Daily Restaurant Deals: To Groupon or Not?

 
Economic downturn provided the impetus for consumers to seek bargains

It's difficult to acknowledge anything that is good about a recession, particularly the deep one that enveloped America late in the first decade of the 2000s.

As the economy faltered, millions of people lost their jobs and the housing market collapsed. Folks who still were employed cut back on their discretionary spending, which left many merchants, including restaurants, struggling.

But the economic downturn did provide the impetus for the development and growth of one industry: daily deals.

During the recession, restaurant operators "did a lot to reduce costs, and they took that as far as they could," says James Balda, chief marketing and communications officer for the National Restaurant Association. "Now, they needed to drive traffic to the restaurant."

That helped spur daily deals.

Less than a decade old

The daily deal business is less than a decade old and has become a $1.7 billion industry in the U.S., according to a study this year by IBISWorld, a Los Angeles-based research company. Annual growth the past five years has been more than 300 percent.

Restaurants make up 23 percent of all daily deals, second only to health and beauty products and services, which hold more than half of deals that are offered, the study adds.

Deals at restaurants provide 12 percent of the daily deal industry's revenues, notes Yipit, a deal aggregator that keeps its members apprised of Web-coupon offerings from various sources. Health and beauty is 23 percent, while travel and tourism is 17 percent.

Daily deals had their roots in Web-based merchandise bidding sites during the late 1990s. The current incarnation began when Woot.com started its one-deal-a-day offers in mid-2004 and gained steam when the economy turned south in 2007.

One year later, Chicago-based Groupon exploded on the scene as an easy-to-use Web-couponing service. Its focus on local deals quickly made it the industry leader.

It was also what restaurant owner Jude Das needed. Das and his wife had acquired the Indian Garden Restaurant in Chicago's Little India on the Near North Side in 2007.

"When I took over, it was packed," Das recalls. "Within months it started dying out."

Next: Groupon comes to the rescue