I have eaten at restaurants using a Groupon from time-to-time over the past year. It makes me feel guilty. I know that the restaurant is only getting 25 cents on the dollar for their deal. So that $20 steak you paid $10 for yields the restaurant $5 – and typically the restaurant has to wait 3 months to get their $5! Even if every customer spent another $10, the restaurant still is providing $30 of food and drink for $15 and that just isn’t profitable.
While the restaurant is hoping that some of those Groupon customers will result in long-term customers however I expect the exact opposite is true! There is a steakhouse that I used to enjoy eating at once every 3-4 weeks. I would typically spend $150 for dinner for 2 and always thought the experience was a great value even though admittedly the price was a bit high. Imagine my delight when I saw a Groupon where I can get $50 of food for just $25! I was overjoyed at my find. Next time I went my bill was discounted by the $50 value for the Groupon I had purchased and of course I had purchased about $150 of dinner and drinks so I am sure the restaurant believed they had made money on my dinner. However a month later I was ready to eat at a steakhouse and thought about my favorite venue. Looked at Groupon to see if they had a deal. Nope. Maybe they have another one coming out in a couple weeks?
Instead of going to my typical destination I decided to put that on hold and try something new. I didn’t see a Groupon on any steakhouses so I tried a place I had heard about in my area. Sure enough, I decided I liked this new place better than my old standby. My old place still has a Groupon every once in awhile and I have purchased another one. However it is about to expire because when I want to go to a Steakhouse I want to go to the one that is my favorite rather than saving the $25.
I suspect that many people who use Groupon use it exclusively. They only dine at places when there is a Groupon available. So these are people you will never make money on as a group.
Which type of restaurant makes more money? The one known for having the cheapest food or the best food? Of course it is the one known for having the best food. Discounting or providing huge portions at super low prices isn’t a recipe for success that typically works. There may be some examples but I can’t think of any.
Groupons are a manager’s desperate attempt at ignoring problems rather than fixing them. Typically offering a Groupon happens somewhere along a downhill trend for the restaurant that escalates its demise.
I recently ate at a Chinese restaurant with a Groupon that I had purchased a couple months earlier. For dinner at 7:30 pm on a Friday night I was the only table. They had a buffet that looked like the food had been there since lunch. Obviously Groupon wasn’t the solution for their problems.
I don’t know of any chain restaurants using Groupon which is another sign that they don’t work. If you are having to advertise heavily to keep the revenues up at your restaurant then the only explanation is that you aren’t having repeat customers! After your restaurant has been open 6 months you should be able to dramatically scale back on your advertising and perhaps eliminate it altogether. If after 6 months you still don’t have enough repeat business to keep your restaurant full then likely you need the help of a professional restaurant consultant.
There is no way that any restaurant owner or manager can be awesome at every aspect of the restaurant business. It is so easy to overlook things that may be obvious to someone else. At Destination Restaurant Consulting we have a variety of services that can assist with your turnaround. One of our most popular services has been our 7 Day Restaurant Rescue – and it isn’t only for restaurants in danger of closing. Our 7 Day Restaurant Rescue consists of 150 hours of restaurant consulting done by two of our restaurant consultants over a 7 day time period plus some followup work after the week is over. This program is customized to best meet your needs and often includes menu engineering, food cost reduction, labor cost reduction, and overhead cost reduction. The 7 day Restaurant Rescue costs $880 per month for 12 months if approved for financing or $8,800 without financing. This a fixed charge throughout the continental United States and there are no transportation charges to or from your location. The only other charge is for meals and lodging while on-site.
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At Destination Restaurant Consulting we want you restaurant to succeed and be truly popular. If you have made a mistake by offering a Groupon we are able to re-brand your image so that you can start out fresh. Just give us a call at (800) 653-8575 or send us a message through our Contact Us page on http://www.DestinationRestaurantConsulting.com.