tickets become harder to sell.

        But you're right, there are precautions that can be put in place!

        • JimmyF on 29/06/2023 - 15:53

          Sure, but even a get-out-of-jail clause like that just makes the prize an older and older car, if anything, tickets become harder to sell.

          Generally that is why they do 'dream' cars that people won't really care about things like age, some even have words like or 'equal value'. So could worm out and just give you the cash and say buy your own!

          Anyhow, an example for a car if running one now would be by ordering a 2024 Ford Mustang…… Gives you heaps of time to sell all the tickets while you wait for the car to arrive ;)

          Even if you don't draw the car till Dec 2024 it is still a 2024 model being given away in 2024 ;)

          They are all basically scams at the end of the day to make money.

          So gives you 18 months to sell 5000 tickets.

  • SharedSugar on 29/06/2023 - 13:15
    +1

    A license to run a raffle might be the profit hurdle. It doesn’t sound like they are charities or sufficiently small to get a waiver. I think this is a State thing so it probably varies around the country

  • Mokr on 29/06/2023 - 13:16
    +2

    Open a charity get students to door kncok.

    Charge commission.

    Profit.

  • I Smell Pennies on 29/06/2023 - 13:20
    +1

    If life was that simple, I think everyone would be doing it… I don't smell pennies here.

  • Porker on 29/06/2023 - 13:38

    Depending on where you are, you'll need to overcome the gambling laws/regulations.

    I had a similar idea a few years ago but for lower priced items and looked into it quite extensively, but didn't proceed. Then LMCT+ and other similar came up and their model overcame what I was getting stuck on re raffle/gambling.

    Now quite a few of the apparent (or outward appearance of) raffle type models/businesses have come up, but its really memberships where their money is, as I understand, as opposed to raffle sales.

    • kiitos on 30/06/2023 - 09:14

      How did their model overcome what you were getting stuck on?

  • Nalar on 29/06/2023 - 14:16
    +5

    Is it an ad on facebook? Yes

    Is it probably a scam? Yes

  • GordonD on 29/06/2023 - 14:28
    +1

    If it benefits a registered charity its not hard to run one of these raffles.

    If it is a business that's a completely different thing.

  • Fysh on 29/06/2023 - 14:56
    +2

    So they have special membership or subscription offers with X extra entries. I kind of feel like they could give special subscription offers to themselves family or friends with xxxxX bonus entries so that there is less chance an actual person can win.

  • Brick Tamland on 29/06/2023 - 15:01
    +1

    I don't think there's even any enforcement on how many tickets can be sold.

    There's quite alot of rules but these businesses get around them as they sell 'tickets' for an entry to be a member of a club. The raffle is purportedly just a side thing despite it being the main thing. Basically it's a clever way of getting around existing rules.

    In my view the biggest hurdle would be having sufficient capital to buy an interesting vehicle and being able to spend a tonne of advertising dollars on FB to get clicks. You also need a pretty charismatic person to sell it all (like Adrian). The established raffles had the benefit of starting early and fairly small, now it would be hard work to catch up.

  • ihbh on 29/06/2023 - 15:14

    you can profit quite easily as in some cases I don't think there's even any enforcement on how many tickets can be sold.

    You're targeting bogans here. I don't know of anyone in my area who'd buy this.

    So you need to do market sizing research and make sure you can target your market and then crowd out the competition. Not as easy as it sounds.

    There's also the possibility of you buying the car after you've collected the required funds with said funds, but I don't know if you can or how long you can do this for.

    • Nalar on 29/06/2023 - 15:46

      ohhh like a Ponzi scheme!

  • JimmyF on 29/06/2023 - 15:19

    As a very basic example, my head is telling me something like:

    Pretty much, but you have the marketing and profit around the wrong way.

    Lots of places are 'paid' to sell the tickets, ie they get a 'fee' for collecting the money etc. Collect $100, pass on $80.

    the car they won still has money owing on it

    There was a QLD house one recently and if you googled the house address, you found out it wasn't a NEW house they had been raffling off, but one that was 5 years old!! They purchased it to raffle off.

    So this wouldn't shock me at all. Kinda makes sense. Buy it on loan, make repayments while you sell the tickets, then pay it out as you 'gift' it away.

  • Wiadro on 29/06/2023 - 15:44

    i know of no one who has won any raffle which they saw on facebook.
    i also know of no one who has won one of those qld houses on the canals

    • pharkurnell on 29/06/2023 - 15:49

      Never spoken to anyone who has heard of a winner either.
      Those buy raffle tickets to win a mansion + 400ton of gold, 3 cars, boat, etc

    • AustriaBargain on 29/06/2023 - 18:21

      The home lottery people publish a list of all the winners, thousands of winners of minor prizes like $30 vouchers at random businesses. They don't do it through Facebook and they do issue actual tickets.

  • netjock on 29/06/2023 - 15:50

    If this is what you are looking at then you are seriously short of ideas. Just Google all the horror stories.

  • Ryanek on 29/06/2023 - 16:32
    +3

    You read today's article on LMCT+ didn't you?

  • pjetson on 29/06/2023 - 16:54

    A standard lottery is another name for a raffle for which a permit is required. Tickets or chances in the lottery are offered for sale to the general public over an extended period and the lottery is decided after the cessation of ticket sales by the drawing of tickets or some other random means.

    A standard lottery permit can be granted where the principal object of the lottery is the raising of funds for the active promotion, support or conduct of any sporting, social, political, literary, artistic, scientific, benevolent, charitable or other like activity. The lottery cannot be conducted for private gain or any commercial undertaking.

    The rules for the conduct of standard lottery permits are set out in Schedule 4 of the Gaming and Wagering Commission Regulations 1988. Division 6 of the Regulations (regulations 27 to 31) details other requirements for standard lottery permits.

    https://www.dlgsc.wa.gov.au/department/publications/publication/standard-lotteries-(raffles)

  • AustriaBargain on 29/06/2023 - 18:19

    These are extremely popular in the UK. I've looked at lottery laws there and I don't understand how they get away with it, must be a loophole. Seems like a fun way to make money anyway.

    Scotty did a competition with a sports car iirc, but the car was a Lego car.

  • hasher22 on 29/06/2023 - 20:19
    +1

    Very strict raffle laws in each state, NSW I think being one of the most strict laws to run a raffle unless it's for not-for-profit organisations.

    I would look into the laws as I wanted to run a raffle for my business but I couldn't cause the law state, NSW, I can't charge tickets for a chance for a customer to win X Y Z. It needs to be free entry or a customer will have to buy something (not a raffle/ticket) then enter in the draw to win.

    The loop hole I found which I see alot of businesses do are "donations" or "tips", you donate or tip the company and they give you a 'free' ticket for the competition.

  • ColtNoir on 30/06/2023 - 11:32

    Be careful of those Facebook raffles, there have been issues with some of them.

  • Gunnar on 01/07/2023 - 12:08

    These raffles have been happening for years well before Facebook and the internet. They were crap then and they’re crap now

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