Groupon: Helping restaurants or hurting them?

Categories: Advice

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Lenny Russo's recent Strib column ran a provocative letter from a reader who suggested that the deep dining discounts provided by sites like groupon.com and livingsocial.com were creating a sort of price-slashing arms race within the restaurant community--hurting participating restaurants and the rest of the industry. Check out the letter and see what you think. Is Groupon a great marketing tool for restaurateurs or a scam? Have you ever purchased a Groupon? How did you use it? (Only once, and not a penny above its price, or did you spend more money and/or become a repeat diner?)

Mr. Russo, I understand restaurants need to do whatever they can to survive. My question is this. How can restaurants continue to provide offers through sites like groupon.com and livingsocial.com and expect to survive? Not only are they hurting themselves, they are hurting the entire industry. If a restaurant gives $50 of food away for $25, these sites take half of that $25. That leaves the restaurant with $12.50 for giving away $50 worth of food. That is less than the food costs the restaurant. Yes, I understand they are expecting people to spend more, but coupons attract coupon users and they rarely spend more. They also expect "breakage." Well, breakage happens when people received gift cards as gifts. When somebody spends money on an offer, the breakage is almost non-existent. ("Breakage', in this case, refers to unredeemed gift certificates or vouchers [my notation].) There are so many of these offers each week that there is no reason to spend full price on a meal when you can go to relatively nice restaurants for half price. Just today al Vento and W.A. Frost have 1/2 price deals.

Restaurants that do this will not see these customers again. They are going to wait until Spill the Wine, Solera, Duplex, Porter & Frye, etc., etc., and others put out their deals again. Why would they pay full price at Fuji-Ya when Giaponese is giving me sushi at half price? Heck, I'll eat a half price burger at Porter & Frye instead of full price at Hell's Kitchen.

So when a restaurant like Solera sells $65 of food for $30 (They sold 3600 of these.), that's potentially taking business away from a $30 restaurant that would have normally received that business. Many of those 3600 would likely go somewhere else.

I knew I had to go to Spill the Wine before a concert so I bought a $65 meal for $30. After I paid my $10 above and beyond, I got home to find out that I received miles for using my credit card. I double dipped without knowing it, and they lost loads of money that I would have spent anyway. I am guilty of buying these, but they are asking me to buy them. Why???

Tens of thousands of these deals have been sold over the past few months. That took tens of thousands of people away from other restaurants.

Again, I don't see how this helps anybody but the site owners. Can you please enlighten me, and, if you agree, enlighten the community?

John Doe

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