Should a Restaurant Partner with Groupon?
Company: Capital One
Role: Data Analyst
Category: Analytics & Experimentation
Difficulty: easy
Interview Round: Technical Screen
A restaurant is deciding whether to partner with a daily-deals platform such as Groupon.
Assume the restaurant's current business is:
- **20 tables served per day**
- **Average spend:** $30 per table
- **Variable cost:** $0.40 per $1.00 of customer spend
- **Fixed cost:** $100 per day
A Groupon-style offer is proposed:
- A customer pays **$15** for a voucher worth **$30** of menu value.
- Groupon keeps **40%** of the $15 payment and remits the remaining **60%** to the restaurant.
- If the customer spends more than $30, the excess is paid directly to the restaurant at face value.
- Assume every Groupon customer spends **at least $30**.
Answer the following:
1. What factors should the restaurant consider before partnering with Groupon?
2. What is the restaurant's current **daily profit** without Groupon?
3. For a Groupon customer, what **average spend per table** is required for the restaurant to break even on a **purely incremental** basis?
4. Based on that result, would you recommend partnering with Groupon? Explain the difference between evaluating an **incremental customer** versus a **cannibalized existing full-price customer**.
5. Now suppose the restaurant serves **25 tables per day**, the **average spend is $36 per table**, fixed cost remains **$100 per day**, variable cost remains **40% of spend**, and **10 of the 25 tables use Groupon**. What is the new daily profit?
6. Why might profit be lower than in the original scenario even though both table count and average spend increased?
7. Under what business conditions would you still consider Groupon despite lower short-term profit?
8. If the restaurant does partner with Groupon, how could it improve profitability?
Quick Answer: This question evaluates a candidate's competence in unit economics, break-even and profitability modeling, and the ability to distinguish incremental versus cannibalized customers when assessing voucher-based promotional partnerships, reflecting skills in revenue modeling, cost accounting, and business analytics.
