Group-buying deals have become one of the most polarizing marketing tactics in the restaurant industry, primarily because they challenge the idea that there is safety in numbers.
Group-buying sites have attracted many restaurant partners because they provide a large rush of traffic on the day the eatery’s offer is featured. Typically, the restaurant offers the consumer a gift certificate at a steep discount, such as a $50 gift card for $25. The website keeps the money consumers hand over for the deal.
Consumers have come to love such offers as those made famous by Groupon — which serves 230 markets worldwide and takes the lion’s share of criticism from operators — LivingSocial, Blackboard Eats and now OpenTable, which has rolled out group deals in New York, Boston and Atlanta.
But some restaurants struggle to find the balance between attracting the huge influx of customers that a deal of the day can drive and protecting their profit margins and overloaded waitstaffs.
Groupon spokeswoman Julie Mossler told Nation’s Restaurant News that while “there’s no other form of marketing that is going to drive new customers” like group-buying sites, Groupon doesn’t position itself as “a fast way to make money overnight.”
“That attracts the wrong kind of merchants — those in need of quick cash flow,” she said. “We think it works best if you think of it as part of your long-term marketing budget. If you get thousands of new customers in one day, it’s up to you to make sure their experience is noteworthy.”
As many restaurants turn to group-buying deals of the day, others are exploring alternatives that allow them to spread redemptions out over a longer period and to exercise more control over the offers and their effects on margins.
A trickle, not a fire hose
La Vie en Rose, a fine-dining restaurant in Brea, Calif., has offered gift certificates sold at a discount via Restaurant.com for the past two years. By offering a set number of cards per month — a $25 card for $10 or a $50 card for $25, for example — director of marketing Kathy Vicari can cap how many people take advantage of the discount.
“Some days there are five [gift cards], then the next day there aren’t any,” she said. “It doesn’t ever seem to be a burden. One hundred in a month isn’t going to kill me. We want all the business we can handle, and we have a high seating capacity. You might feel, if there are 20 in one night, that you’re working for nothing, but we haven’t had that.”
La Vie en Rose is strict about enforcing the right stipulations on the gift cards in order to break even, Vicari said. The offers aren’t accepted during special events or holidays, and can’t be used in conjunction with another deal. Users are asked to tip 18 percent of the bill before the discount.
Vicari still can’t control when people will come in to redeem their gift cards, but as long as the restaurant releases only as many cards per month on Restaurant.com that it can handle, the irregular traffic jumps don’t overwhelm its staff.
More often, the gift cards have a positive multiplier effect, like $100 gift cards enticing the cardholder to bring in a party of eight, making continuing with Restaurant.com a “no-brainer,” Vicari said.
No reservations about these deals
Some restaurants have partnered with online services that tie deals to a reservation, like FineDineDeal, VillageVines and Foodie. Like other online deals, these sites’ offers drive traffic, but they do so specifically when operators want more seats filled, and they also tie into point-of-sale systems for easy tracking.
Jen Hansen, director of operations and marketing for Le Colonial in Chicago, likes the “OpenTable meets restaurant week” positioning of FineDineDeal, which provides a discounted fixed-price meal to users who book a reservation at several restaurants.
“FineDineDeal is different because I can manage the books with it,” Hansen said. “If I only want to offer three different slots per night or offer the deal only Monday through Thursday, I can do that. The margins versus other coupon sites are better. We’ve tried a few other things that were excellent programs, just not the right fit for us.”
The French-Vietnamese fine-dining restaurant is offering a three-course, fixed-price dinner for $35.
Because FineDineDeal handles the marketing and promotion for Le Colonial’s offers, the restaurant had no upfront cost to participate, Hansen said, adding that the incremental effort needed to get the chefs, servers and hosts on the same page to execute the deal was minimal.
Michael Kornick, chef-owner of mk in Chicago, also uses FineDineDeal to entice people to fill his empty tables during off-peak reservation times by offering the restaurant’s $55 tasting menu for $45. He also uses Foodie to offer a complimentary wine pairing with the tasting menu.
“If I limit the offer to before 7 p.m. or after 9:30 p.m. on evenings when I already have less traffic, then I hope I can increase my revenue at a small expense to the business,” he said. “One benefit of a deal-a-day website is that some people may lose their certificate, or they don’t use it. But if you’re trying to build the business, you want people in your restaurant.”
He added that if those guests feel like they’re getting real value, they won’t be the “one-and-done” customers that make operators hesitant to partner with discount sites.
“We’re trying to find customers who think they can go to mk for less than our normal check average,” which hovers around $85 per person, Kornick said. “Even if they’re drinking a moderate amount, they’ve taken the prix-fixe check from $55, which was discounted to $45, back up to $65. Our hope is we get them close to our regular check average, and then the discount is only on the $55, and we keep 100 percent of the margin after that. There are lots of pros.”
Mobile offers get rolling
Still more services are set up to let restaurants deliver offers to guests who opt in for deals on their mobile phones, including TipCity, Shooger, Mobile Spinach or YWaiter.
Nicole Abraham, director of brand management for Pat & Oscar’s, said partnering with TipCity had better implications for building repeat business than posting a daily group- buying deal does.
“For us, in particular, I made an unwritten rule that we don’t participate in those group deals,” Abraham said. “Ultimately, it’s a zero-sum game. Customers are looking for the best deal possible, and they’ll use you once but won’t come back. There are other ways to drive traffic and create a relationship with your customers.”
Restaurants can push out a “Flash Deal” on TipCity’s smart-phone app or website in minutes, such as offering 50 percent off lunch to fill the dining room on a rainy day. The service also has a searchable database of longstanding deals — like happy hours — from thousands of restaurants.
The majority of redemptions at Pat & Oscar’s from TipCity have been for Flash Deals, and “the urgency just isn’t there as much for the longstanding deals,” Abraham said.
Lori Karmel, owner of bakery We Take the Cake in Fort Lauderdale, Fla., opted for mobile-coupon service Shooger rather than a group-buying offer because she already gets as much traffic as she can handle.
“People signing up for Shooger already know us,” she said. “I have 15,000 people in my e-mail database … and I would prefer to reward them, since they’re the lowest-hanging fruit.”
Karmel and her staff tried to drive sign-ups to Shooger by offering a free cupcake to anybody who enrolled in the service then came to the bakery and showed their mobile phones.
To be sure, some signed up for Shooger, took the cupcake and never returned, but enough bought other baked goods and came back to make it worth it, Karmel said.
More importantly, pushing out a just-in-time deal through the service gets trial and repeat business exactly when We Take the Cake needs it.
“So far, the only avenues we’d used [for marketing] were our website, then Facebook and Twitter,” she said. “When we have an urgent deal — like let’s say we made a bunch of Key lime bundt cakes and we want to send them out quickly — we want to touch our local people immediately. If we post it on Facebook, people all over the country comment on it and say, ‘Oh I wish I lived in Florida,’ but this lets us push it to our local customers right away.”
Contact Mark Brandau at [email protected].
