How to Price and Operate Your Restaurants "All-You-Can-Eat" Buffet

by Dave Pavesic Whether you know it y the old na!e of s!or"as ord or the !ore conte!porary salad or food ar# the all-you-can-eat uffet-style ser$ice is still a popular alternati$e to full-ser$ice restaurant ser$ice%

It is not limited to the "budget" steakhouse chains like Golden Corral and Ryan's. Buffet service is also used in country clubs and hotels for unday brunch and salad! focused commercial conce"ts like #eet $omatoes. $he fact that customers can eat as much as they #ant and anything they #ant creates a challenge to the o"erator #hen it comes to arriving at a food cost and a "rice to charge. %o#ever& as this article #ill e'"lain& it is not as uncertain and difficult as it may first a""ear. (hat are the "ros and cons of using buffet service over standard table service) $he first thing that is likely mentioned as a "ositive is that buffet service #ill re*uire fe#er servers in the dining room and therefore save on "ayroll e'"ense. (hile this is true& consider that dining room servers are "aid the minimum #age less the ti" credit. In states #here the federal minimum #age is the standard& this means that servers are "aid +,.-. "er hour. ubse*uently& the amount saved in labor is not going to be significant. In this article& #e look at the rules of survival for offering buffets and salad bars& #here your "rofits can get eaten u" as *uickly as the macaroni salad. $he first "art of the article discusses general o"erational rules of survival& #hich you might heed. $he second section digs into the "ricing as"ects.

Operational Rules of Survival

&here is a food cost trade-off if you use uffet ser$ice% /ood costs #ill be 0 "ercent to 1 "ercent more #ith a buffet than if you em"loy the standard order!taking system of full!service restaurants. $he reason it #ill be more is because leftovers and #aste #ill increase. (hen you cook to order& you eliminate having cooked leftovers and #aste. 2ee" in mind that a buffet must be as fully stocked . minutes before closing as it is at the start of the meal "eriod. $y"ically& food choices #ill be entirely different from those found on the regular menu and leftovers cannot be #orked off #ith daily s"ecials or in regular menu items& thus increasing #aste. You ha$e to do lar"e nu! ers to "et an ade'uate "ross profit return fro! uffet ser$ice% /ull!service restaurants sometimes institute buffet service on busy holidays like 3other's Day and 4aster because of the demand and the ability to service large numbers of customers more *uickly than #ith cooked!to!order food. 5ther full!service restaurants convert to buffet service for brunch on unday mornings and early afternoons. %o#ever& they soon learn that if they do not have sufficient customer counts& the additional food cost can cancel out any labor savings. $he other issue you need to consider #ith offering buffet service is the investment re*uired to offer buffet service in a full!service restaurant. Consider the cost of decorative bo#ls and "latters for salads and desserts& chaffing dishes for hot foods& ice bins& dish dis"ensers& snee6e guards& "ro"ane cookers or even magnetic

induction units used to cook omelets and "asta sauces. In addition& you #ill likely need to "urchase or rent additional linens and table skirts& risers and decorative center"ieces. $he cost of custom!designed hot and cold food buffets for restaurants like Golden Corral is a ma7or ca"ital investment. 8re you #illing to make this kind of investment for a single meal "eriod) $he marketing value of the all!you!can!eat at one "rice can be an effective strategy to increase customer traffic. It is used more at the lo#! to moderate!"riced restaurants #ith "rices ty"ically under +-9 for adults. $he e'ce"tion is #ith country clubs and hotels that offer brunch and are ty"ically "riced in the mid to high ,9s "er "erson. (harin" and do""y a"s are not per!itted% :ou need to be a#are that all!you! can eat "ricing comes #ith some a#k#ard and "otentially un"leasant situations #ith customers #ho #ant to share their food #ith someone in their "arty #ho has not "aid for a buffet. $his re*uires e'"laining this to a customer& #hich never is a "leasant conversation because he #ill often not understand #hy he is not "ermitted to share as he #ould do it if he ordered off the menu. ;ot being able to take home uneaten food is considered #asteful& es"ecially #hen they are told that you discard it any#ay. <If carryout is "ermitted& "ricing is usually based on the #eight of the food& and #ill be discussed in detail in the second half of this article.= &he $ariety and 'uality of ite!s offered on your uffet or salad ar are "oin" to distin"uish you fro! your co!petition% 8s #ith a regular menu& you need to offer some "signature" items or "house s"ecialties" that are uni*ue to your o"eration. :ou have a "mono"oly" of sorts #ith these items and they are going to be the items a large "ortion of your customers #ill seek out #hen they eat in your restaurant. If you are only offering the standard fare& your "rices are going to be lo#er than if you are on the leading edge #ith your buffet choices. You need lar"e nu! ers of custo!ers to opti!i)e the financial returns of all-you-can-eat uffet ser$ice% 5ne #ay to cost out "an average "late" #ould be to have several friends or relatives "ut together "lates that they #ould choose and note #hich items they return to for seconds. >uantify each item taken and cost it out. Consider that you #ill have men and #omen of all ages going through the line and the *uantities they take #ill vary significantly. In fact& s"orts teams traveling across state #ill often sto" at buffet restaurants because they can eat all they #ant for one "rice. :ou have to 7ust look the other #ay #hen a high school or college baseball or basketball team cho#s do#n. Remember& it all e*uals out over the #eek #hen you include the entire mi' of customer demogra"hics that eats from your buffet. $he light eaters #ill balance out the heavy eaters. $his method& cou"led #ith com"etitive "rice "oints of the com"etition& #ill at least give you a starting "oint for your "ricing decision. 8 large number of customers hel" ensure that the averages #ork in your favor.

