Should a Restaurant Partner with Groupon?
Company: Capital One
Role: Data Scientist
Category: Analytics & Experimentation
Difficulty: easy
Interview Round: Technical Screen
You are evaluating whether a restaurant should partner with a daily-deals platform similar to Groupon.
Assumptions:
- The restaurant serves a certain number of tables per day.
- Average spend means the average pre-discount bill value per table.
- Variable cost is 40% of gross customer spend.
- Fixed cost is $100 per day.
- Under the Groupon offer, a customer uses a $15 coupon to receive $30 of value. Assume the restaurant effectively incurs a $15 discount plus a 40% commission on the $15 coupon value, so the Groupon-related cost per redeemed table is $21.
Answer the following:
1. What business factors should the restaurant consider before partnering with Groupon?
2. Baseline case: the restaurant serves 20 tables per day, and average spend is $30 per table. What is daily profit?
3. If every table uses Groupon, what average spend per Groupon table is required for a Groupon transaction to be break-even on an incremental basis?
4. Based on marginal profitability, should the restaurant partner with Groupon if Groupon demand mainly cannibalizes existing full-price customers? Explain.
5. New scenario: the restaurant serves 25 tables per day, average spend is $36 per table, and 10 tables use Groupon while 15 tables pay full price. What is daily profit?
6. Why can the number of tables served and average spend both increase while profit still decreases relative to the baseline?
7. Under what conditions might Groupon still make strategic sense despite lower per-table profitability?
8. If the restaurant does partner with Groupon, what levers could improve profitability?
Quick Answer: This question evaluates the ability to analyze unit economics, marginal profitability, and cannibalization effects using quantitative assumptions and scenario-based financial modeling in a business analytics context.
