Groupon is no more than a short cut—an overnight solution

A month ago, I emphasized that participating in Groupon is no way to run a restaurant. That’s because if we take a step back from the madness, we will see that Groupon is no more than a short cut—an overnight solution meant to bring in an overwhelming number of customers. But short cuts, especially those as gimmicky as Groupon, rarely live up to their hype. For Groupon, the numbers are already in, and Groupon doesn’t work for restaurants.

Here is a quick recap of the facts. Of all the businesses that participate in Groupon, restaurants get it the worst. First, Groupon, as the dominant player, takes an unfair cut (50% of the discounted, fire-sale price). And besides attracting customers that have little loyalty except to rebates, Groupon can actually do harm to a business. If a restaurant’s employees sour to Groupon customers, as they are very likely to (because of volume that strains resources and stingy tipping), it becomes a lost cause. Surely, no one wants a bunch of bitter and stressed out employees warding off customers.

The reasons go on and on. As more high end restaurants get involved, many people who normally would never treat themselves to such a restaurant will make up much of the Groupon customers. Accordingly, fine dining restaurants should be especially wary of Groupon. Lastly, it displaces and potentially alienates existing customers as they may not be able to make the reservation they want or receive the service they have come to expect.

Of course, to any rules, exceptions exist, but they are in no way transformative (only 42% of restaurants turn a profit despite all that volume). Since only a minority of restaurant owners come away with a slight profit, restaurants foolishly risk harming their business, leaving you at the mercy of the whims of Groupon customers. Why chance it?  Besides, the only surefire way to ensure a restaurant succeeds is incrementally, bringing in more business through great food, helpful service and effective marketing.

Rather than following the crowd, focus your energies on sustainable, constructive ways to grow your restaurant. That being said, if the expenses that come with Groupon were considerably less, it might be a good idea to give it a second thought.  But as is, Groupon won’t leave a good taste in your mouth.