January 26, 2008

Buffets leave a bad taste in investors' mouths

As they say in business, "money talks." And money has spoken against Buffet restaurants.

The Minneapolis/St. Paul Business Journal reports the Buffets Holdings Inc., parent company of Old Country Buffet, has filed for Chapter 11 bankruptcy protection.

Buffets has 626 restaurants in 39 states, including buffet-style restaurants under the Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain names, and Tahoe Joe's Famous Steakhouse steak-buffet restaurants.

No more evidence is needed to point out the flawed business model in today's obese society than Old Country Buffet, where unlimited poor-nutritional food is served.

In this blog I have been telling the restaurant industry to change its ways for almost two years now. Americans don't want cheap unlimited unhealthy food from their restaurants. And now they are voting with their wallets.

The company blames the recession, and higher food prices. I blame the wrong sized portions for the wrong price.

In fact, wouldn't logic dictate that during a recession more people would go to a buffet if it was the RightSize at the RightPrice. But as Yogi Berra might say, people are flocking to stay away from these restaurants.

This year the first of the Baby Boomers are receiving their Social Security checks. And traditionally senior citizens are patrons of these buffet-style restaurants. (At Old Country Buffet anyone over 60 gets a discount.)

But what the executives (from a hedge fund) forgot, that this is the first obese generation...that wants to change their evil ways.

As with all recessions, the poor business models will be tested and discarded in this capitalism yard sale. Unlimited poor food is an idea stuck in the 1950s, and will not resonant in the new millennium.

Paul Olson, research director at Restaurant Finance Monitor, a Minneapolis-based trade publication, said analysts are bracing for bad news next month when restaurant companies begin reporting 2007 results.

"Everyone is bracing for some pretty ugly misses. They think the fourth quarter was going to be pretty bad," he said.

4 comments:

Macarthur said...

It goes to show how little you know about the business model. The Majority of people that go to an OCB/GC/Ryans go there for the variety, quick service, and value. Not to line up for the feeding trough. They like the fact that they can get in, get their food and get out while still getting quality food. It is morons like you that make this world into the self denying place it is. Have some responsibility for your own actions. It is always someone else fault that people are fat, lazy, stupid, etc... try looking in a mirror for once! We are responsible for who and what we are. Quit trying to look elsewhere for the blame. It is PATHETIC!!

Ralph said...

I never have said people should not take responsibility for their own actions. You assume that's it black or white: it's either my responsibility or the restaurant's responsibility. I have advocated strongly that Americans avoid eating large portions of food. I have also advocated that restaurants tell its patrons how big those calorie portions are.

As for Buffets Holdings I know the business model well enough to know that it's not working when you declare bankruptcy. I also know that the "value" at these buffets is short term. You might get a lot of food for a few bucks, but your long term health will be bankrupt by eating your meals at buffets.

My hope is that all Americans take personal responsibility and avoid buffets forever.

MacArthur said...

You know it so well then can you tell me why it is filing chapter 11??? I really doubt it. It has nothing to do with the basic business model of a buffet restaurant. It has to do with overleveraging a company and then a downturn in the economy comes. The buffet segment is not experiencing anything that every other segment of the industry iis facing. There is a dramatic drop in disposable income right now, and eateries are and always will be the first to feel it. This is not anything that we have not faced before.

As far as the other, the buffet industry would LOVE for people to eat less. If you look at the overall offerings in an OCB/GC/Ryans it has more vegetables than anything else by far!!!! and no one is forced to take any more than they want! The industry does NOT dictate the menu's, the public does. Villifying the restaurants is idiotic. They are only doing what the public wants and is asking for. For the industry to try and dictate what the public will eat, will only cause the industry as a whole to FAIL. It is a personal choice by the public.

You said several times about the portions, The buffet segment has NOTHING to do with the portions. That is purely a person choice of the consumer!

Anonymous said...

O.K., macarthur. Take a downer and go away now, like a good troll.