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Groupon a bad deal for restaurants and everyone else, including Groupon

Groupon logo

Groupon CEO fired | click for Yahoo Finance article

What happens when you sell a product or service that “kills” your customers?

Just ask recently fired Groupon CEO Andrew Mason. I don’t know that he has the answer, but I do.

Groupon was a bad idea from the start. They talk businesses into selling their goods or services for half the cost of their normal price. Of that half price that is collected, Groupon keeps half and the business keeps the last half, minus any charges for processing fees on both their cut and Groupon’s cut, which equals about 7% of the business’ portion.So let’s do the math. Groupon sells a 50% off deal to your restaurant at $20. Groupon keeps $10 for every one sold. You keep $10 minus 7%, leaving you with $9.30.

With that $9.30 collected from the customer, you have to give them $40 worth of goods or services. If you are like most restaurants, just your cost of goods on $40 eats up $10-16 (25-40%), resulting in a loss of anywhere from $.70 to $6.70 for EVERY Groupon deal sold. That’s before you calculate in additional paper products, cleaning supplies, extra staff, and lost revenue from seats that are taken away from full price customers, among other expenses.

All this turns Groupon into the single most expensive tool there is for marketing your restaurant. This a bad, bad business model. A company that promotes itself by claiming they can bring you new business ultimately ends up putting many of it’s own customers out of business, or their customers wisen up and realize Groupon is a horribly expensive way to market and they stop using the service. Either way, Groupon is cannibalizing itself and it’s customers. Groupon claims the payoff is new, regular customers for the business. The reality is that the customers are loyal to Groupon, not the business, and they follow the next deal to the next restaurant.

No business model is going to succeed long term by killing it’s customers unless it has a never ending supply of new customers. For Groupon, that means it’s hey day in the US is over. It has run it’s course here and most businesses are too smart to fall prey to it’s predatory business practices. Groupon will not rebound from it’s current woes in this market. It’s only hope is to expand into untapped markets where business owners are not aware of the dangerous effects of using Groupon. Groupon is the first daily deal model to fall because it was the first in the market. It will not be the last however.

Ultimately, nobody wins with Groupon, except the people who buy the Groupons. Check out the linked article from Yahoo Finance about the firing of Groupon CEO, Andrew Mason. If you own Groupon stock, I’m sorry for your loss, but cut your losses and dump it now. It’s not coming back.

Brandon O’Dell is an independent restaurant consultant and owner of O’Dell Restaurant Consulting, a restaurant consulting company that offers operations and marketing consulting for independent restaurants and small chains. Learn more at their website or visit their webstore to find Excel speadsheets and Word templates to help you build a better restaurant business.

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Restaurants, chef emphasize sourcing local ingredients | Nation’s Restaurant News

Locally sourcing ingredients is evolving from a niche market into the mainstream. Not sourcing any of your products locally will soon become a liability for your restaurant if it hasn’t already. Rather than the bloated menus full of heat and eat items, the new generation of restaurant concepts are offering less selections, making everything from scratch, and buying as many ingredients as possible from within 150 miles of their location. Whether you are a bleeding heart activist, or a pro-business capitalist, sourcing items close to home just makes sense. You can pat yourself on the back for saving the environment, or pat yourself for saving the local economy. Your choice. Either way, the move to source foods locally is getting to be less and less optional.

Restaurants, chefs emphasize sourcing local ingredients | Nation’s Restaurant News.

Brandon O’Dell with O’Dell Restaurant Consulting offers operations and concept strategy tools and advice for independent restaurants and small chains. Learn more at www.bodellconsulting.com.

50 ways employees steal from your bar or restaurant

I’m not sure where this list originally came from and I don’t take credit for it myself. I didn’t create. However, it is a great list of 50 ways employees can steal from your cash register or POS. As long as there is cash involved in transactions in the restaurant/food service industry, there will be theft. For every possible technique to prevent theft, there is another to get around that prevention method.

If you do suspect an employee of cash theft, one of the best techniques you can utilize to catch them is the mid-shift drawer countdown. This is an unannounced drawer switch in the middle of a shift. You or your manager take a new drawer, with change, to the register. You run a sales report on your point of sale system, or an “x” report (not a “z” report) if you are using a cash register. Switch out the drawers and count down the drawer the employee was using. Most employees who steal will keep their extra money in the cash drawer until the end of shift countdown or sometime close to it.

If you count down drawers together with the employee (which you should), they will try to keep track of how much extra is in the drawer in their head and pull the extra amount before the countdown. They are usually careful not to take so much as to potentially make the drawer short. This causes them to be long fairly often.

If you do not count down the drawers with the employees, they will not pull their extra cash until they count down their drawer at the end of the shift, and they are less likely to leave the drawer long every shift, but will still be long more often than an honest employee will.

In any case, NEVER allow employees to keep their tips in the drawer. This completely eliminates your opportunity to detect theft.

Another tool for reducing employee theft is cameras pointed at the till. Many camera systems will now interface with point of sale systems so you can see what an employee is ringing into a drawer while you are watching their cash handling. Having the cameras alone will keep many employees honest.

Another tip is to eliminate the “no sale” button, or require manager approval to use it. A no sale button makes it very easy for employees to collect money for drinks never rung in. You should also make sure there are no $0 priced items in your point of sale menu. Some poorly designed point of sale systems require you to create sales items for your modifiers, and can inadvertently cause you to have a lot of modifier buttons that can be “rung” in with $0 balances due, but still allowing the employee to settle the sale and open the drawer. If you have $0 menu items or a no sale button, use your sales by item reports to see how often they are used. Also use your transaction reports to see how many $0 transactions are settled. These are both good indicators of theft in your restaurant, bar or food service.

