The owners of a struggling hotpot restaurant in Chengdu, China, hoped that a month-long all-you-can-eat promotion would bring in new customers, but it actually put the place out of business in under two weeks.
On June 1st, Jiamener, a relatively new hotpot restaurant in Chengdu, China’s Sichuan province, kickstarted its cheap all-you-can-eat buffet in the hopes of gaining a new client base. Patrons were offered the chance to fill their bellies for just 120 yuan (US$19) per day, for a whole month. The two owners had anticipated that they would suffer a financial loss during this period, but they hoped that the promotion would pay off in the long run, with some visitors becoming loyal customers. They couldn’t have been more wrong.
Technically, their all-you-can-eat promotion worked. Chinese media reports that at the height of its popularity, Jiamener served around 500 customers per day, with many of them lining up at the door several hours before the restaurant opened, and refusing to leave until midnight. Su Zhe, one of the owners, told reporters that in the 11 days that the offer remained active, he only got 2-3 hours of sleep per night, and the staff had to work 10-hour shifts to keep up with demand.
So what went wrong? Well, as it turns out, management didn’t put a lot of thought into how the promotion. They just issued simple membership cards that featured no photo and no way of limiting people’s access into the restaurant. And it didn’t take long for patrons to figure out that they could exploit these faults to the extreme. Some of them visited Jiamener several times per day and even take food to go, and others just passed the card to their family and friends. As Su Zhe eloquently puts it, “it was insane”.
The owners of Jiamener had planned to run the promotion for a whole month, but only 11 days into June, they realized that they were already 500,000 yuan ($77,000) in the red, which was way more than they had anticipated. So they just decided to close the restaurant and cut their losses.
“We knew we would be losing money, but we wanted to accumulate more loyal clients through this strategy,” one of the owners said, adding that they had also hoped that it would help them get better deals from suppliers.
“For instance, if I had lots of customers and many of them have to drink beer, then I have to import lots of beer. By relying on a huge sum of money and bargaining with the merchants, I could lower the price of the imported goods.”
In the end, the two owners of Jiamener admitted that their failure had less to do with the uncivilized behavior of their customers, and more to do with their poor management.