Groupon is Growing

Groupon, a new couponing website that allows businesses in several markets to feature a "deal of the day" to subscribers, is quickly becoming the place to go for quick-service restaurants looking to leverage the viral impact of the Web to build a client base.

Through the service, users check their local Groupon site in nearly 60 cities around the U.S. and Canada for the deal of the day. If they like the offer, they sign in and purchase it. If a minimum number of users purchase the deal of the day, it becomes active.

"Consumers are always looking to save money, even prerecession," says Mark Desky, vice president of marketing at Groupon. "Businesses are always interested in finding great ways to find new customers. We see this as an alternative to traditional advertising, and it really does have legs in any economy."

Groupon's premise is that there is power in numbers, with its 3.3 million users helping promote deals of the day through their social media networks. The result is free exposure for the quick serve offering the Groupon deal.

"The whole point of Groupon is to get new customers," says Neil Seth, a Baja Fresh franchisee. "At least that is what it was for us. We definitely were losing money on the deal."

Baja Fresh sold about 2,600 two-for-one burrito deals for $8 a piece through Groupon. The burritos are typically around $8 each.

"You’ve got to look at it in the marketing sense," Seth says. "We made it so that if you are coming ... you are going to bring your friend and buy them lunch, too, because you will not be able to eat two burritos on your own."

Seth says one drawback to Groupon is its lack of analytical functionality. He suggested a feature that would allow a quick serve to ask whether the user has been to its chain before.

Randy Schechter is cofounder of Energy Kitchen, a fast-casual concept in the New York City area. Energy Kitchen sold about 5,000 $20 gift cards for $10 apiece as a deal of the day during the holidays. According to Schechter, the key to running a successful campaign on Groupon is to prepare the staff for high customer volumes.

"Other restaurants and other companies might not be able to handle that, but we have a pretty big infrastructure [that] was able to handle the volume," Schechter says.

Quick-service restaurants should also be prepared for a large amount of phone calls and hits on their websites on the day their deal is featured, Desky says.

By Brendan O'Brien