There’s still no such thing as a free lunch, but new online discount coupons are slicing restaurant prices to the bone.
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While recession-weary consumers may be happy to buy a $50 dinner for $25 at Web sites like Groupon.com, a participating restaurant makes only $12.50 — an unprofitable deal for the restaurant.
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Groupon.com, one of several deep-discount Web sites, claims it can help restaurants, health spa operators and other retailers reach new consumers who can be turned into repeat customers.
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You may barely break even on Groupon customers the first time, said David Rangel, Groupon’s director of merchant services. But if you bring them back once or twice, you’ll get a terrific return.
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One restaurant owner called Groupon’s program borderline predatory because it’s aimed at restaurants hurting from the recession. They know the restaurant industry is on the ropes, and they are offering people a quick fix. … They are preying on people’s fears, said Lenny Russo, chef and co-owner of Heartland Restaurant in St. Paul, Minn., who refused to participate in the coupon program.
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The coupon deals jeopardize the restaurant industry, bringing short-term revenue, though not enough to cover the cost of buying, preparing and serving the food, he said. Others say it takes time to tell whether Groupon will hurt restaurants or boost traffic as promised.
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Restaurants can control their costs by restricting the number of coupons — known as Groupons — that can be sold. Chicago-based Groupon Inc. does business in 40 metro markets. Its competitors include Restaurant.com, LivingSocial, DealStork and CrowdCut.
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Groupon approaches restaurants with this pitch: Offer highly discounted meals through Groupon.com packaged as exclusive daily deals. Consumers get a short time to purchase online and must pay in advance. The deal goes through only if a specified number of consumers — say, 50 — opt to buy. Hence…