Pricing Rules of Survival

&he price you char"e is affected y the $ariety# type and 'uality of food offerin"s% 8ssuming that you run your numbers and conclude that the investment in e*ui"ment and serving "ieces for a buffet makes financial sense& ho# do you arrive

at a "rice to charge that #ill give you the return you need) :ou #ill need to start #ith doing your due diligence of "rices at com"eting buffets in your market. $he "rice you have in mind should be one that your target customer #ill be #illing to "ay. If you offer sno# crab legs and "eel!and!eat shrim"& you can charge more <and customers #ill be #illing to acce"t a higher "rice= than a com"etitor offering tuna salad and fish sticks. Greater variety of choices and higher!*uality homemade or convenience items also allo# you to charge a "remium. If you have an u"scale d?cor and offer alcoholic beverages& you differentiate yourself from the com"etition that is basically #hat #e refer to in the outh as a "meat!and!three" o"eration. $hese o"erations are not going to #o# you #ith their d?cor and variety of menu offerings. $hey sim"ly offer the basic menu items like meatloaf& mashed "otatoes& fried chicken& collard greens& corn bread and green beans "re"ared in a home!style manner. $hey are "riced at the lo# end of the "ricing continuum& usually under +@ "er "erson. </or more information& see "%o# to (in the 3enu Pricing Game&"= &he price-per-person !odel% 5nce you are u" and running& you can refine your cost estimates in a #ay that gives you the e'act average cost "er "erson served from your buffet. $he most #ides"read method used today for "ricing all!you!can! eat food bars is the set "er!"erson "rice. 5"erations offering smorgasbords& buffets& and the traditional unday brunch ty"ically charge one "rice for all you can eat. 5ther o"erations serve family style at the table for a set "rice "er "erson. In each case& the "ortion si6e and food cost varies #ith each man& #oman and child that "artakes. $hese t#o key cost factors make it difficult to arrive at a single "rice "oint that is acce"table to all customers because of the differences in "erce"tions of #hat constitutes value. Anlike the controlled "lating of food served from a kitchen& there is no such thing as a controlled standardi6ed "ortion. $he variance in individual "ortions com"licates the task of determining a single food cost that #ill serve as the basis for a single "rice for all adult customers. $he ;ational Restaurant 8ssociation's study on "rice!value relationshi"s at restaurants re"orted that value is not absolute and cannot be determined #ithout considering "rice and cost. Consumers determine the value of a restaurant meal based on the combination of goods and services they receive for the "rice "aid. Customers see themselves as more *uality and value conscious as o""osed to "rice conscious. $he set "rice!"er!"erson "ricing decision begins by determining the food cost for all the items needed to set u" the bar "lus the backu" inventory used to re"lenish the bar during the meal "eriod. 8ssume that +@B0 re"resents the beginning inventory of food and +,.C re"resents the food remaining at the end of the meal "eriod. $he cost of food consumed is the difference bet#een the o"ening inventory and the ending inventory& #hich in this case is +.D1. If the number of customers going through the buffet that day #as ,,D& the average cost "er customer served can be determined by dividing the number of customers into the cost of food consumed <+.D1E,,D=. In this case& +,.09 is the average food cost "er customer. $his "rocedure is re"eated for each meal "eriod for t#o to three #eeks. $he average food cost "er customer #ill vary slightly from day to day

