The Economists Who Studied All-You-Can-Eat Buffets
"If it costs more, does it taste better?" and other financial questions about restaurants that permit unlimited consumption.
When I was a kid, the paradox of choice didn't occur to me. I wasn't yet overwhelmed by the "tyranny" of too many options, nor stressed with decision making if more options were presented to me. That might be why I fell in love with buffets. Not only were they reserved for special family occasions (like the holidays or a birthday)—I could eat chicken nuggets beside slices of cantaloupe, or mac and cheese beside jello salad.
Buffets are now big businesses, particularly in Las Vegas. The buffets in Vegas are no longer the dollar bargains they once were in the late 1950s. They're fancy productions with Kobe beef and king crab legs that can cost over $50.
New research shows that paying that much for a buffet might actually make the food taste better. Three researchers did an all you can eat (AYCE) buffet field experiment to test whether the cost of an AYCE buffet affected how much diners enjoyed it. They conducted their research at an Italian AYCE buffet in New York, and over the course of two weeks 139 participants were either offered a flier for $8 buffet or a $4 buffet (both had the same food). Those who paid $8 rated the pizza 11 percent tastier than those who paid $4. Moreover, the latter group suffered from greater diminishing returns—each additional slice of pizza tasted worse than that of the $8 group.
"People set their expectation of taste partially based on the price—and it becomes a self-fulfilling prophecy. If I didn't pay much it can't be that good. Moreover, each slice is worse than the last. People really ended up regretting choosing the buffet when it was cheap," said David Just, professor at Cornell's Dyson School of Applied Economics and Management, and one of the study's authors.
If you want to know more about the economics of buffets, the following is an excerpt from a longer feature I wrote for Lucky Peach earlier this year on the history and economics of the buffet.
Buffet businesses are rife with secrecy: Hard numbers about profit margins are extremely hard to come by, and many business are scared you want to talk health safety or whom they get their raw materials from, and at what price—information they regard as trade secrets.
But the basic economics of a restaurant are like those of any regular business: The cost of inputs must be less than what customers pay for the outputs. The difference between the two is the profit margin. Full-service restaurants have to balance sales with what they spend on food and alcohol, labor, rent, and incidental costs.
The variables at an all-you-can-eat (AYCE) buffet are different from those at a traditional restaurant. The demand for waitstaff is usually greatly reduced: Customers line up to serve themselves. The kitchen staff cooks from a prescribed menu daily, and at places like AYCE shabu-shabu or Korean barbecue places, businesses save further on cooking costs as customers cook their own food as part of the experience.
Though buffet operations don’t have to deal with finicky guests sending their orders back to the kitchen (log that under incidental costs), they do have to deal with another kind of tough customer: the kind who want to bankrupt them with their stomachs.
“We specifically refer to our ‘all-you-care-to-eat’ items in this way because we do not want to encourage our guests to intentionally overeat,” says Kerry Kramp, chief executive of Sizzler. “Sometimes guests misperceive these types of promotions and they take it as a challenge to potentially overconsume. That is not what we hope for and the majority of our guests greatly appreciate the flexibility to have a little more of their favorite menu items. We never create ‘consumption challenges’ and that is why we basically refer to these as ‘all you care to eat’ versus ‘all you can eat.’ People can eat a lot of food if they are not feeling like there is a value to the actual item.”
Sizzler, once a buffet-focused chain, has moved away from that model since the 90s. But its salad bar remains AYCE, and Sizzler continues to offer special items such as steak and riblets that can sometimes still be purchased as AYCE. As far as dealing with those customers trying to “beat the buffet,” the maxim is this: It’s all about the average.
For every big, hungry guy or gal who can really eat his or her weight in crab legs, buffets count on a few who won’t. It helps that buffets appeal to groups: A big family might have one super-eater, but Grandma or your toddler brother will probably under-eat.
The other key metric in buffet economics is managing waste. Ovation Brands—previously Buffets, Inc.—owns more than 330 buffet restaurants in thirty-five states; it’s the parent company of Old Country Buffet and HomeTown Buffet. Each year its restaurants serve 47 million pounds of chicken, 6 million pounds of steak, and 85 million dinner rolls to 100 million customers. Though the company has suffered some setbacks (Buffets, Inc. filed for bankruptcy in 2008 and 2012), it is currently reporting its strongest sales numbers in seven years. And it got there by really getting to know its waste numbers.
Michelle Gessner, senior vice president of administration for Ovation, emphasizes the importance of portioning as a means of minimizing waste. “Every item will have anywhere from 5 to 25 percent waste, even with the small pans. Whenever you’re doing more than one serving, you’re going to have waste.” Once upon a time, her company made one large pan of chicken potpie. Nowadays it makes single-serving pies in place of the big one.
Ovation Brands collects data weekly on waste in its restaurants. From there, the numbers are plugged into a computer for modeling based on time of year. Projections are made for the number of customers expected, along with what they’ll likely eat.
“We know pretty well how much food will be consumed on any particular day,” says Gessner. “We use far more fish products on the weekends, more salads at the beginning of the year. Meatloaf and fried chicken are the most popular items.”