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There is an old episode of The Simpsons in which Homer goes to the Frying Dutchman buffet and is thrown out after eating all of the shrimp, along with two plastic lobsters. “But the sign said, ‘All You Can Eat’,” he protests, and sues Sea Captain Horatio McCallister, the proprietor.
Red Lobster was not watching, to judge by its current troubles. The US chain has considered Chapter 11 bankruptcy after disastrously putting a $20 “Endless Shrimp” option on its menu last year and making losses by attracting too many Homers. Buffet-style restaurants are constantly in danger of having their all-you-can-eat offers being taken literally.
The company really should have known, having got into identical trouble two decades ago by launching an “Endless Crab” promotion, and finding that customers were all too willing to test the proposition. The thing that sunk it “wasn’t the second helping on all you can eat . . . but the third”, Red Lobster’s then chair explained. “And maybe the fourth,” another executive added mournfully.
But mispricing crustaceans as a marketing gimmick is a symptom rather than the cause of the travails of these chains. Fixed-price buffets, which first came to Las Vegas as a loss-leading way to keep punters at the tables, have long felt tired. They have been overtaken by fast casual chains such as Chipotle, Shake Shack and Panera Bread.
The strange thing is that all-you-can-eat buffets are thriving at the other end of the income scale. Lavish and expensive spreads that offer fine steak, crab and lobster by the kilo, and even all-you-can-drink champagne, are popping up not only in Las Vegas but other places. Casual Sunday lunches at pubs have been succeeded by bacchanalian feasts at casinos and restaurants.
Les Grands Buffets in Narbonne, at which 380,000 diners each year pay €52.90 for piles of haute cuisine including nine kinds of foie gras, was recently dubbed “the hottest restaurant in France” by The New Yorker. The Ned hotel and members club in London offers a Sunday feast of oysters, roasts and champagne for £165, and Caesars Palace Las Vegas a weekend blowout for $85.
All-you-can-eat buffets have thus become exhibit A of what Jane Fraser, Citigroup’s chief executive, this week called “the K-shaped economy”. While lower-income consumers are feeling a sharper financial pinch, the K’s upward stroke denotes the well-off shoppers and diners who, as the consultancy EY put it, “want retailers and brands to excite and entice them”.
The luxury all-you-can-eat buffet feels like a more profitable and less perilous operation than Red Lobster. The high entry price means such operations can afford a few diners who eat in excess of two helpings and guzzle a lot of drinks. The clientele are also more likely to be there for the ambience and less focused on ensuring they consume enough to get a good deal.
The financial problem with traditional chains is that they operate on very thin margins and rely on pulling in plenty of diners to minimise the amount of food that has to be thrown away. Food waste can easily push them into losses, which is why they often default to flashy promotions such as “Endless Shrimp” to lure customers from rivals, says Aaron Allen, a restaurant consultant.
That is an easy trick to get wrong. David Just, a Cornell University economics professor who has studied buffet behaviour, tells me that a bargain offer of prime crustacean is bound to attract “many people who place a high value on one item and are going to eat a lot of it”. It can be mitigated by putting a time limit on promotions but Red Lobster’s was open ended.
The K-shaped economy offers some hope to buffet dining chains, which are above all cheap. The average weekend fixed lunch price at restaurants franchised by Golden Corral, a large US chain, is $12.99. You can fill up on plenty of food while watching every dollar, and its sales have grown by double digits in the past two years after being badly affected by the pandemic.
Golden Corral has done better than Red Lobster by focusing not on promotions, but on driving down its costs so it can profitably undercut competitors even at the bottom end of the market. I doubt whether a Golden Corral meal would satisfy a patron of Les Grands Buffets, but it is faithful to the original $1 “Buckaroo Buffet” at the El Rancho in Las Vegas in the 1940s.
This has further potential. McDonald’s and Coca-Cola both said this week that poorer US consumers had cut spending in the face of persistent price rises and were trading down. McDonald’s said it was focused on providing an “entry-level meal bundle”. There is the opportunity for buffet-dining chains: forget the crab and lobster, offer a very cheap spread.
The evolution of all-you-can-eat buffets tells you all that you need to know about the unequal state of the new economy. The gulf between the luxury feast and the basic meal will keep on widening. Red Lobster’s mistake was not making the “Endless Shrimp” offer, but pricing it too cheaply and marketing it to the wrong people.