Your Guide to Groupon


Is the online couponing site really good for your business? Find out.

Is the online couponing site really good for your business? Find out.

To Groupon or not Groupon, that is the question many restaurateurs are asking themselves these days. Since the online coupon company offered its first daily deal in November 2008, it has become a bona fide phenomenon. Now operating in over 400 markets in 23 countries, the company boasts over 115 million subscribers worldwide. As of the end of the first quarter of this year, Groupon had 56,781 merchants as customers, who sold 28.1 million Groupons in just that first quarter.

Restaurant Groupons are usually the most popular offers in any given market, so these stats seem to indicate that almost everyone is doing one. But before you sign on the dotted line, you need to know exactly what the service can offer, how to maximize its potential and be aware of the possible downsides.

The Deal

According to Groupon spokesman Chad Nason, the typical Groupon deal involves the merchant taking 50 percent of the revenue and Groupon retaining the other 50 percent. So if a restaurant offers a Groupon for $25, the consumer gets a Groupon for $50 worth of food and the restaurant earns $12.50. However, several restaurateurs we spoke to for this article, who asked to remain anonymous, said that Groupon had offered them higher percentages of the revenue. When asked about the flexibility of Groupon’s profit splitting, Nason would only say, “We’ll always be coming up with different deals and different structures.”

Many restaurateurs are understandably wary about Groupon’s large cut of the pie. Paul Fehribach, the chef-owner of Big Jones, a 70-seat sit-down restaurant in Chicago, hasn’t done a Groupon yet. “To take half the profit just to send an email, write the blurbs and create the videos is ridiculous,” he says. “If I did a Groupon that netted $20,000, I’m going to get $10,000 and Groupon is going to get $10,000, but I have to buy all the food and do all the labor. It just doesn’t make sense to me.”

Though Groupon markets itself as a revenue generator, restaurateurs should treat it like an advertising tool. “You should never go into a Groupon deal thinking it's going to make you any money,” says Neil DuPaul, marketing associate at Speedy Incorporation ( “Restaurants can make money, but most of it will come in the long term.”



Groupon is horrible for the restaurant business and Rice University can prove it ... - And with the SEC crawling around Groupon headquarters, restaurants would be wise to steer clear ... The math has never worked in the food service industry. Groupon makes as much as the restaurant for sending out an email! On what planet is THAT a good deal for a restaurant owner?

this is crazy for a restaurant! We looked at it closely. Our food costs run 35 per cent. Hence with a coupon our cost per coupon is 140 per cent! Plus they make you pay the discount for the credit card! Plus you don't get the money for 60 DAYS!

This appears to be written by Groupon -- very biased.  You have to be desperate to sign up for a deal like this, especially since all you do is attract the bottom-feeders and communicate to loyal customers that they've been paying too much.  These programs lead all consumers to believe that restaurant profit margins are enormous.  We only wish that was the case!

I cannot agree more regarding the reality behind Groupon.  A little gorilla warfare marketing from them obviously. I wouldn't  be surprised if they even perhaps offered some $$ for this article. Is the "deal space"  model sustainable enough for this  to be so prolific? I cant see how?

I agree will all the below comments:  Restaurant profits are so minimial and the people who use coupons only come back when another coupon is offered.  Not Good For Business.  Rice University has it Right.

Groupon is the Devil!!!  think about it before you do it!Restaurants are constantly trying to grow their business as they should but when it comes with serious devaluation and hard profit loss is it really worth it?  There are (4) main way to grow your business: New Customers (trialists), increase party size, increased frequency, and increase check size.  Groupon's model is based on the first method only, "Trialists", and they completely degrade the potential to grow utilizing the more efficient methods.  When you sell something at 50% off or more than this "new" customer will look at your brand or product as being worth this amount and will be harder for them to pay full price regularly for the same product!If every restaurant took their customers that are currently visiting and got them to come in 2x/month instead of 1x their growth would be exponential.  Try offering a loyalty program, a return customer incentive program, or even the old school regular discount program.  Get your customers to keep returning Instead of constantly trying to fill your seats with new customers!  Groupon, living social, and 1000s of other daily deal sites that steal from hard-working businesses will be out of the equation soon.  Why sell $100 worth of product for $50 (retaining only $25) when can you sell the same product 2x to the same customer for merely a 15% discount?  Bottom line - if you want to grow your business stay clear of Groupon or daily deals!Here are some links to some cool, new, and innovative companies that can help you build a fun loyalty  - This one is super Cool!  really - inferior but a way to start small - general info

What a fluff piece on Groupon! There are major unforeseen consequences of using these deep discounted sites, that's why I wrote, Groupon: You Can't Afford It and what to do instead (you can also get a preview at you are that desperate to offer multiple highly discounted offers, you should look in the mirror to see why people only come in when you get 25% of what you should have gotten 100%."...makes Groupon a winner for restaurants at any end of the scale" -hardly. If you want to attract the dirt-scratchers eager for the deal and "hope" you'll make it back somewhere down the line, good luck with that. For the rest of the readers looking to be profitable, I suggest you do an extremely good job of creating an exceptional experience for the full-paying guests-the ones who ultimately have to pay for the ones who got the deals. For once they find out someone else gets a better deal, they'll leave and won't be back. Then no discount will solve your profit and cash-flow problems. 

I totally agree Bob. If you attract them with discounts, you'll have to use them to keep them and that's a proven model for failure.Let's also not forget that articles like this, in magazines like this, are not in any way real journalism. They are opinion pieces usually by people who have never worked a day in their life in this industry. They are meant to solicit traffic not to impart knowledge.


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