All-you-can-eat (AYCE) restaurants charge a fixed price for access to food, and they allow customers to consume as much food as their heart desires at no extra charge. Simply put, consumers are charged a specified price regardless of how much food they consume. From “Feast unlimited this Monday at Barbeque Nation; lunch at ₹399 and dinner at ₹499” to sell tandoori feasts in India, to “$24.99 all you can eat buffets” in Las Vegas as a lure to bring hungry patrons into casinos, AYCE has its roots everywhere.
In practice, managers may have several motivations for offering such flat-rate pricing. While some are driven by competitive pricing pressures that may lead to zero marginal cost of production, others seek to reduce costs such as labour by employing a smaller wait staff, made possible by the emphasis on self-service.
If you have ever had an awful stomach after you thought you struck gold at the buffet, you might have just wondered how restaurants manage to keep up their bottom line while you think you seemingly rob them in broad daylight. As you can guess, it is definitely not a loss for the restaurants. They indeed make hefty profits from this scheme. Besides being an ingenious piece of marketing, such restaurants became so popular owing to their wide selection of food and to the freedom given to customers to choose their own portions. People skip their breakfast and lunch to have a buffet dinner. They come with the mentality that they are going to earn their value for money. But little do they know that they come out on the losing side of it, mostly.
How then do buffets manage to create and maintain a winning environment whilst also keeping their customers elated?
To shed light on how this concept leaves restaurants with money requires an examination of some fundamental microeconomics, psychology and what magic a careful blend of both can do. The high-skilled and trained managers in the hotel industry have succeeded in hitting this sweet spot and manage to leverage customer satisfaction and generate profits.
Law of Diminishing Marginal Utility
A law inherent to every Econ 101 class. The crux is that the additional benefit we feel from consumption (be it of cake, cigarettes or coffee) decreases as we consume it. You won’t have the same satisfaction from the last bite you have as you have from the first time eating it (your fifth slice of pizza, although good, just doesn’t taste as good as the first). Additional utility (benefit) from the last slice of pizza will be less than that from the first and this goes on until you have a negative utility for each slice that you consume (nobody enjoys a 25th slice, probably). People go to the buffet with a set mentality of making the most of their money. They want to maximise their satisfaction i.e. eat till they drop. However, again with the prospect of an unlimited buffet, their greed takes over and once their satisfaction is maximum, it slowly becomes negative i.e. the satisfaction derived from the buffet initially rises, then becomes maximum, and then falls. This is nothing but the law of Diminishing Marginal Utility. This is why you see exasperated faces after a buffet when people overshoot.
What this tells us is that no matter what the price paid for a buffet is, you can only continue eating until your satiation point is reached. We’ll see how restaurants are masters at taking you there, quickly and cheaply.
In economics and business decision-making, a sunk cost is one which is incurred and cannot be recovered. You’ve invested the money and nothing can be done to take it back. For this reason, sunk costs should not affect decision-making. If the money’s already gone then it should not be affecting our future decisions. But in reality, people let this influence them. People have a habit to chase their losses, unable to quit and move on. We see it predominantly among gamblers, always chasing a winning bet to recoup earlier mistakes. We also witness it in business, it’s the same reason that investors continue with a loss-making entity. They don’t see a world beyond their already sunk dollars. When we buy a ticket to a buffet, we also face the same dilemma.
Because a customer faces no marginal cost of consumption, conventional utility maximisation implies that he or she should continue to eat until the marginal utility of consumption reaches 0. Economic models of consumer behaviour commonly assume that the utility of consumption is unaffected by the price paid. Rather, the price affects consumption only through a budget constraint. So, in an AYCE setting, price should influence whether one chooses to eat at the restaurant, but it should not affect the amount of food one consumes. But various experiments and test results have proven that price determines the personal evaluation of certain food and indirectly affects consumption.
The Food and Brand Lab at Cornell University conducted an experiment to see how the price of a buffet influenced customers. They offered two groups of customers the same pizza buffet, and charged one group $4, while the other group was charged $8. The group who paid more was overwhelmingly more satisfied with the entire experience. We are driven by our personal conception of value for money.
The purpose of revealing this is to demonstrate the sunk cost fallacy in an AYCE context. In an AYCE setting, price positively influences consumption. Additionally, consumption appears to be negatively related to individual evaluations of taste. In contrast to the standard utility model, this provides support to the notion that individuals consider price in evaluating their marginal utility of consumption, even when there is no marginal cost for additional consumption.
The more the buffet charges, the more you think the buffet is good. Hence, the buffet is charged more and you still think the buffet is good and within all this, restaurants jump in and book their profits.
The Concept of Bounded Rationality and the Bandwagon Effect
Bounded rationality is the idea that rationality is limited when individuals make decisions by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision. It is similar to an inability to make a sagacious decision when bombarded with multitudes of options (as in a buffet) leading us unable to follow rational predictions.
The bandwagon effect is the tendency of an individual to acquire a particular style, behaviour or attitude because everyone else is doing it. It is a phenomenon whereby the rate of uptake of beliefs, ideas, fads and trends increases with respect to the proportion of others who have already done so. Usually, in a buffet, some items come out to be clear winners and almost everyone starts having more and more of the same, the customers recommend the same to the people they are having lunch/dinner with, who in turn again start having more of the product. This creates a bandwagon effect, people will quickly consume a few items thereby saving the restaurant’s cost on all others.
