All you can eat -- illogical business model?

[Goku]

The all-you-can-eat business model capitalizes on consumers' collective desire to mitigate risk. In the same way people buy insurance, all-you-can-eat restaurants are overall, a losing proposition for the consumer, in the sense that they are paying for the mitigation of risk.

A lot of people take comfort in knowing exactly what their meal costs b4 deciding to go out (via AYCE place)-- even if they would have spent less somewhere else.

Some people do come out ahead in this model: the big fatso with a never ending pit for a stomach.

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There is also "perceived value," on the part of the consumer. Maybe the consumer doesn't know, or doesn't care, that he/she is eating the lowest quality meat.

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Marginal cost of next best alternative: if all the other nearby eateries charge $10 for an entree, and the all-u-can-eat place charges $15, the "extra" or marginal cost is only $5 more to ensure that one gets to eat to his stomach's delight.

 

[Ex-User (9062)]

Good observation!
But is it illogical?
It works.
I have no precise data on the exact amount of profit margin per customer,
but i would have to imagine that compared to traditional restaurants, the 5 extra $ you mentioned are pure profit.

 

[Goku]

Good observation!
But is it illogical?
It works.
I have no precise data on the exact amount of profit margin per customer,
but i would have to imagine that compared to traditional restaurants, the 5 extra $ you mentioned are pure profit.

People do tend to overeat to try to get their money's worth.

I don't really understand how it all evens out into a total overall profit. There must be a huge premium that the human mind places on the risk mitigation.

 

[Ex-User (9062)]

Some interesting comments on this article:
http://www.forbes.com/sites/modeledbehavior/2012/05/23/the-economics-of-all-you-can-eat-buffets/

 

[Base groove]

Quality restaurants operate around 17% profit. Food costs are probably 20-30% of sales.

$5 extra per plate in sales, how much does this offset the increased cost of food?
Labour costs are much lower probably.

What is illogical about mitigating risk of imaginary hunger/false idol of satiety?

 

[QuickTwist]

@Goku, The thing to consider here is are you retarded.

 

[Brontosaurie]

@Goku, The thing to consider here is are you retarded.

why this all the time bait and switch? what i was and is am going to ask would be and going to be: why do you attack Goku.

 

[Ex-User (9086)]

@Goku, The thing to consider here is are you retarded.

Really?By the same notion: I don't understand this, dumb posting.

People do tend to overeat to try to get their money's worth.

I don't really understand how it all evens out into a total overall profit. There must be a huge premium that the human mind places on the risk mitigation.

It could work as a form of dated food. You would have a restaurant serving fresh and later large amounts of left overs could be remade from many restaurants and sold again in the form of all you can eat.

 

[Goku]

Really?By the same notion: I don't understand this, dumb posting.

It could work as a form of dated food. You would have a restaurant serving fresh and later large amounts of left overs could be remade from many restaurants and sold again in the form of all you can eat.

lol that sounds really disgusting, but an interesting idea nonetheless.

 

[Fukyo]

@Goku, The thing to consider here is are you retarded.

Responding to someone you disagree with by just calling him a retard isn't appreciated on this forum. Just a small mod warning for future reference...



First you have to thoroughly prove him wrong and then you can call him a retard.

 

[Ex-User (5841)]

The all you can eat model is logical as well as successful.

People habitually overestimate the value of food because it's based on cost at the individual consumer level.

Example: The same steak costs each of two restaurants $2.00, yet A charges $15 for it and B offers it on a buffet. The customer who eats 3 steaks at B's buffet is convinced he's getting a $45 value if he normally eats at A.

 

[QuickTwist]

I understand Fukyo. I was actually trying to add to the conversation rather than outright calling him a retard. My point being, if you are retarded it is harder to control your eating habits... but I totally understand where you are coming from and will try my best to act in accordance with the rule put in front of me. It will be difficult but I will try. Apologies.

[Edit] If he is thoroughly proved wrong by another individual posting on the forum can I call him a retard if he fails to see it and keeps making the same arguments?

[Edit 2] I am nothing if not for my ability to change.

 

[Base groove]

You are nothing.

 

[Black Rose]

You are nothing.

Spoiler

Spirit Never Dies Anime AMV

 

[Helvete]

Really?By the same notion: I don't understand this, dumb posting.

