Even if you did not offer them, are buffets worthwhile?
How would you know?
In this article, I will lay out a case for buffet offerings vs the traditional a la carte menus.
Let’s jump right in.
Traditional Restaurant Offerings
The most common offering of restaurants is the menu based one.
What is known in the industry as a la carte menu items.
These are individual menu items listed with a price for each.
Menu items could be food or beverage types.
More granularly, they could be based on meal periods.
What are meal periods?
Most commonly they are:
- Breakfast
- Lunch
- Dinner
Lunch and Dinner might further have multiple courses (with menu items) like:
- Salad
- Soup
- Entree (Main Course) and
- Dessert
A customer can order any single or combination of menu items in any meal period.
Note the word “combination.”
It will feature in our discussion later in this article.
So, what then is a buffet all about?
Let me introduce you to an example of the concept you may be more familiar with.
The Combo Meal
Ever been to a McDonald’s or Burger King?
If you have, you know if you order Chicken Nuggets, you will be asked if you want the Nugget Combo.
What is this Combo?
Well, it is more than one menu item bundled together.
For example:
- Chicken Nuggets
- French Fries and
- Soft Drink
What’s the big deal with this bundling concept?
It is a big deal.
By selling fries and a soft drink bundled into a meal combo with the entree that is the burger, McDonald's or Burger
King have successfully boosted revenue contribution.
How?
By selling more than menu items in a combination at one time.
The buffet is a restaurant’s version of the Combo meal example above.
Let me explain.
The Bundle Concept
A buffet spread is a bundle offering just like the Nugget Meal Combo.
It brings together the following generic menu items which are also available a la carte:
- salad
- soup
- entree
- dessert
The above is a generic buffet composition for lunch or dinner.
There can be more items added to the bundle depending upon what the selling strategy is.
But these can be considered basic.
We now come back to an earlier question.
What’s the big deal with a buffet?
Rationale for a Buffet Spread
Why are buffet spreads offered?
There are many reasons.
Let’s take first the obvious ones:
- ease of access to the customer or guest
- quick turnaround,
- visual attraction,
- more choices,
- unlimited quantity,
These are reasons which are a huge win for the customer.
I will, through an example later, prove how that is so.
So, the customer is clearly benefiting.
How about the restaurant?
Do they benefit from a buffet offering?
Or, does buffets make money for them?
Yes, indeed they do.
A powerful principle is at work relating to bundles.
The Buffet Revenue Bundle Concept
A buffet which is well conceived of and priced attractively is a major contributor of revenue.
How so?
Let me give you an example of how this works.
Illustration
Let us assume a Lunch Buffet in a 24 hour Dining Restaurant (Coffee Shop).
Items included are salad, soup, entree, dessert. Individual prices of a la carte items included in buffet:
- Salad $3.50
- Soup $4.50
- Entree $11.75
- Dessert $4.75
- Total of a la carte items (without taxes): $24.50
Now, assume that the buffet spread is priced at $20 (without taxes).
Advantages of the Bundle Strategy
Let us list the advantages of this strategy:
- Most critical one is for the guest:
o saving of $4.50 with unlimited choice of menu items in buffet
o this amounts to 18% discount based on a la carte total - This is for the restaurant:
o It need not sell salad, soup, entree, dessert individually.
o in one shot, all items have been sold through a buffet offering.
o This has powerful implications for revenue.
o The restaurant also ends up selling more of the buffet spreads. - Not all guests who choose buffet spreads consume every part of the meal.
o Some may just have the entree and dessert or the soup, entree and dessert and similar combinations which do not include all the items.
o This has implications too. - The most powerful effect is that revenue contribution is higher when a buffet is sold than when individual a la carte items are sold.
- Simply put, revenues are higher with buffets sold.
- This is because of the combination (bundle) of menu items sold at one time.
- Apart from this increased revenue, there is a strong impact on margins and profitability. [See section later on Buffet Profitability].
- With a buffet laid out, restaurant outlet operates with less service employees.
o This reduces labor costs and
o boosts restaurant profitability - With a buffet laid out, there is less movement in and out of the operating equipment
- For example, plates, dishes, chinaware, glassware and so forth) between restaurant and the kitchen.
o This brings down breakages thereby boosting profitability of the restaurant. - So, eventually the restaurant bottom line is boosted by all these factors cause by a buffet spread.
Revenue that consists only of individual a la carte items sold is less effective than a buffet sold.
As said before, the buffet is like a bundle.
The Buffet Bundle Revenue and Profitability
The increased revenue contribution from a buffet compared to individual a la carte items is clear from the above illustrations.
But that is not the only benefit.
There is a huge factor that boosts margins and profitability when a buffet is sold as a bundle:
- the additional variable costs for the revenue achieved are lower
- this increases profitability.
Finally, the most powerful implication of the buffet spread offering is this:
- more buffets sold in a particular meal period result in higher profitability.
- due to better contribution margins compared to individual a la carte items.
So, what is Contribution Margin?
Contribution Margin is based on the principle of the extent of contribution a revenue item makes to the total Profit.
It recognizes that to earn revenue, both fixed and variable costs will be incurred.
However, a change in revenue or sales quantity will only affect the variable costs.
Fixed costs remain unchanged irrespective of sales or revenue quantities.
As a result, additional sales of buffet meals will only incur variable costs.
This will lead to higher profitability.
Lakshmi Narasimhan Soundararajan is the founder of Financial Skills Academy a New York city based enterprise focused on hotel finance training, coaching and consultancy. Lakshmi has been teaching undergraduate and graduate courses for a decade at New York University, Jonathan M Tisch Center of Hospitality as an Adjunct Assistant Professor during Spring and Fall semesters. He teaches hospitality finance, business development among other courses.
Right from the time he was in school, Lakshmi had a head for numbers. In fact, he says, numbers talk to him and tell him stories. At the same time, as he fashioned his career in the hospitality industry, he worked closely with colleagues who did not have a financial background. He saw them struggle with numbers and fear them.
Lakshmi made up his mind there and then to commit his career to hotel finance training by simplifying numbers for the benefit of his non-financial background colleagues.
He is currently working on Financial Skills Academy Membership with the philosophy of assisting hotel middle managers, small business owners and students to Build Financial Skills, Knowledge and Ability in themselves.
His vision is for Financial Skills Academy Membership to be the Ultimate Learning Hub for Hotel Finance Training.
Lakshmi 's all-time favorite historical figure is Leonard Da Vinci and in particular Da Vinci's love for simplicity. While developing his membership site, Lakshmi based the value proposition for his hotel finance training courses on three foundational principles: SIMPLE. NON-TECHNICAL. USABLE.
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