When choices are abundant, rationality is limited, and people have a tendency to follow the bandwagon, the result is skewed option picking. Some dishes emerge to be the most wanted and are generally those that are in abundant supply. Usually, dishes that are cooked in large vessels with cheap ingredients. Hence the restaurant saves on the more expensive dishes and the cost is limited yet again.
Economies of Scale
Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. The larger the business, the more the cost savings. Buffets are large production businesses. A restaurant buffet achieves economies of scale by producing in large quantities, spreading its costs over a larger number of dishes, even though it often demands a serious cut in food quality. Because of tight profit margins, the food quality becomes a second priority. However, this doesn’t matter, they have their footfall.
In addition to this, lesser personnel need to be deployed for a buffet. As a result, the restaurant makes large savings in employment costs. These overhead savings are one of the crucial areas in which buffets differ from traditional restaurants. That's because you are doing most of the work for them - and paying for the privilege. You serve yourself, and in some places, you might even get your drinks. This means there's next to no need for waiting staff. And since the menu relies heavily on a series of regular dishes which are prepared in advance, they can hire fewer and cheaper chefs.
Heck, at some buffets like Korean BBQ places, the customers are even doing the cooking as well as the serving!
Now that you know the economics, you may have the power of defying these principles and "beating the buffet’. Defy the diminishing marginal utility function. Be wise and judge your taste buds independent of price. Be rational and avoid the bandwagon. But buffet designers know this. While most people will be modest, some people will try to get "all-they-can-eat" and go for a ton of pieces of cottage cheese. Some don’t stop from piling it up vertically or going back for another plate.
So, buffets must cut corners in other ways to make sure they aren't losing out. They achieve this by teasing you in clever ways.
Strategic Layouts and Secret Nudges
Buffets invest a lot of time into developing the right layout.
Expensive items are cut into smaller pieces. Cheap, filling foods such as your salads, veggies, rice and noodles are served at the beginning, offering the consumer the opportunity to load up before the ‘luxury’ items. Relatively expensive offerings will be surrounded by four or five cheaper veggie side dishes, and pricier desserts like cakes will be surrounded by platters of fruit. Coupled with larger serving times for expensive items, buffets usually nudge you to take up the cheaper, more available, readily in flow food items. You can grab a ladle-full of rice and veggies any instant, but when it comes to those small pizza slices, you wait for your turn in line. They'll take longer to get on your plate, and most people don't like the pressure of holding up a line, so they tend to move quickly through. Also, pans with more expensive foods are generally less full — a subtle encouragement to take less, a nudge, while cheap ingredients will be served in giant, overflowing pans. Those are plenty for all, and people like that. They like to believe that must be the right choice.
One of the biggest factors impacting your eating habits at a buffet is the cutlery you're given. You'll seldom see full-sized dinner plates or actual soup bowls. Instead, you'll be given small plates and even tiny dessert bowls to limit the amount of food you take. Restaurant suppliers know this, and buffets even purchase miniature tableware specially designed for buffets. This even includes purchasing silverware, which tends to be smaller — but not small enough you'd notice unless you already know their sneaky tricks.
Generally, buffets will keep extra sweet desserts, so clients are satisfied with lower portions. Complementary to this, buffets will usually have huge water and soft drink glasses. They need you to be full of soda that costs a penny. The more you drink, the less you eat, the more the restaurant saves. For a lot of buffets, things like vegetables, potatoes and rice are staple dishes. That's because they are both super cheap and extremely filling. Buffets entice you into indulging on salads before the meat because salad is cheaper and quickly fills plate space. Psychology Today took a look at what's occurring in the buffet line, and they call this the "fill the customer's belly cheaply" metric. But remember, if you are truly there to make the most of your money, these items will only fill you up with nonsense.
At its crudest level, the AYCE buffet restaurant manager’s primary job is simply to fill the customer’s stomach as cheaply and quickly as possible. Minimising waste by using computational data analytics to figure out the customers’ eating habits go a long way in cutting costs. Coupled with the power of using cheap ingredients to prepare worthwhile dishes, AYCE buffets tease your bellies to fill their pockets. But to satisfy customers and bring them back, buffet managers can’t stop there. 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 minimised.
With just a few tricks, such as using smaller plates, putting cheap items towards the front, and using drinks to off-set other costs, all-you-can-eat restaurants can accomplish the same goal as any other restaurant: get people in the door.
Finally, you may not want to take the "all-you-can-eat" part quite so literally. People can and have been banned from buffets for eating too much food. For instance, a Wisconsin man named Bill Wisth was not only banned but had the cops called on him for abusing his local buffet. So, before you go back for that fourth slice of pizza, ask yourself how much you might like the taste of jail food. Because the buffets there aren't nearly as good.
So, for a recap.
What did I teach you about buffet strategy?
"Grab a small-sized drink and a large-sized plate, start with your high-end entrée, skip veggies and carbs and yeah, ride your own bandwagon.”
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