because the mi' of customers& the meal "eriod& and day of the #eek all affect business. 8 #eighted average can be calculated to a""ro'imate a standard "ortion cost for a set "rice "er "erson. 8lthough this is a satisfactory #ay to estimate average food cost "rior to setting the "rice& certain customers& es"ecially #omen& dieters& and older "atrons& are likely to *uestion the "rice value. (ith "er!"erson "ricing& the light eaters subsidi6e the heavy eaters because they "ay 7ust as much as the customer #ho goes back for seconds and thirds. ;utrition!conscious customers are not as motivated to "urchase by all!you!can!eat "romotions. In fact& all!you!can!eat may be vie#ed negatively by those #ho #ant only salads and vegetables and feel that they should "ay less than those eating meats and desserts. 5"erators that use multi"le "rice categories for children& adults and seniors are often challenged by the customer& and in all likelihood& charges are not consistently a""lied by the servers #ho must classify the customer into a "rice category. &he y-the-ounce !odel% 8 ne# "ricing strategy is being tried in o"erations offering self!service salad and food bars. Restaurants are e'"erimenting #ith "ricing by the ounce as an alternative to the traditional "er!"erson "rice for all you can eat. 5ne idea they are testing is #hether "ricing by the ounce #ill increase the marketing value of all!you!can!eat "romotions to nutrition! and diet!conscious "atrons. In addition& all!you!can!eat o"erations that do not "ermit carryouts or doggy bags for leftovers can do so #ith "ricing by the ounce. (ith the increasing demand for takeout service& by!the!ounce "ricing #ould allo# o"erations to offer the same "rice value to both carryout and dine!in customers. Restaurants can basically charge customers for only #hat they take. 8rriving at a by!the!ounce "rice is com"le' because items offered range from ine'"ensive croutons and bean s"routs to the more costly chicken and salmon salad. 8 random check of o"erations "ricing by the ounce revealed "rices ranging from +9.-. to +9.,C "er ounce. $he "er!"erson "rices for all!you!can eat ranged from a lo# of +-.BB for a basic salad bar to double digits for elaborate buffets #ith meat and seafood entrees. %o# does one arrive at a "rice that is acce"table to the customer's "rice!value "erce"tions and the o"erator's "rofit and food cost goals) Pricing by the ounce "rovides the o"erator #ith an o""ortunity to establish "erha"s #hat the most e*uitable menu "ricing methodology is for all customers regardless of se'& age or income level. $he o"erator seeks to set a "rice that #ill cover costs and return the desired "rofit margin. 8rriving at a set "rice "er "erson re*uires an estimate of the average food cost "er customer. $he *uestion is& ho# does one determine the average cost of food "er customer #hen on any given day the mi' of customers may range from senior citi6ens to gro#ing adolescents) (hen a single "rice is used& it must reflect the #ide range of "ortion si6es that are consumed by the mi' of customers. Pricing by the ounce addresses t#o other difficulties sometimes associated #ith "er! "erson "ricing of all!you!can!eat food and salad bars. $hey are the customer #ho shares food #ith another member of his or her "arty #ho did not order& and the issue of taking home leftovers in doggy bags. Carryout meals could also be sold by the ounce& thereby allo#ing customers to "ay only for #hat they take and so creating additional marketing o""ortunities.