It could work as a form of dated food. You would have a restaurant serving fresh and later large amounts of left overs could be remade from many restaurants and sold again in the form of all you can eat.

Possibly. This would be highly illegal most places though I'm sure. Even if it isn't then customers would have to sign a disclaimer to not hold the restaurant in question responsible for any diseases the customers my contract. Nevertheless, bring on the pate sausages!

 

[Ex-User (9086)]

You are nothing.

I cannot agree, first you would have to prove something wrong.
Or is this what you meant that he or something, somebody you were referring to, actually is an abstraction or a concept in your mind?
This thread shows how nothing is not true nothing.

 

[Jennywocky]

Really?By the same notion: I don't understand this, dumb posting.

It could work as a form of dated food. You would have a restaurant serving fresh and later large amounts of left overs could be remade from many restaurants and sold again in the form of all you can eat.

I also think the quality of "all you can eat" food is generally lower, and the prices charged are relatively high.

So you need to pay less for skilled staff, and your staff is no longer having to specifically make food to the customer's specifications -- you're making it to YOUR specifications (which can lower) and just "dumping stuff in the trough." You also can cut back on your waiting staff since all they do is seat people and deliver the check.

I've seen situations where the drink fountain is not included in the all-you-can-eat area, but this seems stupid to me as any savings in soda (which is cheap for the restaurant and WAAAY overcharged for in their bill) is lost by the money invested in the waiting staff and potential customer displeasure if the staff doesn't deliver refills when requested.

As long as you get your price point right, where your customer base is maxed, you should be good to go.

 

[pernoctator]

The all you can eat model is logical as well as successful.

People habitually overestimate the value of food because it's based on cost at the individual consumer level.

Example: The same steak costs each of two restaurants $2.00, yet A charges $15 for it and B offers it on a buffet. The customer who eats 3 steaks at B's buffet is convinced he's getting a $45 value if he normally eats at A.

I don't see how it being logical and successful follows from the fact that people overestimate the value. In this example the customer's conclusion is correct, he is only unaware of the scale. Whether the scale is 2:15 or 1:1 the success or failure should be proportionate.

 

[Ex-User (5841)]

I don't see how it being logical and successful follows from the fact that people overestimate the value. In this example the customer's conclusion is correct, he is only unaware of the scale. Whether the scale is 2:15 or 1:1 the success or failure should be proportionate.

It's certainly successful from the standpoint of the business...

The same business model is very common. Insurance was mentioned in the article, but also consider transportation, parking, membership to... any institution that offers a membership, season tickets, the online music industry...

 

[Goku]

I also think the quality of "all you can eat" food is generally lower, and the prices charged are relatively high.

So you need to pay less for skilled staff, and your staff is no longer having to specifically make food to the customer's specifications -- you're making it to YOUR specifications (which can lower) and just "dumping stuff in the trough." You also can cut back on your waiting staff since all they do is seat people and deliver the check.

I've seen situations where the drink fountain is not included in the all-you-can-eat area, but this seems stupid to me as any savings in soda (which is cheap for the restaurant and WAAAY overcharged for in their bill) is lost by the money invested in the waiting staff and potential customer displeasure if the staff doesn't deliver refills when requested.

As long as you get your price point right, where your customer base is maxed, you should be good to go.

the soda issue is common for most places that sell soda; the marginal profit on soda is huge; say the syrup plus carbonation and water only costs the restaurant $0.10 (ten cents) and they charge $3 for unlimited refills. That's $2.90 profit, but represents something like a 3,000% profit margin for that individual item, soda.

Say the AYCE place charges $20/person. They're probably only making 5%-10% profit at the end of the day on that meal. So that's like $1-$2 of profit on the food.

In this scenario, the restaurant makes more total profit off the drink sale than the food, (I think this was mentioned above somewhere) to make profit off sodas and drinks, etc.

It's not so much about "saving money" that they do not include a "free drink" in the price of the AYCE, but it's a microeconomic analysis regarding marginal profit vs total sales.

For example, if they lost so much business by charging extra for the drink, maybe because the AYCE place across the street gives free drinks, then they would have to stop charging for the soda.

