Still Life with Mussels and Shrimp

The Endless Misery of Endless Shrimp: Why?

All-you-can-eat is a trap. In repeated case studies, it drives restaurants to lose money, sometimes to the point of bankruptcy. The latest poster child is Red Lobster and its Endless Shrimp deal that brought the chain financial misery and a Chapter 11 bankruptcy filing.

How did this happen? Why did management seemingly have no clue that endless shrimp would bring them endless misery?

Butts in Seats

On Marketplace, Stacey Vanek Smith offered insight from restaurant consultant Aaron Allen. He described the quick effect on sales as the attraction:

“‘It’s like heroin … there’s a short high,’ Allen said. ‘They do get a short spike from it.’

“Simply put: All-you-can-eat gets butts in seats. When Red Lobster’s endless shrimp deal was made permanent last year, customer traffic jumped 40%.”

Smith sums up the downside, saying, “If you offer Americans all-they-can-eat, they will eat until you are bankrupt.”

This should have been no surprise to Red Lobster. An endless bucket of crab promotion nearly put the chain out of business in 2003 and cost the CEO her job. Apparently the American restaurant industry can’t help itself any more than American consumers can.

Explain This, Please

Hearing this story, we feel compelled to wonder where the American response to all-you-can-eat has its roots. Is the dysregulated appetite of American consumers the source of our weakness for these deals? Or, as Peter Coy speculates, is there a social and economic explanation?

“I wonder if changes in the economy and society have made people more prone to exploiting all-you-can-eat deals to the max. Trust in big business is the lowest on record, according to Gallup polling. So diners may feel less compunction about taking advantage of a big business’s marketing slip-up. At the same time, people are feeling economically stressed, so free is even more enticing than usual.”

Morgan Spurlock, who made a sensation lamenting super-size consumption habits, has died. McDonald’s cancelled their super-size menu 20 years ago. But the impulse for this phenomenon remains as strong as ever. Red Lobster just proved it by driving itself into bankruptcy.

Click here and here for more on the latest case study in super-size consumption.

Still Life with Mussels and Shrimp, painting by Vincent van Gogh / WikiArt

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June 16, 2024

2 Responses to “The Endless Misery of Endless Shrimp: Why?”

  1. June 16, 2024 at 1:12 pm, Susan March said:

    Great column, Ted. I agree with what you say about the “eat-all-you-can” phenomenon, which defines consumers’ supersized consumption habits—encouraged by restaurants and marketing geniuses.
    However, regarding Red Lobster, the shrimp debacle is only part of the problem.
    This article in NBC News elaborates, “Assigning blame for company failures is tricky. However, some analysts say the root of Red Lobster’s woes was not the endless shrimp promotions that some have blamed. Yes, the company lost $11 million from the shrimp escapade, its bankruptcy filing shows, and suffered from inflation and higher labor costs. But a bigger culprit in the company’s problems is a financing technique favored by a powerful force in the financial industry known as private equity.”

    • June 17, 2024 at 3:56 am, Ted said:

      You make a good point. And one of the problems with private equity financing is that it fosters a preference for making a quick buck. Nothing rings up quick sales quite like all-you-can-eat promotions. So, yes, it’s reasonable to argue that private equity was the real culprit and one of the symptoms of that is the reliance on AYCE promotion to bring in the sales.