How all-you-can-eat restaurants don't go bankrupt
With a few tricks, these restaurants still manage to turn a profit- despite offering endless food. Following is a transcript of the video.
Announcer: It's all-you-can-eat pancake time at IHOP.
Announcer: Endless shrimp is back at Red Lobster.
Announcer: All-you-can-eat of this for $6.99?
Narrator: Unlimited food. These restaurants give you all-you-can-eat for one fixed price. Sounds like a pretty good deal, but how do these restaurants make any money? The way buffets typically work is each person pays the same fixed price for access to a line of self-serve dishes. You grab a plate, fill it with food, eat, and repeat. As many times as you want.
Bonnie Riggs: This started in the 70s and the 80s, and they were very popular. I think it was kind of sign-of-the-times. They were a family-style restaurant, they did not serve alcohol, but it was a lot of food for not a lot of money.
Narrator: Popular chain restaurants that use this model are Golden Corral and Home Town Buffet. Other all-you-can-eat buffets specialize in one type of cuisine, like Chinese food, Indian food, or different types of pizza. The most obvious money saver for a buffet restaurant is there's less need for servers.
Riggs: They don't need full wait staff because you're getting your own food and bringing it to the table.
Narrator: But these restaurants apply another strategy that's hidden in plain sight. Pay attention to the layout of a buffet line. Buffets often put cheaper, or more filling carbs towards the beginning of the line.
Riggs: They would have a lot more menu items that had good profit margins on them. Then all of the sides and the carbs came before the entree so that by the time you got your entree, your plate was full.
Narrator: And to try and stop people from taking more than they can eat, these restaurants might provide smaller than average dinner plates. Or really big soft-drink cups, so you can fill up on soda. But that doesn't always stop people from piling it up vertically. Or going back for another plate
Garfield: This will do as an appetizer.
Narrator: So some buffets may cut corners in other ways to make sure they aren't losing a bunch of money.
Riggs: Because of the tight profit margins, the food quality wasn't as great as it probably should have been or could have been.
Narrator: Riggs says this contributed to their decline. Between 1998 and 2017, the number of all-you-can-eat buffets dropped by 26 percent. Even though the number of restaurants overall rose by 22 percent. Part of the reason for the decline in buffets, was the expansion of casual dining restaurants like Applebee's, TGI Fridays, Olive Garden, and Outback Steakhouse. This is the type of restaurant that typically offers all-you-can-eat specials on particular items.
Riggs: For example, you take Red Lobster, they will have their all-you-can-eat shrimp. They're not inexpensive and consumers like those and they think they're getting a good value for the money. They're around for about six weeks, so there's a sense of urgency that's created.
Announcer: But hurry, endless shrimp won't be here long.
Riggs: The hope is that once consumers get inside the restaurant, they will add more things, they'll try, they'll be satisfied, and will return. Because the only way you're going to drive your business in the restaurant industry today is through building loyalty.
Narrator: With just a few tricks, like using smaller plates, putting cheap items towards the front, and using drinks to off-set other costs, all-you-can-eat restaurants are able to accomplish the same goal as any other restaurant. Get people in the door.
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