However, if they charged extra for soda, but saw no noticeable drop in sales/traffic, because few people who want a soda will be dissuaded by the price. There will be some who say "omg $3 for coke. F that, I can get two 2-liters at the supermarket for $3." But that is probably the microeconomic analysis that goes on either consciously or unconsciously, or certain strategies have become industry standard because they've already been proven to work.

The main reason I am interested is if I can "improve" this model somewhat, to squeeze more profit from it, or make it better in some innovative way.

Most buffets or AYCE's try to make their money on 1) volume and 2) saving on labor costs as well as other controllable costs.

Are there any laws against pumping some kind of gas in the air that makes you feel less hungry? lol...

Don't supermarkets already employ some kind of smell technology to make you hungry while you shop?

How bout we invent some type of anti-hunger gas that drastically reduces the amount of food someone wants to eat?

However, if that were invented, there would probably be billions to be made in the pharmaceutical industry than to try to apply it to some old broke business model like AYCE.

 

[pernoctator]

It's certainly successful from the standpoint of the business...

The same business model is very common. Insurance was mentioned in the article, but also consider transportation, parking, membership to... any institution that offers a membership, season tickets, the online music industry...

I know it works. I just don't see the connection to overestimating value. Regardless of the difference between cost to the restaurant and cost to the consumer, B is still giving away two pieces of steak they otherwise would have kept.

 

[Ex-User (9086)]

I know it works. I just don't see the connection to overestimating value. Regardless of the difference between cost to the restaurant and cost to the consumer, B is still giving away two pieces of steak they otherwise would have kept.

If there was no overestimation of value there would be no actual profit, or profit would be discussed before transactions, wouldn't it?

 

[Goku]

I know it works. I just don't see the connection to overestimating value. Regardless of the difference between cost to the restaurant and cost to the consumer, B is still giving away two pieces of steak they otherwise would have kept.

If there was no overestimation of value there would be no actual profit, or profit would be discussed before transactions, wouldn't it?

Just a comment: one of the things we have disregarded so far is the "value" placed on variety.

You get to try a little bit of everything at a buffet/AYCE. The "value" (which is subjective, so it's difficult to give it an objective measure but we can try) of being able to have steak, shrimp, crab, sushi, egg rolls, etc. is a material fact.

You know how they have those Appetizer Sampler platters at Applebees'? I'm always as sucker for that one because I get to try a little bit of everything for the same price as a single dish of a single appetizer.

The "value" of variety could make up for the value-deficit caused by the low-quality food, to where the perceived "value" by the consumer equals exactly the "value" paid by in terms of dollars.

Think of how much time and money you'd have to spend to cook yourself steak, and shrimp, and crab...

vs getting all that for $10 at a buffet.

 

[pernoctator]

If there was no overestimation of value there would be no actual profit, or profit would be discussed before transactions, wouldn't it?

Of course, but that's a general fact not specific to buffets, so what does it serve to explain?

 

[Ex-User (9086)]

Just a comment: one of the things we have disregarded so far is the "value" placed on variety.

You get to try a little bit of everything at a buffet/AYCE. The "value" (which is subjective, so it's difficult to give it an objective measure but we can try) of being able to have steak, shrimp, crab, sushi, egg rolls, etc. is a material fact.

You know how they have those Appetizer Sampler platters at Applebees'? I'm always as sucker for that one because I get to try a little bit of everything for the same price as a single dish of a single appetizer.

The "value" of variety could make up for the value-deficit caused by the low-quality food, to where the perceived "value" by the consumer equals exactly the "value" paid by in terms of dollars.

Think of how much time and money you'd have to spend to cook yourself steak, and shrimp, and crab...

vs getting all that for $10 at a buffet.

I don't attack the importance of profit and specialisation, that is the basic chain of events that led to what we have.

It is the interplay of specialisation and control that leads to overestimation or underestimation and conflict or scarcity.

From your perspective and your control of means of production and your control on your means on specialisation you were unable at that time to generate enough value in your action to be independent, so that is why you chose to do this and this is why this specialist earned his money, that from his perspective was undervalued as he clearly spent less to produce and was quite right for you as you made the decision to buy.

you is a general you and well, a model

As focusing on buffets:
I would say that restaurants are specialised in quality.
Buffets or AYCE would be specialised in quantity.

