Buffet Power in a Restaurant Sales Mix
This Part 2 of a 3 part series is on Buffet Power in a Restaurant Sales Mix.
Click here if you did not read Part 1.
In Part 1, we learned about the components of a sales mix being menu item mix, meal periods and market segments. We also saw how restaurant seat capacity plays such an important role in not only revenue generation but also profitability. We will now look at a concept which is central to optimizing sales mix in a restaurant and which is a popular approach adopted by hotel restaurants. In the process we will learn how this approach boosts restaurant profitability.
The Buffet Philosophy
No Restaurant Sales Mix analysis whether it be of menu item mix, meal period or market segment is complete without an analysis into whether menu items are a-la-carte dishes or a buffet spread. A-La-Carte dishes are single menu items sold separately. In a traditional menu list, each menu item priced separately is thus an a-la-carte menu item. The most popular and common offerings of restaurants are individual menu items or a-la-carte items. Hotel restaurants often offer buffet spread apart from a-la-carte ordering.
A buffet spread is a bundle offering which brings together the following generic menu items which are also available a-la-carte:
The above is a generic buffet composition for lunch or dinner. There can be more items added to the above depending upon what the selling strategy is. But these can be considered basic.
Rationale for Buffet
Why are buffet spreads offered?
Apart from the obvious reasons of ease of access to the customer or guest, quick turnaround, visual attraction, more choices, unlimited quantity, there is a powerful principle at work relating to a Restaurant Sales Mix.
Buffet Power in Revenue Contribution
A buffet which is well conceived of and priced attractively is a major contributor of revenues to a Sales Mix.
Let me give you an example of what this means.
Lunch Buffet in a All Day 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).
Let us list the advantages of this strategy:
- Most obvious one is the saving of $4.50 (this amounts to 18% discount based on a la carte total and more than 20% based on the buffet price)
- Instead of selling the salad, soup, entree, dessert individually, in one shot, all items have been sold through a buffet offering. This has (as said before) powerful implications for the Sales Mix.
- Not all guests who choose buffet spreads consume every part of the meal. Some may just have the entree and dessert or the soup, entree and dessert and similar combinations which do not include all the items. This has implications too. The most immediate effect is that revenue contributions are higher when a buffet is sold than when individual a-la-carte items are sold. Simply put, revenues are higher with buffets sold. Apart from this increased revenues, there is a strong impact on margins and profitability.
- With a buffet laid out, the restaurant outlet can operate with less number of service employees. This again reduces labor costs and boosts restaurant profitability
- With a buffet laid out, there is less movement in and out of the operating equipment (plates, dishes, chinaware, glassware and so forth) between restaurant and the kitchen. This brings down breakages thereby also boosting profitability of the restaurant.
It is quite obvious that a Sales Mix that shows individual a-la-carte items sold (not all of them all the time) is less effective than a buffet sold. As said before, the buffet is like a bundle.
The McDonald’s Meal Combo model
Although McDonald’s is a fast food outlet serving pre-portioned and processed food and is different from a hotel restaurant outlet (primarily the all day dining restaurant), the Sales Mix principle involved in the Meal combos sold by them is similar to the buffet spreads offered in hotel restaurants.
By selling Fries and a Soft Drink bundled into a Meal combo with the entree that is the Burger, McDonald’s has successfully boosted revenue contributions by optimizing their Sales Mix.
Buffet Power and Contribution Margin
The increased revenue contribution from a buffet sales mix compared to individual a-la-carte items is clear from the above illustrations. But that is not the only benefit. A huge factor that boosts margins and profitability is that when the buffet is sold as a bundle, the additional variable costs for the revenues achieved are lower thereby increasing profitability.
Buffet Power in Restaurant Sales Mix Profitability
Finally, the most powerful implication on Sales Mix of the buffet spread offering is that more buffets sold in a particular meal period result in higher profitability (owing to better contribution margins as seen earlier) than compared to individual items on a-la-carte basis.
One related factor in a revenue contribution from a sales mix is the concept of a table turnover ratio. Table Turnover Ratio is a simple ratio which measures the number of times a table in a restaurant is turned over during a particular meal period. In effect, how many number of times the same table in a restaurant is sold.
Obviously a high turnover ratio means higher incremental revenue for the restaurant.
In the concluding Part 3 of this 3 part series on Restaurant Sales Mix, we will examine the powerful concept of Table Turnover Ratio and its application in restaurant meal period analysis.