Jeremy Julian

4 Reasons a Restaurant Should Avoid Deal Sites

April 1, 2014

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We are all looking for a great deal.  Whether it is as a business owner or as a consumer, everyone is looking to stretch their dollar as far as it can go.  And why wouldn’t you?  We are paying more in taxes, more in gas prices, and just more everywhere than ever before.  So as a consumer, why wouldn’t we want to seek out the great deals services like Groupon can provide? Better yet, as a business owner, why not drive new business in the door by offering a great Groupon deal and then getting repeat business?? With the increasingly cluttered hospitality space, it is difficult for small restaurants to dig out a spot for themselves. Despite this seemingly impassible hurdle, do not, I repeat, do not fall into the deal website trap.  Here are four reasons why:

  1. These sites like Groupon are not a charity.  They are legitimately HUGE businesses that are trying to make money.  They do not care about your business, your well-being, your family, or the vet bill Fido just racked up after he ate the dining room rug.  The salespeople at Groupon don’t care if you’re only realizing a 30% margin on your sales already and are demanding to take 60%.  It’s not their problem.  The traditional Groupon model requires a discount of 50%, after which the merchant and Groupon split the revenues.  This cuts-past-bone deep into your revenue and can really take a bunch out of your bottom line. (reference: here)
  2. Customers in, customers out.  Sure, discount deals will drive people in the door.  But will these people come back to your store?  Odds are, they won’t.  In a survey done by the business insider, of those surveyed, “only a handful” customers turned into repeat customers. This means you are paying dearly for one-off business that won’t come back to help fill that void that Groupon sucked from your bottom line in the initial deal.
  3. Does it fit your concept?  Are you trying to give the aura of a high-end restaurant? What about a niche dive that supports the local community?  Or how about a restaurant that is confident its food and service will stand on its own? Groupon and services like it have quickly diluted the reputation of many restaurants as seeming like a last resort.  I know I have personally purchased Groupons to two separate restaurants only to have them go out of business before I can use the deal. Is this related to the discount deal specifically?  Maybe, maybe not. What it does indicate is the use of Groupon as a lifeline or as a ditch-effort to revive the business. If you’re trying to develop your own voice (and let’s be honest, who isn’t?), steer away.  Use the money you would otherwise use in some well-placed marketing efforts or go support a charity. It’ll go a lot further for you in the long run.
  4. The surge.  Best case scenario, your deal takes off and people are flooding into your restaurant waving smartphones and printed-off deals like they are mad. Combined with the fact that you likely won’t make much money off this wave, it can create a dangerous situation for your restaurant.  By artificially inflating your numbers, you make it incredibly difficult for yourself to help realize what is real demand and what is the one-off business.  When you’re trying to predict the demand in upcoming weeks, the lines start to get blurred when it comes to inventory management, labor management, and other managerial decisions.  Sure, your POS system will help you out immensely, but this unnatural cycle creates nothing but headaches for management… Take our word on this one.

Some of you may have seen great success from using deal services like Groupon.  Obviously, Groupon has been able to stay alive this long by being able to show some success stories.  If you’re a Groupon success story, We’d love to hear it.  Sound off in the comments to let us know!

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