Arri$in" at a price% $he "rocess of arriving at a "rice "er ounce is not difficult. %o#ever& there are items #hose #eight and density are at different ends of the #eight continuum. /or e'am"le& D ounces of bean s"routs #ill fill a medium salad bo#l #hile D ounces of "otato salad #ould amount to only three or four tables"oons. Items usually measured in li*uid ounces must no# be measured by avoirdu"ois ounces. It cannot be assumed that , li*uid ounces #ill #eigh , avoirdu"ois ounces. (hen "ricing by the ounce& all items must be #eighed. Divide the #eight& e'"ressed in ounces& into the total reci"e cost to arrive at the cost "er ounce for each item on the salad or food bar. Calculations #ill reveal costs ranging from +9.9, to +9.D9 "er ounce. $he chart on Page 01 sho#s the cost "er ounce of common salad bar items. 8 cost marku" based on the highest cost item #ill result in grossly over"ricing the salad bar. (hen "ricing by the ounce& consider the customer's "ers"ective on the *uality& *uantity and value. 2ee" in mind the "rice range the market for the conce"t #ill "ermit. /or e'am"le& students and faculty "atroni6ing a college cafeteria have e'"ectations of lo#er "rices there than at a nearby commercial cafeteria serving identical food. $here are definite "rice "oints for each conce"t& menu and service delivery system that must be considered before setting the "rice. etting a "rice "er ounce that #ill achieve a s"ecific average check is im"ortant. /irst estimate the #eight of an average "ortion in ounces and divide the number of ounces into the desired average food check. If the average check target is +D.B. and the average "ortion si6e is -1 ounces& a "rice of +9.,. "er ounce is needed to achieve the desired average check. %o#ever& forcing a "rice to achieve a desired average check #ithout "roviding value to the customer #ould be a mistake. ee "8verage Cost Per 5unce for tandard alad Bar Items" belo#. In a survey of costs of "remium salad bar items& the cost "er ounce of "remium items like "asta salads #ith tuna or shrim"& chicken salad& and ham salad can reach +9.09 "er ounce& es"ecially if "remade "roducts are used. ee "Cost Per 5unce for Premium alad Bar Items" belo#. $echnically& a customer could fill the "late #ith high!cost items such as anchovies and smoked salmon and e'ceed the average "ortion cost target. 5ne should not be overly concerned #hen this ha""ens because it #ill generally average out over the month. $he rounded straight average for all items found on ty"ical salad bars is about +9.9@ "er ounce. (ith a "rice to the customer of +9.,. "er ounce& the food cost is a res"ectable ,C "ercent. Addin" $alue% 8 bar #ith both cold salads and hot entrees #ill be "erceived as a better value than one #ith only cold items. 8 national su"ermarket chain #ith in! store food bars "rices both by "er "erson and by the ounce. Its dine!in!store all!you! can!eat "rice is +..,B "er "erson& and the take!home "rice is +D.BB "er "ound or +9.,. "er ounce. %ot selections include fried chicken and "ot roast and desserts like banana "udding and cherry cobbler. $he food bars found in many budget steakhouses offer similar lo#!cost hot food itemsF that is& meatloaf& fish sticks& and s"aghetti and meatballs. $he cost of most items #ill still be under +9.,. "er ounce. Premium cold items like "asta& chicken& and tuna salad "rovide value and command higher "rices. 4ven the *uality of the salad dressing can affect "rice!value "erce"tions of the customer. Does the bleu cheese dressing contain chunks of real bleu cheese) "ecialty items like anchovy fillets& stuffed man6anilla olives& and "ickled corn are "remium items& too.

Cost marku" of salad bars and buffets is ty"ically lo#er than "lated items in full! service o"erations. $he overall food cost "ercentage #ith a food bar or buffet #ill usually run four to si' "ercentage "oints higher than #ith table service. $his translates to a better value on the "late. $he added costs are recovered from the lo#er labor cost associated #ith self!service. In high!volume o"erations& once the sales e'ceed the break!even& every "ercentage "oint that fi'ed costs are lo#ered goes directly to bottom!line "rofit. (ur$ey says%%% 4leven foodservice o"erations in a large southeastern city offering all!you!can!eat salad or food bars #ere surveyed to ascertain offerings and "rices. 5nly one commercial o"eration "riced its salad bar by the ounceF it charged +9.,. "er ounce. /our of the restaurants offered only cold items #ith "rices that ranged from +,..9 to +..0. "er "erson. $he higher "rice #as indicative of more e'tensive offerings& the higher *uality of their selections& and intangibles such as location& ambience& and service. i' o"erations offered hot entrees along #ith salad items #ith "rices ranging from +D.BB to +1.0B "er "erson. Carryout #as "ermitted in all but one of the o"erations& and the "rice #as the same as the dine!in "rice. Pricing by the ounce does have some #eaknesses that need to be considered before s#itching over. /or e'am"le& the daily average check may fluctuate and run lo#er than #ith a set "rice "er "erson. %o#ever& this does not necessarily mean lo#er overall revenue if daily customer counts increase to offset lo#er check averages. In addition& digital "ortion scales must be "urchased& and the logistics of having to #eigh each "late before the customer is seated may be disru"tive to the service delivery system already in "lace. 3any customers like to return to the bar for seconds& and "ricing by the ounce "recludes return tri"s& #hich could lo#er the value "erce"tions of the customer #ho e'"ects to return for seconds.

For Now, Per Person is the Rule, Not the Exception

Pricing of all!you!can!eat salad and food bars in commercial foodservices by a "er! "erson charge is the most #idely used "ricing strategy largely for reasons of marketing& logistics and customer "rice!value "erce"tions. Institutional foodservice o"erations and retail grocery stores may find that "ricing their food and salad bars by the ounce is an acce"table alternative "ricing strategy. %otels and "rivate clubs offering elaborate buffets containing boiled shrim"& "rime rib& and other "remium items may find a "er!ounce "ricing structure im"ractical. Changing from a "er!"erson "rice #ould likely lo#er the "rice!value "erce"tions of regular customers. /or no#& commercial o"erations featuring food and salad bars are likely to remain #ith th