Groupon's first year in the Twin Cities - good for local eateries?

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Today Groupon celebrates one very successful year of business in the Twin Cities, where the company enjoys about 330,000 subscribers (as compared to 550,000 in NYC and 800,000 in Chicago). The deal-a-day voucher service has offered up around 400 group discounts via email to the greater Minneapolis/St. Paul area and estimates that about half of the vouchers were for restaurants.

While we know that Groupon is loving this market, how do local eateries feel about them? 

We spoke with Benjamin Meents, who does marketing for the Sawatdee restaurants about its experience with Groupon, and he said it was great for the St. Paul location, where tables weren't being filled on a regular basis. Sawatdee sold a total of 2,565 Groupon vouchers on June 6, and about one quarter of them have been redeemed to date. According to Meents, they have seen many fresh faces, like the couple from Eau Claire, WI, en route to the Ordway, and the regulars have enjoyed the discount benefit as well. And, it's created an uptick in business that is still being felt. 

Meents does explain that the Sawatdee management did their homework before doing Groupon. They limited each buyer to four coupons and picked an appropriate price point ($20) so that diners would, on average, spend more than the value of the voucher. That mitigated the fact that Groupon splits the fee 50/50 with vendors, so that in effect, the food is being sold at 25% of the normal price. Also, Meents had them staff up in preparation for the first few weeks and told servers what to expect. This made for a smooth transition the day the coupon hit the net. The only thing they might do different next time is to limit it to dine-in customers only.

Joe Kaplan, owner and proprietor of Joe's Garage says he would use Groupon again also, having sold around 950 of the deals for his Loring Park restaurant. He says that proprietors need to look at it as, "Steep discounts in exchange for people coming in the door." In his eyes, it is essentially an advertising expense that is lessened by the number of individuals who buy the coupon and then fail to use it (called breakage in the trade). His staff is accustomed to large crowds in the summer, so they had little trouble handling the increase in numbers the initial and final weeks of the deal.

Any negative reviews? A worker at an Asian restaurant in Minneapolis who asked to remain anonymous mentioned that some diners who came in as a result of the Groupon were not exactly the clientele the shop was hoping to cultivate. Coined "deal chasers", they can plague an unsuspecting staff with requests to use multiple and/or expired coupons and tip only on the cash amount of their bills. Also, the TC foodie rumor mill tells of a sushi place that experienced an onslaught of Groupon customers that nearly brought the place to a standstill because there was not enough staff or food. That establishment did not return our call.

Our tiny survey is hardly gospel, but it does confirm the findings of Utpal Dholakia, a Rice University professor who published a paper called, "How effective are Groupon promotions for businesses?" His findings suggest that the number one indicator of a successful deal is employee satisfaction and prep, which fits with all the stories we heard. But while we were hard pressed to find someone locally who wanted to dis Groupon, Dholakia found that 40% of the businesses in his nationwide study would not use them again. Also, of all businesses, restaurants fared worst in his research, with salons and spas experiencing the most profits.

So on this, Groupon's one year anniversary in the Twin Cities, we have to say that several local restaurants give the company a good grade--and everyone we spoke to said that it is the best advertiser of this kind... for the moment. Similar businesses are cropping up every day with new local and charitable twists on the concept and may encroach on Groupon's firm hold over the area in the future.
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