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Perhaps you're misunderstanding. Let's say there's a Groupon "$100 of food at ABC Restaurant for $50". You pay $50 for the deal to Groupon. Groupon takes hal
by biot 15y ago
Perhaps you're misunderstanding. Let's say there's a Groupon "$100 of food at ABC Restaurant for $50". You pay $50 for the deal to Groupon. Groupon takes half of that as their commission, leaving the restaurant with $25. Now the restaurant has to provide you with $100 of food for the $25 that Groupon gave them.
If the cost of goods are 30%, that $100 in food costs them $30. They're only getting $25 for it. My slide rule tells me that's a $5 loss per customer. The restaurant hopes to make it up on drinks and such, but that $5 loss is only cost of goods and doesn't include staff, rent, and other overhead. It also doesn't factor in the fact that people who came to your restaurant only because they could get cheap food don't tend to be big spenders.
I'm sure you've seen this: http://posiescafe.com/wp/?p=316 http://posiescafe.com/wp/?p=316
- pbreit 15y agoI'm not misunderstanding. You said there'd be a $5 loss on a $100 order. I said a $110 order would thus break even. It's irrelevant to look at all the fixed costs when considering incremental revenue. Those would have been spent regardless. The Posie's owner has only been in business less than 2 years and did not seem particularly business savvy. In agree that you probably gt adverse selection but also not relevant in this thread.
- biot 15y agoThanks for the clarification... I wasn't seeing where you came up with the $110 figure.
- joeguilmette 15y agoOr let's assume they lost $5. They just paid $5 for the opportunity to impress 4 people and gain 4 regular customers. $1.25 to bring a human into your business isn't that expensive, especially if they actually showed up. If you divided the cost of a billboard into how many people walked in the door, it may cost you much more.