1. In economics, the law that a yield rate (i.e., of profits, production, benefits, etc.) will eventually fail to grow in proportion to the amount of investment, skill, time, or effort that is added.
The restaurant, to combat high volumes of customers, hired a large surplus of wait staff and cooks. The law of diminishing returns kicked in, however, as the overcrowded staff was far less efficient and eventually cost the restaurant more in wages than it was earning.
2. By extension, the idea that any output or results (e.g., of a product, project, organization, etc.) will eventually begin to fail increasing proportionally to additional time, money, skill, or effort. Schools feel like they have to pile on homework so students meet increasingly high targets for standardized tests, but then you rub up against the law of diminishing returns, because students can only handle so much work before they begin to burn out and perform poorly anyway.
Unfortunately, the show’s charm has not lasted, with increasingly zany plots and more characters than one can keep track of. That’s just the law of diminishing returns, unfortunately.