Every so often, we read about people getting banned from all-you-can-eat (AYCE) buffets for eating too much. Many of us can recall the signs of gluttony we witnessed at a buffet ourselves — plate after heaping plate of food taken back to the table, a stack of half-full plates left behind, and the sweaty, glazed look of someone who has eaten far more than they should have. Combine unrestrained gorging by customers with moderate prices and the fact that a typical restaurant has a wafer-thin profit margin — $1.07 on a $40 bill or around 3% according to one analysis, how are AYCE buffet restaurants able to survive, let alone make a profit? A reader asked me this question recently.
No, this is not about the lavish AYCE buffets in Las Vegas casinos. In an effort to out-do each other, many casino buffets offer over-the-top options like overflowing displays of caviar, unlimited cocktails, Wagyu steaks cut by an in-house butcher, and crab legs flown in daily from Alaska. Vegas casino buffets even have evocative names to go with their exotic offerings: the one in Caesar’s Palace is aptly named the Bacchanal Buffet. But the truth is that most Las Vegas AYCE casino buffets lose money and would go bankrupt as stand-alone operations. Their mission is to draw people into the casinos. Any loss incurred on the buffet is easily recovered by the gambling that ensues after the feasting (and then some.)
The question is more about AYCE buffet restaurants dotted across small and large American cities that not only survive the onslaught of seemingly ravenous patrons, but actually thrive year after year, enjoying healthy profit margins in the process. Houston alone has 182 AYCE buffet restaurants according to Yelp, and many of them have been in business for decades.
At its crudest level, the AYCE buffet restaurant manager’s primary job is simply to fill the customer’s belly as cheaply and as quickly as possible. But in order to satisfy customers and bring them back, AYCE buffet managers must also do other things. They must create the perception of providing ample variety and high quality food items. At the same time, they must manipulate customers’ choices and portion sizes, and ensure that food waste is minimized. Let’s look at how each of these things is done in a buffet restaurant.
Flexible menu design. Any successful restaurant keeps its food and beverage costs at or below 30% of its revenues. Believe it or not, AYCE buffets are able to do this quite easily. Compared with other restaurants that have fixed menus, an AYCE buffet has more flexibility. It can change its menu every day based on what is cheap and available and often does.
Cheap veggies and meats. The AYCE buffet menu is built around ingredients and foods that are available cheaply. Vegetables and cheaper cuts of meat when purchased in bulk are surprisingly affordable (for example, a 50 pound bag of potatoes costs about $6 from a wholesaler, and a 50 pound sack of carrots costs around $9.) 50 pounds is a lot of food! Such ingredients can not only be turned into healthy dishes, but they go a long way toward stuffing customer's bellies. Where meat is concerned, cheaper fish (tilapia instead of salmon) and cheaper cuts of meat are used.
Seasonal ingredients. To increase food quality, seasonal items are added to the buffet menu. For example, fresh tomato-based dishes and crawfish entrees are significantly cheaper to offer during spring and make customers feel they are getting high-quality dishes without the corresponding expense. Squash and pumpkin-based dishes work the same way in fall. If the price of some staple such as pork or beef goes down drastically, more dishes using it are offered. And when its prices shoot up, the pricey protein is taken off the menu and substituted with something cheaper.
Once the menu is built up, the manager’s next task is to influence which foods customers put on their plates and how much they take. While food scientists have made a cottage industry of studying different ways of controlling people’s portion sizes recently, buffet restaurant owners have been practicing many of these ideas for decades.
Instead of consumers trying to control their own mindless eating, it is the AYCE buffet manager who is interested in curbing their mindless eating or directing it toward cheaper items. Go to any Chinese or Indian buffet and you will see what I mean. Here are some ways in which they influence food choices and control the portion sizes of their customers.
In an all-you-can-eat buffet, most people eat the same way they do elsewhere. A painstaking observational study of 213 patrons at all-you-can-eat Chinese buffets conducted by psychologists Brian Wansink and Collin Payne found that the estimated Body Mass Index (BMI) of patrons was strongly predictive of their eating behaviors. Compared to those in the highest BMI tertile (top third), those in the lowest one were more than twice as likely to browse the buffet first (71.0% vs. 33.3%), almost three times as likely to use chopsticks rather than a fork (23.5% vs. 8.7%), and chew more times (14.8 vs. 11.9). Interestingly, all patrons left relatively little uneaten food on their plate, less than 10% of what they had served themselves.
Another clever study manipulated the price of an AYCE Italian buffet and found that when it was priced at $4 instead of $8, customers rated their first piece of pizza as less tasty, less satisfactory and less enjoyable, and showed a negative trend in enjoyment. Clearly, getting a good deal was not of primary importance for these buffet-goers.
All this is good news for buffet restaurant owners. It suggests that not all customers are going to over-eat, and relatively few people waste a lot of food. Having large parties of customers — co-worker groups at lunch or families for dinners further ensures that even if some people in the party over-eat, they are balanced by others who under-eat and maintain the AYCE buffet’s profit margin. And not all AYCE buffet patrons are price-sensitive. Holding the food items in the buffet constant, higher prices may actually make their experience more positive and keep them coming back.
I teach core marketing and pricing to MBA students at Rice University . You can find and download a lot of my academic and some of my practitioner-oriented writing at SSRN. If you can’t find something old I have written, shoot me an email and I will send it to you. Some of my writing for managers and business people can be found at HBR.org and I also write a blog called “The Science behind Behavior” on Psychology Today.