Let’s be real, hearing someplace is giving unlimited food makes you hungry even though you might have just eaten. This type of ‘all you can eat’ restaurants at first might look like they’re just inviting people to the restaurant to eat their restaurant business alive (pun intended)! However, contrary to popular opinion, offering unlimited food could be turned into a profit-making juggernaut which elevates your business to new heights of exposure and popularity.
It is interesting to note that the classiest and most upscale places to eat always serve up either a breakfast buffet or an All You Can Eat(AYCE) dinner or something along similar lines where you don’t have to keep reordering and be conscious about what you eat (too much). AYCE type themes work based on a flat pricing system meaning you can eat anything you like everyone pays a standard fixed amount per head. It can be a bit confusing at first that how can you even rake in a profit from this type of restaurant system. We address the economics of AYCE themes to get a detailed insight on how to maneuver this business model into a successful one.
If you’re looking to start a buffet type of restaurant you might consider reading Checklist for starting a food business in India and acquiring appropriate licenses like the FSSAI License
Economics of AYCE Businesses
- Sales Projection
- Deploying economies of scale
- Staffing Savings
- Law of Diminishing Marginal Utility
- Balancing Dishes and proportions
We can understand that a dark cloud of mystery looms around the economics of the AYCE businesses. At first glance, it may seem like restaurants are giving up unlimited food at limited prices which seems broken. However, the way these theme-based restaurants make money is so intricate and hidden that it might confuse anyone who wants to enter the industry with this model. Read on, to decode the puzzling economics behind buffets, AYCE themes.
First and foremost, if you decide to run a buffet or AYCE successfully, you need to project an estimated amount of sales. The flat pricing of these themes means you need to make an estimate on how many people are going to grace your event. This is not just to prepare the food according to the footfall, but it is also necessary to understand how many people might be coming to decide the per-head cost. This is necessary to cover up your operations cost. How many people will come and how much they will pay per person is basically what you wish to earn with the event. It’s important to have a goal in mind before commencing any type of operations.
Ideally, if the buffet you put out there is sold out, the profit will be generated from the markups and the expenses you will have saved. After including the markup on the entry price according to projected sales, you will start earning the basic profit, rest is dependent on what people eat and the markups on them.
Deploying Economies of Scale
In addition to projected sales and markups, the AYCE type of restaurant operates on the basis of Economies of scale. Practicing economies of scale basically, imply that these buffet type restaurants prepare food in bulk to lower their operating costs. By practicing this model, restaurants bring down their operational costs and in turn increasing on the margin of revenue generated later.
Staffing Savings( No need to Hire Waiters)
Whether it’s a promotional event or a long-term business model, one area where huge savings can be made is the staffing and hiring of employees. Every buffet or AYCE is a self-service type of restaurants. This completely removes the need for hiring waiters. Thus, revenue is saved on the hiring part and can be contributed to other things such as improving restaurant decor or expanding services and types of cuisine.
Law of Diminishing Marginal Utility
The underlying basic principle for the success of All You Can Eat type restaurants is based on a concept from economics i.e. the law of diminishing marginal utility. Basically, this means that with every piece of food item that a customer eats, his satisfaction level from each individual item keeps lowering. For eg. the First slice of pizza is amazing, the second slice is a little less exciting or satisfying and so on. So basically if you charge a person Rs. 200 per plate for all you can eat food they might be full only after consuming materials worth Rs. 150 but hey still paid Rs. 200, which is profitable for your business.
A flip side to this is that sometimes in the quest to get their money worth, people end up consuming food materials beyond their consuming capacity and it might end up costing you. However, generally, you tend to earn much more profits from people who will only eat till their capacity than with people who go all gung-ho when they see unlimited food.
Balancing the Dishes and Proportions
A well balanced and prepared course for AYCE will always help ensure restaurants stay in the profit margin. Appetizers always come first, and salads and drinks are given to customers to help them fill up on the less costly items in your menu. The more “fine dining” type and expensive dishes are to be presented when customers’will to eat more have almost vanished. This is how you ensure customers are happy with the selection and yet they only have a few select items. It’s the proper balancing of dishes that help accomplish that.
Balancing dishes is alright but managing proportions effectively is how it all clicks into place for your buffet event. By this step, restaurants serve up the low-costing food articles in big containers and fill them up constantly provoking people to believe these dishes are the best and motivating them stock up on those food articles. In contrast, the high-end, high-cost food articles are placed in small containers. The illusion almost always pays up and restaurants end up earning a fortune with one event itself.
Inclusion of Drinks
Unlimited drinks format can sometimes be even more profitable than the food options. The markups on them can be considerably high since they can be procured at relatively lower prices and can be sold at extreme rates. The best example of this Taco Bell’s bottomless coke where you buy a soda for a particular price and have unlimited refills. After the third glass, no one rarely goes for a refill. 4 if you’re someone who loves cola as much as I do!
Things to keep in Mind for All You Can Eat Buffets
Well, by now you might have been convinced that buffets are extremely profitable and maybe you should start up a buffet type service of your own. (Don’t forget getting your FSSAI License before starting a food business) . However, if not run properly, buffet dinners can go disastrously wrong. Here is a list of things to keep in mind while running an AYCE themed restaurant.
You cannot just keep offering unlimited food throughout the day. Well, you can but you will end up being bankrupt in no-time. Keep standard timings for your buffet or keep it on specific days only. This will not give exposure to your restaurant but it will also create a following for your business on non-buffet timings as well. There’s a restaurant named Jiamener, an all-you-can-eat hot pot restaurant in Chengdu, located in China’s Sichuan province which went bankrupt because the people ate too much of their food. DO NOT do what they did and keep fixed timings for your buffet. Keeping fixed timings also attracts more crowd. If people know you’re always open to give unlimited food they might not feel a rush or a compulsion to come to your restaurant.
Many times some naughty people mistake unlimited food for ‘free food’. These individuals share their unlimited food with one or more person to save costs. This rarely happens in up-scale restaurants however, it is not entirely out of the picture. Restaurants can go ahead and ban customers who keep misusing the bottomless format of restaurants and keep coming back, again and again, mooching off other people.
Marketing is important I hope you know that! Now since the service you are offering has a compelling USP(Unique Selling Point) that there is unlimited food, you can advertise that in as many ways as possible. Utilize various channels for growing the outreach of your event and organization. Use Social Media outreach, flyers, boards, hoardings, street signs, e-mail marketing to meet your expected revenue done in the Sales Projection part of your planning.
Thus, with this comprehensive list of things you should consider we hope we provided some insights into how to go about hosting a successful AYCE event or AYCE themed restaurants. Good Luck!
I know, I know I’ve said this before but, it is absolutely necessary and statutory for food businesses to get an FSSAI License before commencing any operations in India. Get your FSSAI license from FSSAI Food License by calling +91-8750008585.