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The economics of all-you-can-eat buffets

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Re: The economics of all-you-can-eat buffets

#141

Post by kgwgk »

brownbat wrote: post #125
pintxo wrote: post #100

Earlier quoted context omitted.

24% sounds very much like return on equity. While the 5% for the restaurant are somewhat likely return on revenue.

Alright, yeah, I pulled up basic formulas on profitability ratios to check my math: https://thismatter.com/money/stocks/valuation/profitability-... I've talked myself into: maybe 24% is technically "profit margin," but only because banks are weird and profit margin makes no sense for them. If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investm…

> If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investment.

Return on investment is something else. A grocery store will have sales well above the invested capital. The profit margin may be low-single-digit while ROI is double-digit.

Re: The economics of all-you-can-eat buffets

#142

Post by formercoder »

yodon wrote: post #93
asdfasgasdgasdg wrote: post #50

Earlier quoted context omitted.

Isn't ROIC the more important variable? Let's say I want $100k of profit per year. With 5% margins, I need to do $2M of business. But that doesn't mean I need to pay for all the inventory I'm going to transact up front. I don't have to have $2M capital invested in the business. I might even be post-paying for the inventory (net 30 terms, for example). I post-pay the labor as well. In this case, it's kind of meaningle…

I think the issue is that ROIC is harder to assess and harder to understand than a simple profit margin calculation. For reference, in it's heyday Windows-and-Office Microsoft had a 42% ROIC.

Yeah, ROIC is really tough to get right and be meaningful. NPV is less “right” but more accurate.

Re: The economics of all-you-can-eat buffets

#143

Post by Scaevolus »

xenocyon wrote: post #132

The danger for consumers is assuming this is a zero-sum and that the converse economic goal applies to you (i.e. assuming that the consumer benefits by eating a lot or focusing on meat). I conjecture that after factoring in the economics of health and quality of life, the economic optimum for a typical buffet consumer is the same as for any other eater: to eat sparingly and in a balanced manner.

Buffets feel like an unbounded solution to optimizing for calories per dollar, which is a ridiculous thing to focus on as an overweight engineer!

Re: The economics of all-you-can-eat buffets

#144

Post by ozim »

katzgrau wrote: post #16

The only thing I found more interesting than all-you-can-eat buffets actually turning a profit is that there are business people who are apparently content running a business with such slim margins. This article quotes a 5% margin. I know food industry margins are low in the first place, but as a business owner in a different field I'm left wondering why anyone would even bother. The same business prowess and attenti…

You underestimate how hard it is to switch a field. If it takes $50k to switch I will get better margins but first I have to have $50k. Then how do I know that new thing I will do will bring that profit in first year? That is already $50k and lost profits for figuring out new market.

If you look at risks involved and potential loss of money instead of only looking at higher margins, it is easy to see why people would rather earn their 5%.

Re: The economics of all-you-can-eat buffets

#145

Post by lostlogin »

castratikron wrote: post #130
pge wrote: post #9

The other technique not mentioned here is for buffets to just stop refilling the higher cost items on the buffet if a group of big eaters comes in. then let them sit empty while the diners fill up on potatoes or what not, before finally refilling them.

Another trick is to keep drinks topped off. Fills you up.

Adding more salt to the food helps this path, but maybe I’ve just been too cynical and that day’s kitchen staff too heavy handed.

Re: The economics of all-you-can-eat buffets

#146

Post by AareyBaba »

Jommi wrote: post #56

I'm still at awe of the Sushi Buffet thing that you can see all around in Helsinki, Finland. So far I have not seen anything like it, anywhere else in the world. Usually the price you pay is 10€ for an unrestricted and no time limit access to eating sushi. And the sushi is incredibly okay! It's nothing compared to stuff you find Tokyo ofcourse, but the price for quality is literally unbeatable. And all this is happen…

I'll leave this here and step away 'cause I am supposed to be on a diet. Buffet in Mumbai https://youtu.be/kUosDBUjq5A?t=67

Re: The economics of all-you-can-eat buffets

#147

Post by vnorilo »

Benji_San wrote: post #83
theironlily wrote: post #63

Earlier quoted context omitted.

Perhaps the restaurant uses a lot more rice for the rolls and the nigiris, or offer to fill up patrons with green tea or miso soup. Or, they are constantly busy and make their margins by the sheer number of patrons coming in for the incredible deal!

There are also quite a few all-you-can-eat-sushi buffet places in Turku, all with the same price of around 10€ during lunchhours. A interesting part that was left out from the initial post is that we have these "lunch coupons" in Finland. AFAIK most employers provide these for their employees either as part of the total compensation or allow the employees to buy them tax free. The idea is basically that you get lunch…

In Helsinki, most good lunches are more than the 10.80€ maximum. Everyone is paying the overage of 0.5-1€ with their card. For people unfamiliar with the system, the lunch coupons you use are deducted from your salary pre-tax, so it's significantly cheaper.

Re: The economics of all-you-can-eat buffets

#148

Post by brownbat »

kgwgk wrote: post #141
brownbat wrote: post #125

Earlier quoted context omitted.

Alright, yeah, I pulled up basic formulas on profitability ratios to check my math: https://thismatter.com/money/stocks/valuation/profitability-... I've talked myself into: maybe 24% is technically "profit margin," but only because banks are weird and profit margin makes no sense for them. If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investm…

> If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investment. Return on investment is something else. A grocery store will have sales well above the invested capital. The profit margin may be low-single-digit while ROI is double-digit.

Good catch, most sources and the link I included hold ROI as equivalent to ROA, and distinguish it from profit margin.

I was trying to shift to a lay voice in that bit and in the process totally misused one of the terms of art under discussion, was a bad oversight on my part.

I think my general explanation stands as to why we might want to shift between ROA/ROI and profit margin when comparing different industries though.

Re: The economics of all-you-can-eat buffets

#149

Post by seanmcdirmid »

richk449 wrote: post #110
chrisseaton wrote: post #28

Earlier quoted context omitted.

> there are business people who are apparently content running a business with such slim margins ... I'm left wondering why anyone would even bother A percentage margin is expressed relative to the value of the sales. Low margin on high value sales is as good as high margin on low value sales, in terms of how much money you make. Low margin is only a problem in low value sales. Why shouldn’t people running a business…

> You can’t criticise just the margin in isolation like you’ve done. The article is specifically discussing all you can eat buffets. I don’t think they are selling jumbo jets at Old Country Buffet.

No, but they might be getting a lot of volume. 5% on 100 customers a day is different from 5% on 500.

Re: The economics of all-you-can-eat buffets

#150

Post by BurningFrog »

derefr wrote: post #114

One nice thing about buffets—all-you-can-eat or not—is that, if you want, you can eat small portions of a wide variety of things, rather than large portions of a small number of dishes. The economics of a buffet are the only reason this is really possible; it’s not like you could place an order for e.g. “five breaded shrimp, three grams of braised pork, two wontons’ worth of wonton soup, ...” from a Chinese restauran…

The other nice thing is if you're on some unconventional diet (keto, vegan, kosher, etc), you can pick whatever fits your belief system that day.
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