lucky peach


All You Can Eatonomics

By Bourree Lam April 9, 2015
Illustration by Helen Tseng

There aren’t many all-you-can-eat buffets in Manhattan, but hidden behind scaffolding on 7th Avenue, marked with half-lit signage is Midtown Buffet. Inside, steel pans line two aisles with the basics of a Chinese buffet: hot and sour soup, sushi, fried rice and noodles. There are chicken nuggets next to the egg rolls and slices of cantaloupe arrayed aside a sea of red jello cubes.

The crowd on a recent Sunday afternoon, after lunch and before dinner, was mixed: a mother-daughter duo who spoke Spanish and got identical plates of food; a couple of hungry-looking single men; a family of four with screaming kids; tourists with curious faces.

I sat there with my “free” Coke, wondering what I’d eat next. I glimpsed some crab legs and some delightfully greasy roasted duck. I was already obsessing over my choices while working on my plate of salad. The waitresses vacillated between intense boredom at the afternoon’s slow crowd and rushing at lightning speed to clear plates off tables whenever guests got up. I wondered if they’d take my plate if I went to stockpile some duck before finishing my current course. Moreover, I wondered, how do these places survive?

Later I asked the manager this very question. He laughed and handed me a piece of paper with a number.

“Try to call the boss,” he said.

On the many occasions I phoned, the voice on the other end would always ask, “Why?” Each time, I left my number and was told: “Mr. Chen will call you back if he wants to.” After many calls and many messages, none of them returned, I finally gave up on Mr. Chen.

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 nineties. 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 the 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.”

The introduction of the AYCE buffet in America is most often attributed to Herbert McDonald, an entrepreneurial casino publicist. It is said that McDonald started the cheap casino buffet tradition at the El Rancho Vegas in 1956. From McDonald’s 2002 obituary in the Las Vegas Sun, we get a look at the American AYCE buffet’s simple origins: “One night while working late at the El Rancho Vegas, the first hotel on what would become the Strip, McDonald brought some cheese and cold cuts from the kitchen and laid them out on the bar to make a sandwich. Gamblers walking by said they were hungry, and the buffet was born.”

The Las Vegas buffet has evolved over time. The priority in the early days could be boiled down to one word: cheap. The original twenty-four-hour Buckaroo Buffet at the El Rancho had AYCE salad, cold cuts, and hearty entrées like Salisbury steak for just a dollar. The trend caught on fast: other Strip casinos offering AYCE Chuck Wagon Buffets with seafood and cold cuts sprang up. By the turn of the century, the cheap buffet had become an archetype of the Las Vegas business model: lure visitors in with cheap entertainment—say, AYCE prime rib—and hope to snare them at the tables on their way through the casino floor.

In an article for the website Vegas Inc, Ed Komenda, a gaming reporter at the Las Vegas Sun, wrote, “Throughout the ’80s, ’90s, and early 2000s, buffets were among Las Vegas’s biggest loss leaders. That’s when gambling revenue still reigned on the Strip.”

But the model has shifted. Las Vegas buffets today push the Vegas indulgence factor. “The buffet at Bellagio was the pioneer in the revival of the modern-day buffet,” says Edmund Wong, Bellagio’s executive chef.

Fifteen years ago, Bellagio was the first hotel on the Strip to make the buffet a big, fancy deal—offering caviar on Fridays, for instance. After it came the Wynn and Caesars—both of which offer a staggering 500 items in their respective buffets.

And they’re no longer cheap. A weekend dinner will set you back $50.99 at the Bacchanal Buffet at Caesars. So the question becomes: Do Las Vegas buffets make money as independent operations, or are they still just a draw to get hungry gamblers in the door?

Though none of the casinos I interviewed would reveal earnings numbers for their buffet operations, their chefs were aware of strategies for turning a profit. The secret is tactical presentation: placing appropriate side dishes near entrées (you’ll definitely want some mashed potatoes with that) or well-manicured fruit near sophisticated desserts.

“Buffets are not known as moneymakers per guest. It’s all about volume levels,” says David Snyder, executive chef of Wynn Las Vegas. “When writing buffet menus, the key is having your costs correct, having the correct amount of high-cost items compared to lower-cost items.”

David G. Schwartz at the University of Nevada’s Center for Gaming Research, which does scholarly research into gambling and gaming issues, speculates that at least some buffets are able to meet the bottom line. “It’s hard to say for sure because I don’t see their balance sheets. At some casinos on the lower end, they probably don’t make money. But when you’re hitting at a higher price point, it’s likely that there’s some profit.”

All this talk of profitability demands a further question: Are customers “profiting” in the all-you-can-eat system?

Economists will tell you that more choice is better (though researchers like Columbia University’s Sheena Iyengar have found in recent studies that too much choice can be paralyzing). And that certainly seems to be one big reason people go to buffets. I asked what draws people to AYCE buffets on Chowhound and got 300 replies in a week.

Laliz: “When there is a large group, then everyone can find something they will eat or enjoy. I also very much enjoy the ‘show’ of people and what they choose. Kind of like looking at others’ shopping carts in the grocery store.”

mrsphud: “I can have all the protein I want—sliced meats, chicken, etc. and the family can have whatever else they might be interested in.”

However, while more food choices in unlimited quantities sounds like a great deal, when the effort to maximize value exceeds satisfaction (because you’ve stuffed yourself silly), marginal utility—the difference between what you’re putting in and getting out of the buffet—will be negative. In other words, if you eat past the point of comfort, the buffet is a losing proposition. This is the calculus that people forget when they try to get their money’s worth from AYCE. If you try to beat the buffet by busting your gut, you will fail. But if your particular bag happens to be mixing a little caviar with your crab legs and egg rolls, you just might leave the casino on top.