Groupon approached me to offer a coupon on their site. I ran the numbers inside and out and I could not figure out how I could do this without losing money on each person.
The customer buys a $50.00 groupon. Groupon really wants restaurants to offer coupons that will cover the price of one person's meal. In other words, they won't approve a coupon for lets say $15.00. If you see a restaurant offering one at that price you'll see alot of negative comments. Groupon doesn't like negative comments. No one does.
The customer pays $25.00. The restaurant receives $12.50 and Groupon keeps the other $12.50. The problem is that a $50.00 meal will cost the restaurant about $16.00 to produce. So the restaurant loses $3.50 for every person with a Groupon just in the cost of food and beverage. There is no money for overhead and payroll.
The sales pitch offered by Groupon to the restaurant is that the Groupon holder will bring in someone else to eat with them filling the restaurant's empty seats. Another pitch is the promotion will get new people in and they will become regulars and come back and spend money on their next visit. Groupon tries to set some limits such as not allowing more than one coupon for every two people, or just 2 per table.
The reality is that most of the time the Groupon holder will just spend the $50.00, even for 2 people. There is a certain pleasure in not spending a penny more. Another reality is that Groupon holders will not come back, they will go to the next place that is offering a Groupon. And the last reality is that Groupon holders will come in on a Saturday night when you are already going to be booked and take up the space of regular diners whose check average covers the costs and overhead. This is a big concern when the Groupon is about to expire and the dining room is packed with people using theirs before they expire. This really hit a friend of mine last week. I know this isn't very nice of me to say and of course some of the diners will not fit this profile, but those are the facts.
It is very hard to stay competive in this business. It's very hard not to want to try anything to bring in a new customer base, but when you are already cutting your margins very tight in order to offer your guests a great value, this program is too risky.
I love Groupons but I also appreciate your points. I try to use my restaurant Groupons other than Thursday to Saturday, because good restaurants are busy on those nights. I tip for the full value of the meal. And I always take my husband with me and he seems to have the view that since we have a Groupon he can buy a better bottle of wine AND order something more "daring" on the menu. But it sounds like we might be in the minority. I love your restaurant and will be back soon.
Posted by: Linette Barclay | February 07, 2011 at 07:24 PM