Should Your Restaurant Participate in Daily Deals?

August 27, 2012 - 4 minutes read

If you’re thinking long and hard before jumping on the daily deal bandwagon, congratulations. While many independent businesses have had success with daily deals, many others have lost too much money to make it worthwhile. If you are leaning towards marketing your business this way, the four important points below will help you win the daily deals game:

1. Negotiate the split.

The key to using daily deal websites is to negotiate. Let’s look at the leader in daily deal offers, Groupon. Traditionally, Groupon offers a 50/50 split, the restaurant receives 50% of the promotion and Groupon receives 50% of the promotion for their services. On top of their 50%, Groupon also receives approximately 2.5% in processing fees.

Recently though, Groupon has started offering an 80/20 split, with 80% of the sales going to the restaurants. Why did Groupon start giving a larger portion of the promotion to the restaurants? Many critics believe that the leader of daily deals is feeling the heat from its growing competitors. It is possible that Groupon’s new 80/20 tactic is an attempt to grab hold of new markets and take market share from newer daily deal players such as Google Offers, Facebook Daily Deals, Amazon Local and LivingSocial. Another train of thought is that Groupon implemented its 80/20 deal because its competition is eating into its margins. If this theory is true, how long can Groupon continue to offer restaurants a larger portion of the pie without repercussions? So stand your ground and negotiate – you have nothing to lose. There are so many daily deal guys vying for your business.

2. Ask for customer data.

If you decide to participate in a daily deal program, always request customer information from anyone who purchased your deal. This should include a name and email at the least, but try to negotiate as much information as possible. With daily deals you are trading a portion of your profit to acquire new customers – make sure their data comes with them! Once you get customer data, you can add this valuable information to your email database. You can then invite them to join birthday and other VIP clubs. Don’t expect all of them to convert, but some will. This is a huge way to maximize the gain from daily deal programs.

3. Put a limitation on days to use the promotion.

Don’t be swayed by a good sales pitch; negotiate the days your offer can be used. A good practice is to make the promotion available at slow times. For instance; require usage on slow days like Mondays, Tuesdays or Wednesdays. In addition, don’t forget a gratuity and taxes clause allowing you to automatically add 18 or so percentage at the restaurant. These little things help you to make some of your food cost back.

4. Calibrate your offer below your average ticket per person.

It is important to look closely at what makes sense for you, and not what you are being told by the sales person. For example, if your average ticket per person is $10.00 don’t do a “$40.00 worth of food and drinks for $20.00.” You’ll lost a lot of money this way. If your average is $10.00, consider offering $10.00 for $5.00. In the end you will pocket much more and still get your food cost back for acquiring that new prospective customer.

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