Opening a new restaurant is never easy. Apparently Groupon isn’t helping matters. Three-month-old DC waffle shop, Back Alley Waffles, has gone out of business. The co-owner Craig Nelsen blames Groupon. This note was posted on the restaurants website along with an explanation:
Grouponistas, sorry, but I’d rather have my hand slammed in a car door than honor your Groupon coupons. You’ll have to seek refunds from your new insect overlords. If you act quickly, you should get your money back by Christmas. 2015.
Here’s our Groupon story:
Groupon promises to send you lots of new customers. The customers buy 50% off coupons (two waffles for the price of one, for example). They send the money to Groupon, which issues them a code. The customer brings the code into the shop. The shop gives the customer the two waffles, collects the code, and then “redeems”, or verifies, the code with Groupon.
Does Groupon then electronically deposit the money that the customer paid them for the coupon into the business’ bank account overnight like credit card companies do? No. After taking a big chunk of the money as its share, Groupon holds on to the business’ share, using it while the business waits. And waits. And waits. And waits.
After about a month, Groupon issues the first of three payments to the business. By check. Then it has to “process” the check, which can take up to ten days. Then it snail mails the check. A month later, the process is repeated for your next installment. Then, a month later, the process is repeated again for your final installment.
Now, keep in mind, the bulk of the Groupon activity (i.e., the big surge in customers) occurs at the outset of the Groupon campaign. That means the business has to lay out all the money (in our case food and labor) up front to service this expensive campaign, but it takes roughly a month for Groupon to send the (deeply discounted) payment for the waffles those customers ate. And even then its only half or less of what is owed. The business has to wait for most of the remainder of its money until two months after laying out the cost of the food and labor. And for some of the money, it will be three months after honoring the customer’s Groupon coupon in the shop before the business is paid for that customer.
That’s the part that I didn’t expect and the part that put our new business out of business.
And that offer of $450 waffles doesn’t appear to be a joke. He explains on his website that the hefty price tag isn’t just for breakfast:
Here’s what you’ll get:
- a fluffy 7″ Belgian waffle with fresh-churned butter and real maple syrup
- a 4′ x 4′ mosaic similar to the one shown below [see here] (which was stolen—if you can believe it—by two black guys and a white guy at around 3 a.m. one Friday night/Saturday morning several months ago) of the subject matter of your choice*
- the materials with which to make the mosaic (roughly $225 at Home Depot)
- the unparalleled experience of creating your own piece of art
Next waffling scheduled for July 28, and there are already only five spots left. To reserve a place, please contact Craig at 202 568 9448.