Targeting Groupon Diners

If I had been the founder of Groupon when Google offered up $6 billion for it, the door wouldn’t have hit me on the back-side as I rushed to the bank to cash the cheque! While I think Groupon is an interesting concept, they are really greedy, and ultimately, it will be their downfall. Let me explain.
Groupon seeks out businesses that are willing to offer deep discounts for their goods and services. Usually, the discounts are around 50%. Groupon takes another 25% or so for publicizing the offer and collecting the funds from the bargain-hunters. That leaves the business with only 25% of what it would normally take in on a sale.
Groupon talks businesses into signing up by claiming that they may lose a bit on the first sale, but they will make it up on subsequent sales. Nonsense. Alternatively, if businesses have excess capacity, they can accommodate lower-paying customers, because they only have to cover the incremental (or marginal) cost of servicing the customer. This works for spas and other similar businesses. There aren’t too many businesses that have a marginal cost less than 25%.
What about restaurants? They are probably the most popular Groupon category, based on demand. Is it worth it for a restaurant to sign up for Groupon?
Continue reading “Targeting Groupon Diners”

Groupon POS Implications

This is the second article in a series about Groupon coupons for restaurants.  The first article covered accounting for Groupon transactions.  This piece covers how to set up your Point of Sale (POS) system to record POS systemredemptions of coupons.  Failing to do so properly could result in the restaurant being on the hook for a lot of sales tax, penalties and interest!
In the first article, we learned that HST applies to the “promotional value” of the Groupon coupon.  In our example, the coupon was worth $100 of meals, and the customer purchased it for $50, which was paid directly to Groupon.  The promotional value of the coupon is the $50, even though the restaurant does not receive this amount from Groupon.  So, when the customer orders $100 worth of meals and drinks at a restaurant, she will have to pay tax on $50, but she will receive a credit for $100 (face value of the coupon).
Restaurants that use Groupon (or other similar programs) may need to update their POS systems to properly account for these transactions.  Many POS systems can be easily modified by the user to make these changes, but some require programming by the developer (which can take time).  Here are the changes you will need.
Continue reading “Groupon POS Implications”

How to Compare Your Restaurant

It is almost impossible to compare a restaurant’s operations with industry averages.  Organizations like the CRFA aggregate the smallest mom-and-pop with the largest chains to get their averages.  Not many restaurants are “average”, anyway.  Just about all industry statistics are based on surveys, not actual operating results.  Even though such surveys are anonymous, who wants to put down that their cost of sales is 40% or more?  So, the results are often skewed.
There is another way of compiling restaurant operating results.
Continue reading “How to Compare Your Restaurant”

Restaurant Fraud & Theft – Part IV

The first three posts in this series covered fraud and theft of products entering the establishment, food theft, and alcohol theft.  Now, we’re going to look at outright theft of sales receipts.  While it’s unlikely that your servers are grabbing handfuls of dollars on their way out the door, today’s post looks at several more sophisticated methods of achieving the same result.
Continue reading “Restaurant Fraud & Theft – Part IV”

Take Part in a Canadian Industry Restaurant Survey

Technomic, Inc. is seeking independent and regional Canadian restaurant owners and managers to help them with a study on the current business environment for restaurants in Canada.
If you qualify and complete the survey, you will receive an Amazon.com code for $10 (Canadian) that can be used for purchases on their website. If you prefer, this amount may be donated to charity instead. Total participation is limited, so please click on the link below today!
 
http://www.ilabonline.com/mrIWeb/mrIWeb.dll?I.Project=IND211
 
I hope you will take the time to complete the survey, so that we can improve the general lack of Canadian restaurant market information.  Once the results have been tabulated, I’ll be reporting on some of the key findings.

Restaurant Theft Findings

Most restaurateurs know that theft is a problem in the hospitality industry, but very few know how much is going on in their own establishments. According to the U.S. National Restaurant Association, approximately 4% of all revenue is lost to in-house theft.  The latest figures from Statistics Canada, NPD Group and the CRFA, indicate that the average profit margin for Canadian restaurants was only 4.4% of operating revenue!  Based on these figures, approximately one-half of your profit is lost to employee theft.
As if that isn’t bad enough, the cost of missing alcohol is only half of the story.  Increasingly, restaurants and bars are learning that they have substantial tax liabilities resulting from stolen alcohol.  I urge you to learn more about this insidious practice, here.  It’s no wonder that 35% of restaurants fail because of employee theft!
Continue reading “Restaurant Theft Findings”

Cost Control is the Key to Survival

AbacusWhile there are some signs that we may be emerging from the recession, I think you’ll find that consumer behaviour has been changed, perhaps for many years to come.  Even your “well-off” customers are much more price conscious that they have ever been before.  Actually, they are more value conscious.  In order to “survive and thrive”, you have to continuously monitor your restaurant’s value proposition.
While there’s more to the value proposition than your menu and prices, these are the two aspects that can be adjusted fairly easily in the short-term.  These are also the two areas that most restaurateurs fiddle with first, when times get tough.  We could probably add labour into the mix, too.
Recessions always harm the restaurant industry.  People lose their jobs (or worry that they will lose them), cut back on meals outside the home, and spend less when they do go out.  Most restaurants experience a drop in both volume and check averages, often severely reducing (or eliminating) their profits.  To cover their fixed costs, restaurateurs will try everything to keep the customers they have and steal their competitors’ customers.  Most start with price reductions, either through coupons and discounts or with across the board price reductions.  It doesn’t take long to realize that quality or portion sizes have to be reduced to maintain profitable margins.  Easier said than done!
Continue reading “Cost Control is the Key to Survival”