Take a look at the following 50 ways employees steam from your bar or restaurant and keep your eyes open in your own restaurant. An aware owner is one that doesn’t get stolen from.

50 Ways to Steal from the Bar

  1. Short Ring – Under-ring the correct price of item and pocket the
    difference. Common when employees have access to a “no sale” button or sale items with $0 prices that are used as modifiers in a point of sale system.
  2. Phantom Register – Extra register put in bar and items not rung
    in on main register.
  3. Serve and collect while register is reading between shift
    changes.
  4. Claim a phoney walk-out. Keep money received from
    customer.
  5. Phantom Bottle – Bartender brings in his own bottle and
    pockets cash from the sale.
  6. Short Pour – Pour less than shot to cover “give away” liquor
    costs.
  7. Collusion between cocktail server and bartender.
  8. Using one shot on two glasses.
  9. Claim a returned drink – Extra drink is sold and cash is
    pocketed.
  10. Returned bottle of wine – Wine is credited on inventory,
    bartender sells wine by the glass, pockets cash.
  11. Undercharge customers or free liquor in hope of large tip.
  12. Re-Using register drink receipts.
  13. Bartender exchanges drinks to cooks for dinners.
  14. Adding water (diluting) liquor to get more shots out of it. Pocketing the cash.
  15. Using lower priced liquor and charging for call brands.
  16. Receiving kickbacks from liquor distributors.
  17. Charging customer regular prices, ringing happy hour prices.
  18. Complimentary cocktail or wine coupons from hotel rooms
    sold by maids to bartender which can use in place of cash.
  19. Short-Changing Customers.
  20. Ringing food items on liquor key in order to cover high liquor
    cost percentage.
  21. Giving free drinks to employees in exchange for higher tips.
  22. Not pouring liquor into blended drinks to cover high pour
    costs.
  23. Duplicate imprinting of customers credit card charge slip.
  24. Claiming opening bank till was short.
  25. Z-ing out register tape early. Under-reporting of sales.
  26. Recording incorrect overrings and voids.
  27. Change a credit card amount after a customer leaves.
  28. Hitting “no sale” key to open register. Pulling money out later.
  29. Keep income from vending machines.
  30. Ringing items on another bartender or manager key.
  31. Bringing in a pair of work shoes, wearing boots. Put liquor
    bottle in boots and walk out with it.
  32. Claiming fictitious Paid-Outs to customers for broken
    malfunctioning vending machine. Keeping Cash.
  33. Re-using empty bottles to get new inventory out of storeroom
    without suspicion.
  34. Pouring wine by the glass and ringing in a bottle sale. (the sum
    of the glasses is more than the bottle price).
  35. Not ringing in cocktail server sales and splitting the money.
  36. Turning in only the amount of sales on Z-Report and keeping
    any overages.
  37. Under pouring drinks by a sixth, keeping track, and pocketing
    the cash for one drink every sixth drink.
  38. Using jiggers brought in from home that are smaller than
    standard pour, with the same objective as above.
  39. Substituting a house brand for a premium brand (that usually
    sells at a higher price), charging for the premium brand, and
    pocketing the difference.
  40. Overcharging the number of drinks served to a group of
    customers who are running up a tab to be paid later.
  41. Claiming a fictitious robbery.
  42. Re-pouring customer wine leftover in bottles (e.g., banquet
    wine) to other customers by the glass.
  43. Claiming a fictitious walk-out.
  44. Free drinks to local merchants in exchange for merchandise.
  45. Making juice or coffee drinks with little or no liquor.
  46. Picking up excess customer change on bar.
  47. Carrying full bottles of liquor and beer to the dumpster with
    the empties.
  48. Free drinks to the cooks in exchange for food that is sold and
    cash pocketed without ringing in.
  49. Inflate ending inventory values by filling empty liquor bottles
    with water and counting as full.
  50. Free drinks to customers in exchange for larger tips

Share your own tips for preventing theft or other ways employees can steal cash from an employer.

Brandon O’Dell and O’Dell Restaurant Consulting offer operations and brand strategy consulting for independent restaurant owners and small chains. Learn more at www.bodellconsulting.com.

Positive outlook for restaurants in 2012, or is it?

Here’s an article from Nation’s Restaurant News about sales predictions for 2012. According to the study, everything is looking rosy. The question to you is, “Since this study only contains data from the Top 500 largest chains, does this study suggest restaurant sales overall are going up 3.4%, or does it suggest that independent restaurant competition is weakening for the chains and they are taking a larger marketshare of the consumers budget?”

Since this report also recognizes that most the previous and expected gains have been in quick service restaurants, it suggests that consumers are still being careful with their dining dollar, looking for value in quick casual restaurants instead of full service restaurants. Time will only tell what the real deal is. I tend to trust studies that include a large sampling of independent restaurants. They are a better indicator of the overall market and health of the industry in my opinion.

Restaurant sales rose 3.4% in 2011 | Nation’s Restaurant News.

To help organize your restaurant systems so you can compete with the chains, visit www.bodellconsulting.com.

Hilton Worldwide seeks independent restaurant concepts ripe for franchising

Hilton seeks restaurantsSpread the word, Hilton Worldwide is looking for successful independent restaurant concepts to pitch to their franchisees to put into their hotels. This might be a good opportunity to take the first step into franchising. The following article from Restaurant Hospitality E-Zine doesn’t say as much, but the Hilton maybe willing to foot all or part of the cost of franchising the concepts.

http://restaurant-hospitality.com/trends/hilton-wants-restaurant-concepts-yours

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