Monday, April 21, 2014

The "Golden Corral" Story (With Lobster)

To this day, I've never seen a "Golden Corral" restaurant in person, despite it being a nationwide chain, and despite having seen hundreds of TV commercials for it on ESPN over the last few years. THIS recent 15 second TV spot caught my eye in particular, because it advertised that diners at the all-you-can-eat "Golden Corral" buffet could now, for a limited time, also purchase lobster tails a la carte for an extra $3.99 each.

This offer raised so many questions (like "Why lobster?" and "Why now?" and "How many people who go to a $10 all-you-can-eat buffet really want to buy an a la carte lobster tail?"). And in the quest for answers, I learned so much more.

To use the language of crime, the 'Motive' and 'Opportunity' were spelled out in THIS Wall Street Journal article from last month. "Supply of lobster is plentiful and pushing down prices. This comes at a time when rising commodity costs are boosting the price of foods like beef and coffee... Inexpensive chain restaurants have jumped at the chance to add lobster's premium image to their menus. Golden Corral bought 200,000 pounds of frozen lobster tails last August. It paid $3.79 per tail... Golden Corral is now thawing the tails for a limited-time special, a common practice with tails served at inexpensive restaurants. (The tails have a 12-month frozen shelf life, Mr. McDevitt says.) The special is timed to lure diners after a cold winter that kept them eating at home, he says. At $3.99 a tail, the company isn't making a profit on the special, but it is likely to boost sales of buffet dinners, he says."

Has this business strategy worked, I wondered? It turns out that the North Carolina-based Golden Corral Corporation is privately owned. So it doesn't make its financial results public. Golden Corral Corporation is owned by Investors Management Corporation, or IMC, the founder, Chairman and largest shareholder of which, James Maynard, is also the co-founder of Golden Corral Corporation. In addition to Golden Corral, the IMC family of companies also includes an oncology management company, a building materials distributor, and an investment management firm.

I've always thought the name "Golden Corral" was an oddly imperfect one for a chain of buffet restaurants. The company's history, which dates back to the early 1970s as it turns out (detailed HERE) explains it all. "Golden Corral" began in 1973 as a single steakhouse in Fayetteville, North Carolina, when the co-founders had their application for a "Ponderosa" franchise turned down. They later expanded it into a chain of steakhouses that by 1987 had over 500 restaurants in 38 states, intentionally sited in small town markets with little competition. But by then American tastes and eating habits were changing, and the steakhouse business stalled. So in the early 1990s they evolved "Golden Corral" into the chain of all-you-can-eat buffet restaurants it is today.

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