The Economics of Eat-All-You-Can Chicken Wing Restaurants

Naughty Nachos Unlimited Chicken Wings. Photos via Flickr/Jep

I was supposed to write about this restaurant I just went to called Naughty Nachos which offered eat-all-you-can chicken wings from a variety of flavors to choose from all for 299 pesos. However, the whole experience was so underwhelming that I decided to write about something else instead. While waiting patiently for about 30 minutes for the next batch of chicken wings to arrive (yes it was that bad) it got me thinking how can these restaurants exist? Wouldn't they be losing money every time? Surely, their strategy is not to have service so bad that you won't return there again, so they won't lose money serving customers, right?

Well, as it turns out, there is this concept of Loss Leader Pricing Strategy in the restaurant industry. Simply put, it is when you sell a menu item at below-cost to entice customers to try out your restaurant. These items are usually prominently featured in advertising materials which can take the form of posters at the front of the restaurant or in "Value Meal" promotions in digital signages. The idea is that once they lure you in using these menu items, the staff will then push hard to upsell other menu items with a higher profit margin (such as drinks and side dishes). Have you ever wondered why some restaurants have a "no outside food and drinks policy" in place or a corkage fee imposed on food brought over for parties when you use the restaurant as a venue for an event? They are concerned that you will just bring in items when you see that the same items on their menu seem to be much more expensive than say in a grocery. This particular strategy should be employed with caution since there is a real possibility that the customer will only buy from the loss leaders and the items on the menu with minimal profit margins. 

The restaurant can also make use of other strategies such as purchasing the raw material for the dish in bulk to take advantage of wholesale prices (oftentimes buying directly from the supplier thus eliminating the middlemen) as long as they can figure out the logistics of delivery which is usually provided by the middlemen. 

Most buffet restaurants have a set time limit for the customer to dine. This time limit is carefully considered to prevent abuse of the system.

Oftentimes, the pricing reflects a reasonable amount of food that an average person can eat in a given time frame. Sure, there will always be outliers that can wolf down an unbelievable amount of food for a short time, but on average, they should be able to earn a profit.

Another thing that you should also realize is that the restaurant business is oftentimes a very competitive space, and margins are usually razor-thin to begin with. So they do everything they can to minimize losses due to wastage -they typically impose a heavy fine for excessive leftovers. And they also prevent spoilage since unlimited wings are typically cooked to order. They also strictly control the portion sizes (in our case it is just 4 pieces of wings per serving).

Then there's the arguably shady practice of deliberately delaying the serving of the food so that the diner's consumption is limited by the time limit imposed by the restaurant if there's any. 

Oh, and if you're wondering about the dining experience at that restaurant, it was truly disappointing! Granted, it was Valentine's Day evening at that time and a long queue was waiting to get seated. The time between servings of 4 pieces of chicken wings was on average 15 minutes. They kept forgetting what we had ordered. And to top it all off, we didn't even get the flavors we ordered, and we just got random flavors (who knows maybe they were meant for another table?). We were so hungry between servings that we didn't even care and gladly ate whatever the waiter served. We ordered an additional order of unlimited French fries for 99 pesos on top of the base price. The fries were hit-and-miss. We would sometimes get a good batch which was hot off the fryer and sometimes it felt like we were eating pieces of cardboard sticks. Fortunately, this particular restaurant did not have any time limit. However, they might as well have one since we just decided to leave the restaurant since most of the stores in the mall were closing down for the night and the centralized air-conditioning has been turned off.

In conclusion, the economics behind eat-all-you-can restaurants are complex and multifaceted. From loss leader pricing to bulk purchasing and waste control, these establishments employ various strategies to maintain profitability. While my experience at Naughty Nachos was far from ideal, it provided valuable insight into the intricate balance these restaurants must achieve just to remain in business.