The Trap!

I got a call from one of my restaurant friends telling me about a great thing he found for advertising his business at no cost- www.restaurant.com.  Restaurant.com would list his site for free on their server and sell discounted gift certificates to his customers, with the website getting the money from the sale of the gift certificate.  The only decision my friend would have to make is whether he wanted to offer $20 gift certificates for $10, $50 gift certificates for $25 or $35 gift certificates for $25.  

This sounds like a great idea, right?  They will advertise your business for free and you can track the success rate by the new customers coming in who use the gift certificates.

You know the saying “nothing is FREE”?  Let’s take a minute to examine some of the problems with restaurant.com.

1.     Many restaurants run a food cost of over 33%, meaning if a customer orders $30 in food, it costs the restaurant $10 just to buy the food they are making.  So when restaurants put a $25 gift certificate with a minimum purchase of $35 on restaurants.com, the restaurant actually spends more money on food then they will see in the cash register.

2.     The discounted gift certificates are available all the time and the website, restaurant.com offers further discounts on the gift certificates to sell more of them.  By being on the site you are allowing your customers to get a $20 gift certificate to your restaurant for as little as $.40, yes that’s right forty cents when they run the 90% off sales.  Why would your customers ever want to pay full price for your services?

3.     When you join restaurant.com you must agree to a one-year commitment with them.  So for one year you cannot stop doing this promotion even if you fear it is not benefiting your business. 

4.     How do you plan to attract customers that are going to pay full price for your goods after the recession when they know your business as a discount place to dine? 

For some businesses discounts are great - pizza, yeah saw a Papa Johns ad this afternoon in the mail. Fast food- yeah my aunt handed me a stack of McDonalds coupons last week.  Coupons and discounts work for these restaurants

High-end restaurants that cater to special occasion celebrations with quality food should resist the urge to discount. 

Are the people who want to only spend $10 on your $30 rack of lamb the people you want in your restaurant?  If so by all means plan to put your restaurant on the list for discount advertising. If not? Research, Plan, Promote, and Buy a little advertising to HELP YOU SUCCEED. Trust me, it’ll cost you far less to do some real advertising than it will to sacrifice your image on restaurant.com. 

For more information on Coupons, Discounts and Promotions - how they affect your business - please plan to attend the Lunch n' Learn session in Gettysburg on January 6th. Please RSVP here:  http://www.eventbrite.com/event/1070141823/efblike