The Foodlympics and Never Ending Pasta

Welcome to The Modern Day Renaissance Man newsletter. I, Trey Layton, write about the things that interest me, often covering topics such as startups, sports, and entertainment. If you'd like to receive these newsletters directly in your email a few times a week, go ahead and subscribe to never miss an email!

Happy Monday, folks.

Why can’t we let people enjoy things?

My Halloween costume just came in, the leaves are just beginning to fall and provide that satisfying sidewalk crunch, and football is in full swing, yet the rest of the world has already moved on to Christmas. With more than two full months until December 25 and an entire holiday sandwiched in between (I appreciate you, Thanksgiving), stores have already swapped the football Reese’s for the Xmas Trees and the PSL for the eggnog. What’s next? Black Friday Holiday shopping in October?

What’s that? They’re doing that right now, too? I give.

On Friday, I wrote about the rumored partnership between ESPN and DraftKings, killing two birds with one stone in the process by touching on both sports AND movies. This gave me more time to listen to some football on the radio this weekend as I drove around looking at trees, and my cholesterol immediately shot up when the advertisement aired for the return of Italy’s favorite form of cultural appropriation, the Olive Garden "Never Ending Pasta."

For those of you whose doctors don’t hate them, this in-store promo lasts for a few weeks and gives patrons the opportunity to do their best Joey Chestnut impression by selecting a base from four types of pasta, some flavor from five options of sauce, and some protein from among four options for an additional price. Then, as the name implies, customers get to eat that combo until they’re physically ill as the waiter continues to bring fresh plate after fresh plate and judge you as you put down pounds of pasta.

I understand that pasta is cheap, and for the more expensive ingredients like chicken and meatballs, you do have to pay a bit more, but if you’ve met any teenage athlete, some people can eat. That's not even considering other restaurant expenses such as waiters and cooks. How does every Italian's personal hell make money?

The question becomes even more prominent when you consider its applications for more upscale establishments like Brazilian steakhouses where the ingredients become more expensive. They might sucker some people into filling up on the salad bars, but many other customers (guilty) make it a personal mission to make the restaurant lose money as they fill a dozen plates with ambrosial cuts of lamb and filet.

It turns out that the financial implications of buffets and unlimited food offerings are different for different types of restaurants.

For a more typical a la carte restaurant such as Olive Garden with its pasta or Red Robin with its bottomless fries, the never ending menu items aren't really meant to make money directly. Consider the fact that OG discontinued its endless pasta bowl back in 2019. This decision was due to the fact that the promotion actually lost the company money and had a "negative impact" on sales according to the company's CEO.

This statistic is a bit misleading, though. While revenue was hurt, there was actually an uptick in traffic. More repeat customers frequented stores, and more irregular customers were drawn to the promotion, but there were fewer patrons purchasing other items with individual pricing. These a la carte items are more profitable on a per-item basis, thus despite more customers and serving more food, the company was still losing revenue.

Other restaurants have exploited Americans' affinity for carbs and lipids and turned to unlimited food, too. One of my favorite middle school football postgame rituals was hitting TGI Fridays for its bottomless boneless wings. First, boneless wings are superior to bone-in, and I really don't care if they're just saucy chicken nuggets. Second, while the company might not have made money on this God-given appetizer, it did succeed in bringing me and countless others into the restaurant where we also purchased high margin products like drinks and other food items.

More than anything, bottomless offerings are marketing campaigns which succeed in driving traffic and brand awareness in ways which are economically profitable for the company to justify the lost money on the item itself.

For more high scale restaurants with these business tactics, there actually is quite a bit of profit to be made from the food itself. In 2021, 🐐 of the Churrascaria restaurant world, Fogo de Chao, posted its highest ever revenue numbers with $314.4 million in sales, just short of that of popular drive in Sonic (near $420 M... nice). For how few Fogos there are, those are impressive numbers. This is indicative of the margin for Fogo which is what really sets it apart from most other types of restaurants.

Let's envision a trip to one of these glorified buffets. You walk in, sit down, and immediately get up again to fill your flying saucer-sized... saucer with vegetables, cheeses, and carbs. You sit down and get to munching right as you're provided baskets of heavenly cheese bread rolls, plantains, and potatoes. Finally, you turn your plate marker to green for go, indicating to the speedy waiters that you're ready for the meats. Before even swallowing the first bite, you're offered skewers of pork, chicken, and all things steak. If you've survived this long, finally, you feel it necessary to finish the day strong with a Brazilian cheesecake or chocolate lava cake.

At $60 per head, regardless of how hungry you are or how big your appetite is and how high the quality of the cuts you choose might be, it's hard to push past the meat sweats and eat enough to "beat" the price you're paying. It's even more unlikely for those with smaller appetites such as women and children who generally pay the same price and eat half as much. In addition to some customers naturally being higher margin patrons that pay for the offensive linemen among us, the real money is still also made by filling you up on the cheaper salad bar offerings, drinks, and desserts which have profit profiles similar to those of a la carte restaurants.

To conclude, the never ending pasta bowl from Olive Garden will probably not make the company much money directly. In itself, it's just not very profitable, even if the food is pretty cheap to prepare. Instead, this LTO will likely succeed in driving customers back into restaurants when economic conditions such as inflation have taken their toll on sales, particularly among lower income consumers. As those customers flock to America's favorite "Italian" kitchen, they will remember their affinity for the breadsticks while still shelling out on high margin drinks, especially because of the recipes' purposeful use of excess salts to make customers thirstier. Hopefully, even once Never Ending Pasta leaves us once more, customers will still take a family trip for the lasagna.

For more upscale establishments (personally would classify Italian Applebee's as gourmet, but to each their own), the single set price for the unlimited food is profitable in itself as some customers are more than profitable enough for the others, and all customers tend to fill up on cheaper items like the salad bar and bread. Customers also tend to still purchase high margin items like drinks and desserts, and the way in which waiters rush the food to customers' plates makes them fill up faster and eat less than they would have had they slowed down their pace.

I hope this educated all of you as consumers.

Personally, I learned nothing from this research. I still plan on going to Olive Garden or Fogo and doing everything I can do to make the restaurant kick me out because of my personal impact on their hundred million dollar budget sheets despite what the numbers might say.

Tell me I can't do something. Then, watch me.

Cheers to another day,

Trey