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News Tue May 04 2010

Is Groupon Worth it to Restaurants?

Chicagoans are nuts for Groupon -- and other similar services that seem to roll out every week. But in an article in today's RedEye, Kyra Kyles asks restaurateurs whether Groupon's crowd-sourced coupons are worth it on their end.

But is there another, possibly dirty, secret when it comes to the deep deals and visibility? Some local restaurant industry insiders -- including at least one Chicago owner of a public relations firm focused on restaurant clients -- have questioned whether businesses, specifically high-end restaurants, suffer when they allow a third party to offer patrons half-off for a meal.

On one hand, the restaurants cut a deal in order to attract new customers; while those diners may not be as profitable, the hope is at least some of them will become repeats, and return visits won't be at a discount. On the other hand, says Ellen Malloy of the Restaurant Intelligence Agency, there can be a temptation on the part of restaurant staff to treat coupon-carrying diners as second class citizens -- and reap the results of the poor service in terms of reputation and repeat business, negating any boost the coupon may have delivered.

An aspect of Groupon discounting that's not mentioned, though, is redemption rates. Depending on the deal and the restaurant, the number of coupons actually used might be significantly lower than the number purchased; the ones that aren't used are basically free money in the restaurant and Groupon's pocket. While the unredeemed coupons aren't going to make up for the full cost of the promotion, they do mitigate costs somewhat. I know we've had a gift certificate that went years without being spent; we finally just threw it away. Chances are there are Groupon deals wasting away in drawers as you read this.

What do you think? Are collective deals like Groupon a bad idea or a boon for businesses?


George / May 5, 2010 8:04 AM

Groupon is only good for getting people into your restaraunt once, after that it is in the restaraunt's hands. I have had both good and bad experiences at restaraunts I went to with a groupon. I will go back to the good ones and not the bad. Groupon has also offered deals to places I have been before and wanted to go back to anyway, the groupon just gave me an extra push (thinking of Mado specifically).

Patrick Asher / March 17, 2011 6:35 PM

GroupOn keeps the $$ if the coupon is not redeemed.

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