Restaurant Groupon Deal — Profitability Analysis

Context

You are advising a restaurant on whether to run a Groupon-style promotion. A typical voucher sells to the customer for $15 and gives them$30 of in-restaurant credit. Groupon keeps a 40% commission on the voucher revenue it collects. Variable costs are 40% of the pre-discount menu spend; fixed costs are $100/day.

Tasks

1. List the business and financial factors a restaurant should evaluate before partnering with Groupon.
2. Baseline (no Groupon):
   • 20 tables/day
   • $30 spend per table
   • Variable cost = 40% of revenue
   • Fixed cost = $100/day Compute daily profit.
3. Voucher break-even (marginal table):
   • Voucher face value = $30 (customer pays$ 15)
   • Groupon keeps 40% commission on the $15 voucher revenue
   • If a voucher table’s total menu spend is s, the first $30 is covered by the voucher; the customer pays any overage beyond$ 30 at POS
   • Variable cost remains 40% of spend What minimum menu spend per voucher table is needed to break even on a marginal basis? Based on this, would you run the deal? Why?
4. New scenario with Groupon running:
   • 25 tables/day total; 10 use a voucher
   • Average menu spend = $36 per table
   • Variable cost = 40% of spend
   • Fixed cost = $100/day
   • Voucher mechanics as above (face $30, customer pays$ 15, 40% commission) Compute total daily profit. Explain why profit can decrease even though table count and spend increase. Would you still partner with Groupon under this scenario? Justify.
5. Suggest concrete tactics to raise profitability if the deal must run.