[Request] How much food do you need to eat at China Buffet for them to lose money?

Rather than try to directly calculate this I think I'll try an indirect approach based on common-size restaurant metrics and rules of thumb. I will be using Baker Tilly's "Restaurant Benchmarks" (PDF)" as a basis.

  • A full service restaurant that performs moderately well or is breaking even should be making $150 to $250 of annual revenue per square foot of its space. My local China Buffet has been around for a long time so let's say it fits in this tier. I'll assume the higher end given that the business seems successful based on how long it's existed. It is also in a low cost metro area so I'll assume no adjustments need to made to this metric.

  • It has around 11,000 square feet, so multiplying by $250 results in around $2.8 million of annual revenue.

As a gut check I'll try to back into this revenue figure. The guide says that rent expense for a successful restaurant should be no more than 6% of revenue. Rental rates for restaurant space in the same general vicinity range from $15 to $18 per square foot per year according to current online listings. We'll call it $17 for China Buffet, or $187K annual rent. Dividing the rent by 6% results in $3.1 million estimated revenue...reasonably close to the $2.8 million figure above.

  • Assuming they have very thin margins given their business model, let's say bottom line net income is 2% of $2.8 million revenue, or $56K of annual net income. This margin is consistent with data from RRG Consulting.

  • By 'lose money' I assume you mean you want to wipe out their entire annual income of $51K. I also assume you want to lose them money by the sheer amount of food you eat and not, say, occupying a table to prevent table turnover and cause revenue loss.

  • The average price to eat at my China Buffet is $8 (different prices for lunch vs. dinner). And food costs are around 30% according to the BT guide, or $2.40 per visit. This is consistent with a blog on buffets that I found. Note that this is an average and that some people consume more or less than this amount of food.

  • Assuming a 'normal' visit is indeed $2.40 worth of food, on any given visit to your China Buffet, you would need to eat 3.3x as much as you normally would to wipe out the profit they make off your visit ($8 / $2.4).

  • Assuming that in a normal visit to the buffet you eat 2,500 calories in one sitting. You would need to eat 3.3 x 2,500, or 8,250 calories to make them break even on the price of your meal. Eat slightly above this and you just lost them money. This is doable if you sit there all day and have both lunch and dinner there (and they don't kick you out).

  • However, this would only cause them to break even on your bill. Your ability to actually lose them money is limited only by how much you can eat.

  • Let's say that after eating 8,250 calories in one day you can only eat 2,500 more before calling it quits. That extra 2,500 calories, which on average represents the amount of a calories normally consumed in one visit by a normal adult, would cost the restaurant $2.40 as estimated above.

  • So, $51,000 of net income divided by $2.40 of is over 21,000 days. I do not think it is possible for one person to cause the China buffet to incur an annual loss, just due to the sheer amount of food that would need to be eaten.

In conclusion:

  • To lose them money on your meal alone, you would need to eat slightly over 3.3 times your normal amount of food an average person eats on a given visit. Assuming an average of 2,500 calories per normal visit, that is 8,250 calories total. This is an average and therefore might change if you focus on the higher-price items.

  • If you wanted to cause the China Buffet to lose all of its annual net income, it would not be doable by you alone.

/r/theydidthemath Thread