What Restaurant Owners Should Know About Groupons (Part One)

As part of Groupon week on The Hospitality Formula Network, The Manager’s Office will address how to successfully execute a Groupon promotion.  The focus of this article is not to discuss whether or not you should execute a Groupon promotion.  That post is coming soon.  Instead, this two part installment will deal with how to get the most out of a Groupon promotion if you choose to do one.

In compiling this list, I talked to managers and proprietors of a number of restaurants who have offered groupons in the past.  They had mixed results.  All of them had regrets on how their first experience went.  They say life is too short to make all the possible mistakes yourself, so you need to learn from the mistakes of others.  These professionals shared a few thoughts with me that they felt would have made their promotion more successful.  I am sharing them with you so you do not have to make the mistakes they did.

This list is compiled in chronological order.  All ten of these items should be carefully considered before agreeing to the promotion.  The largest benefit to offering a groupon is exposure to new customers.  These are the tips that will have you ready to make the best possible impression on them and your bottom line.

1)  Set The Right Price: This was emphasized time and again by the people I talked to.  Two of them learned this lesson the hard way, but saw dramatically improved results by modifying this factor in a second offer.  Your pricing point needs to be greater than the price of any one entrée, but less than the price of two of your less expensive entrees.  The key to profitability with groupons is for the guest to spend more than the amount of the groupon.  This ensures that you receive full price for at least part of the meal to offset your losses.

2) Restrictions: This is a crucial balancing act.  You are offering a deep discount to your guests and therefore should be allowed to limit it to some extent.  Restricting the offer to one groupon per visit is a must.  Dine in only will limit the costs of packaging on your meals and give you more of a chance to impress your guests.  If you offer separate menus for lunch and dinner, consider offering the groupon for only one of these menus.  Any major holidays you will already be turning away guests during should be excluded.  You should also set a firm expiration date on the offer.  Most importantly, limit the number that can be sold.  Selling more groupons than you have the ability to honor can leave these potential guests with a very poor opinion of your restaurant.

3) Stock and Staff: Now that you know when the groupon is going to be sold, it is time to prepare.  Understand that the first week of this promotion will lead to a huge rush of people looking to redeem them.  You must have the inventory in house to handle this wave of customers.  This does not just apply to food.  Make sure you have enough plates, glasses, silverware, linens, napkins, etc as well.  You also need to have enough employees to handle the customer’s needs efficiently.  The entire reason you made the offer is to get customers to see what a great restaurant you have.  If you are understaffed or understocked, you have made a terrible first impression.

4) Plan Procedures: Most restaurants have procedures in place for handling discounts and coupons.  Groupons work differently than most other discounts though.  You will have a large number of them arriving at once in the first week.  Make sure your management levels are sufficient to process these promptly.  Your guests will still expect their payment to be handled efficiently.  This is when they are at their least patient and the final part of the first impression you make on them.  Groupons also have a feature to be redeemed directly from a smartphone.  Do your managers have the technology to redeem these?  Plan a procedure to account for discounts on a servers check out that are not accompanied by a paper certificate.  This will help you prevent fraud that could further damage your bottom line.

5) Polish: You will have a great number of new guests arriving at your restaurant when the offer is extended.  You need to be certain that you can impress these guests.  This means making sure your restaurant looks impressive as well.  Take the week prior to the launch to get some extra cleaning projects knocked out.  Address any issues you might have with your staff’s uniform appearance.  This is your only chance to make this first impression.  You need to do everything you can to make it a positive one.

These first five points cover the issues that you need to make sure are addressed prior to the launch of this promotion.  The will put you in the best position you can be when the first guest arrives.  Tomorrow, part two will address the things you can do once the guests arrive to make the most of their visits.  These are the keys to making groupons profitable and creating regulars out of these guests.  You are taking a big gamble by offering these deep discounts.  Tomorrow, I will show you how to put the odds in your favor.

Tips²: Tips For Improving Your Tips, the new book from the author of The Manager’s Office, teaches the skills of exceptional servers that will increase customer satisfaction and dramatically improve restaurant sales.  This book is more than a server training manual.  It is the secret to teaching your staff to enjoy selling and give your guests the experience that will create raving fans.  To learn more about the book, visit www.tips2book.com.  Use the coupon code “MANAGER” to save 20% at the checkout.

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About David Hayden

David Hayden is a restaurant marketing and training consultant based in Kansas City, MO. He writes a series of 9 blogs collectively known as The Hospitality Formula Network and is the author of "Tips2: Tips For Improving Your Tips" and "Building Your Brand With Facebook"

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