Groupon Or Not To Groupon? NOT!

Groupon has been trying to get me to advertise with them for a while. They make it sound good by telling you it's free advertising and you will drive up business volume. What they don't tell you is that it eats into your margin and you'll probably make a loss.

Here's how the math breaks down, and this is just a simplified example. They expect the business to make an offer of at least 50% discount. They take 50% of the sales. Industry average for food cost is 30%. So for every dollar sales, 50 cents is discounted, 25 cents is Groupon's share and 30 cents is food cost.

You're losing 5 cents on every dollar before including rent, wages, utilities and insurance.

The Groupon people tell you that it'll bring in lots of new customers. They don't tell you that most of these customers won't come back unless they get another coupon.

I still believe that the best way to build a customer base is to offer a good product and a great value.