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Proof Groupon-style Deals Stole $115M from Restaurants in 2011

Don’t do it. That’s all I have to say. And now the numbers bear it out- daily deal sites including the biggie- Groupon- are not helping people build great relationships with repeat customers- they are killing small businesses.

Not every time but it isn’t worth the risk because the odds are against you.

You are better off creating your own special coupons and doing your own marketing to actually build a loyal customer base and create new business. Here are some better restaurant marketing suggestions that will serve your business much better over the long haul than anything a daily deal site is going to bring you.

Visits to independent restaurants were down by 4% in 2011, but Groupon-like deals expedited a massive increase in half-price “deals” across the country. Just let that sink in for a second; roughly 14 million-restaurant deal vouchers were sold in 2011 all while total visits to independents went down significantly.

The Groupon deal activity did not create new visits at all! At best, Groupon and Living Social discount vouchers convinced diners to trade an already planned visit from one restaurant to another. In other words, rather than generate new visits, Groupon has just rearranged the location of visits with the purchase of a 50% off voucher. Furthermore, diners around the country get a minimum of five dining offers every week, negating all likely-hood that a Groupon offer will produce a loyal customer at your restaurant. Meanwhile, Groupon and other daily deal sites made a whopping $140 million in fees from restaurant deals that didn’t help you at all.

Data suggests that the growing daily deals economy is a virtual arms race, where your restaurant buys patron visits from your competition at the Groupon rate of 50%. Restaurants no longer control their industry revenue, $140 million now flows into the pocket of Groupon and Living Social and another $140 million is lost in heavy discounts you pay to play a loosing hand.

Let’s follow the money.

Restaurants have paid out approximately $140 million in fees to daily deal sites and allowed their goods to be discounted another $140 million, for a total of $230 million, all while watching the restaurant industry slide 4% in 2011.  Groupon’s a modern spin on an age-old game; generate an audience by giving away discounts they don’t pay for and selling the audience to the highest bidder. Is this how technology is supposed to be helping Main Street?

Quoted Article Source Link: FobBoh

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