Why Daily Deals Don’t Work for Restaurants
If you’re like most local restaurants in America, you have fairly low margin (less than 10%) and you have both on days and off days. Many local businesses have turned to Daily Deals as a solution to get more customers and in some cases it can be helpful. In many cases, daily deals do more harm than good. Here’s a brief explanation as to why Daily Deals may not work for your restaurant:
- Lack of targeting - deals should be used to get people into your restaurant when they don’t normally come in. Daily Deal companies get paid when they sell as many of your deal as possible, so they want to limit restrictions. Selling deals to consumers who come in to your dinner restaurant on a Saturday night is going to hurt your business, not help.
- Deep discount - daily deal sites require you to offer a 50% discount and then share the revenue with them. If you’re a local business with low margins, discounting 50% and then sharing the revenue is going to cost a lot. It’s only worth it if those customers come back at least 2+ times, which brings us to our next point…
- Intentions - Daily Deal sites want to sell as many of your deals as possible so they typically distribute your deal across an entire city or series of towns. The problem for restaurants is that if you are far from someone’s home, the chance of them returning to your restaurant is very low, no matter how amazing your service and food may be. In order for a deal to work, you have to target consumers who live or work near your establishment so they have a high chance of coming back.
- Reselling Existing Customers - Daily Deal sites don’t distinguish between your new or old customers, which means that consumers who have already been to your restaurant and would likely come back are buying this deal just to save some money. As a result, you are serving someone who would have already come in and basically paying them to do it through very deep discounts.
Deals can be incredibly effective but they need to be restricted to times when you need customers, offer a discount that supports your margins, be targeted to either new or existing customers (depending on your intention) but not both and be targeted to consumers who live or work near your restaurant.