If you’re a restaurateur looking to optimize the performance of your establishment, there’s a very good chance that you’ve heard of Groupon. As the world’s most well-known ‘deal of the day’ website, Groupon is responsible for generating millions of dollars’ worth of consumer spend each and every year. It does this by arranging deals for customers with discounts of up to 90%. Businesses are able to afford to offer these staggering savings because each deal will not become ‘active’ until a certain number of people have signed up. In this way, establishments make up the deficit with volume. Not content with dominating the deal of the day space, Groupon has now moved into the online reservations arena with its new service, simply known as Reserve. So what does this mean for the restaurant industry, and how can it help your business?
The Basics of Groupon Reserve
The Reserve service has actually been in certain restaurants in the US for three years; it’s only now that the company is taking it out of its ‘beta’ phase. Reserve works in much the same way that OpenTable does, a service that countless restaurants already use to bolster their business. In fact, OpenTable claims that since its launch in 1998, it’s been directly responsible for seating 450 million customers. Groupon’s new Reserve service is now set to take a slice of that pie. The basic service is broadly the same as OpenTable: customers can now reserve a seat at a restaurant directly from Groupon’s website with the great savings thrown in too. Additonally, Groupon Reserve uses a unique method of adjusting prices depending on how full or empty a restaurant is at the time of booking. That makes Reserve a very attractive proposition for hungry diners. OpenTable does provide discounts with the seats it offers, but whether it can compete with Groupon’s huge percentage cuts is another story.
The cost to restaurants
The pricing scheme for Groupon Reserve has also been designed to make it a great choice for diners. Rather than them having to pre-pay for their meal or use vouchers when they’re at the establishment, diners simply receive a percentage discount from their total bill – including any drinks they may have. As for how this saving is absorbed by the restaurant, Groupon claims that they will only charge a small fee per diner. Again, how this will affect business remains to be seen, but if the establishment can offset the cost in volume, it could work very well. Groupon Reserve is unique in the sense that it adapts prices dynamically based on popularity – and this could well be the ‘killer feature’ that sways restaurateurs in the direction of Reserve rather than OpenTable and its competitors.
The dangers of Groupon and ‘deal of the day’ services
You may instantly assume that Reserve is a great product with no downsides; but there is a darker side to this coin. Since the advent of ‘deal of the day’ websites like Groupon, many eateries and restaurants have actually found themselves becoming reliant upon these discounted deals to get any customers at all. It’s a feast or famine situation whereby when a deal is on the place is packed with diners, but with no active deal, business is slow at best. Like any other industry, pitfalls such as these can easily develop over time. Running a small business can be fraught with issues, particularly when finances are involved, and restaurants can easily find themselves in a situation whereby they’re reliant on other entities or unsustainable income sources. In situations like this, it’s always good to be covered by a comprehensive policy. Many of these will include coverage for loss of income streams and other perils that can beset small companies and establishments.
So what is the next step for Groupon Reserve? Well, it’s already in 600 restaurants over 10 US cities, so you may well have the chance to try it for yourself very soon. It’s also safe to assume that the competitors of such an initiative, like OpenTable, will move quickly to counter this new service and perhaps even create a dynamically priced system of their very own. The real question has to be, will it be worth it – and will you take the leap of faith as a restaurant owner.
Freelance Restaurant Writer: Julie Moore