By: Nicole Reed, Communications Manager, MenuMax
I like many others use discount sites like Groupon, Daily Deals, and Living Social. Many of the deals that fill my mailbox on a daily basis are for restaurants, and that got me thinking. With most of the deals 50% off or better, are restaurants really making enough money off of these deal to cover their costs?
For most restaurants offering coupon deals online through deal sites are meant to help business. The theory behind it is that a large number of people will purchase the deal, visit the business, which will build their client base, encourage return visits, and increase word of mouth advertising. For some restaurants it does just that. However, one crucial element for restaurants to understand before they take the plunge into online deal sites is they need to know their food costs.
Discount sites usually offer discounts of 50% or more. On top of that restaurants that use these services are usually are only entitled to 50% of the profits, the deal site gets the other half.
For example say a restaurant offers a $50 certificate for $25, and they sold 500 of them. That means there is $25,000 worth of food and drink to be had. Most discount sites take half of the profit so the restaurant would get $6,250 for the deal. If the restaurant works on a 30% margin, their hard costs are $17,500 for those certificates. Because they only made $6,250 the restaurant still needs to pay $11,250 out of pocket to break even.
In order to be sure that they are making wise food costing decisions it is imperative that restaurants understand their food costs. By knowing their food costs they can offer a deal that will grant them all the benefits of discount coupon sites and meet margins.
For food costing down to the penny check out MenuMax.com.
For more information about MenuMax, call 1-877-Menu-Max or visit www.menumax.com.