After all if this comes to production quantity is the quality in itself

Of course, but that's a general fact not specific to buffets, so what does it serve to explain?

If you don't see a connection or it is obvious, then you either knew the answer and your question was invalid, or you saw this as an invalid connection to your assumption.
I like to state obvious things so that we know what is obvious

Random thought:
A perfect service generates no income and no unemployment.

 

[Ex-User (5841)]

I know it works. I just don't see the connection to overestimating value. Regardless of the difference between cost to the restaurant and cost to the consumer, B is still giving away two pieces of steak they otherwise would have kept.

Who's to say that B wouldn't be victimized by a price war or A's reputation if they didn't use the divergence in value assessment? A relies on quality, B quantity, and both exist in tumultuous marriage as one model supports the other via competitive exclusion, which ironically results in maximum efficiency for both if a price war is avoided.

Do the bulk of people who buy museum/zoo/recreation memberships go more than twice a year? How many times does the average monthly bus pass owner use it on a daily basis? How can a university parking lot afford to oversell parking permits by 10% more than the number of available spaces yet experience little if any parking issues?

Consumers purchase based on future possibility. The greater the time span involved, the greater the error in risk assessment.

 

[pernoctator]

^ Correct me if I'm wrong, but you presented your example in your first post as an explanation of the model's success. But the overestimation is a superfluous variable; the fact that he thinks he is getting an extra $30 value when he is actually getting an extra $4 doesn't change the fact that he is paying less. The points you're mentioning now about quality vs. quantity and unrealized future possibility are different than the one I responded to -- in the context of your example the steaks were identical and the consumer was taking advantage by eating three.

 

[Ex-User (5841)]

^ Correct me if I'm wrong, but you presented your example in your first post as an explanation of the model's success. But the overestimation is a superfluous variable; the fact that he thinks he is getting an extra $30 value when he is actually getting an extra $4 doesn't change the fact that he is paying less. The points you're mentioning now about quality vs. quantity and unrealized future possibility are different than the one I responded to -- in the context of your example the steaks were identical and the consumer was taking advantage by eating three.

This whole thing is based on the assumption that a lower price accesses a larger customer pool. This should tie it all together. Spending-money is a finite resource that individuals are biased to conserve. It's a customer-oriented strategy as opposed to a strictly profit-oriented strategy. "What can you afford?" is the first theoretical question asked vs "What do you want?"

 

[Ex-User (9062)]

Say the AYCE place charges $20/person. They're probably only making 5%-10% profit at the end of the day on that meal. So that's like $1-$2 of profit on the food.

I think 20-25% is more realistic.

 

[Goku]

I think 20-25% is more realistic.

I am assuming that such a fat profit margin can only last in the short term, especially for a low-margin business like cheap AYCE/buffet or fast food. If that profit was sustainable, someone else would open a place across the street and they'd compete, slash prices until someone gives up and goes out of business.

The individual mom n' pop restaurants might claim to do 20-25% profit, but are they really factoring in the time that the owner spends managing and worrying about the business?

Smaller restaurants can claim larger profit margins, because the owners don't factor in the cost of hiring a manager to completely replace the owner.

I could see fine dining, with $30+ plates, achieve the 20%-25% profit margin, however they're not doing as much volume as a McDonald's.

Anyways, if I really knew what I was talking about I'd have my own restaurant, so don't listen to me.

 

[Hawkeye]

 

[Base groove]

I am assuming that such a fat profit margin can only last in the short term, especially for a low-margin business like cheap AYCE/buffet or fast food. If that profit was sustainable, someone else would open a place across the street and they'd compete, slash prices until someone gives up and goes out of business.

The individual mom n' pop restaurants might claim to do 20-25% profit, but are they really factoring in the time that the owner spends managing and worrying about the business?

Smaller restaurants can claim larger profit margins, because the owners don't factor in the cost of hiring a manager to completely replace the owner.

I could see fine dining, with $30+ plates, achieve the 20%-25% profit margin, however they're not doing as much volume as a McDonald's.

Anyways, if I really knew what I was talking about I'd have my own restaurant, so don't listen to me.

You are wrong about this made up information.

Anyways, I just read your last sentence so I have learned to not stop reading posts halfway through.