First Person: My Restaurant's Groupon Experience Was No Deal (ContributorNetwork)

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Groupon is a website that offers 50% discounts on select business offers as daily deals. It advertises that selling on Groupon can increase your revenue and provide advertising while getting you new customers at the same time. However, there are a few things you should consider before signing your business up for a Groupon.

I used Groupon in January of last year, I decided that my restaurant could use the promotion and advertised a 2-person steak meal at half price. I was hoping to get a few hundred hits and then offer the clients a 15%-off deal for the next three times they came in. It seemed like a great way to get new customers and then keep them coming back.

Then things went wrong. Within the first two days Groupon sold 500 of my discounted steak meals. I called them and asked them to limit the number of sales, then said that they could not and that I was bound by contract to honor the certificates.

After lowering the cost of my food to retail price I discovered that Groupon was getting 50% of the sales. That meant that I was only receiving 1/4 of the cost for the meal! I then discovered that I was going to be paid in installments over the entire period of my Groupon advertisement and that any credit card fees would be taken out of my share.

By the end of the contract I had lost nearly $4,000, with the cost of paying employees, heating grills and buying the food to serve, I simply could not afford to sell so many steaks at that price.

While Groupon is a good advertising tool, I noticed that most of the people who came in were not interested in the restaurant so much as the fact that it was cheap. Many of them didn't return and I can only assume that they wandered away to visit Groupon's next daily deal.

I also noticed that many of the people who came in with certificates were already regular customers, therefore I was not getting new customers, only giving food away to dependable ones. I did actually receive a few new customers, but not may. The first rush of customers when the Groupon ad was placed was hectic and hard on my employees, and then having to deal with each person who had purchased a coupon in the coming months was even more trouble.

While I am sure that Groupon is beneficial to some businesses, especially the bigger ones, for me it was a disaster and I will definitely not be doing it again.

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Source: http://us.rd.yahoo.com/dailynews/rss/personalfinance/*http%3A//news.yahoo.com/s/ac/20110722/bs_ac/8074936_first_person_my_restaurants_groupon_experience_was_no_deal

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