Customers Pitch In To Save Business Almost Ruined By Ill-Advised Groupon Deal

Since Groupon launched, we’ve written a handful of stories about businesses — like the bakery that claimed $19,500 in losses and the cafe owner who called it the “single worst decision” she’d ever made — that said they took on huge amounts of red ink when they were overwhelmed by bargain-hunting shoppers who only wanted the discount. Well, here’s a story that’s slightly different, in that the shop’s regular customers have come to the rescue to save the sinking business.

Food for All Market is a Philadelphia-area shop that carries products for people allergic to everything from soy to wheat gluten to nuts.

Last summer, a Groupon rep contacted the store’s owner and sold them on a Groupon that would give the buyer $30 worth of stuff for $15. The owner tells the Philadelphia Inquirer she thought it would be a good way to introduce the store to new customers.

Which it did. Unfortunately, a lot of those shoppers came for just whatever they could get with the Groupon and didn’t spend any extra.

Making matters worse, the owner claims that the Groupon rep never told her she could cap the number of discounts that were sold. This is a complaint we’ve heard before from other businesses who felt burned by Groupon.

In the end, the owner estimates she took on about $10,000 in losses from the Groupon deal, which appeared to be too big of a hole for her to climb out of.

So when it looked like Food for All was going to become just a memory, the owner posted a notice to her meager list of around 500 e-mail addresses, 400 Twitter followers and 450 Facebook likes.

The response was a pleasant surprise, the owner tells the Inquirer: “About two dozen customers have basically made me low-interest loans, so that we can restructure our loans, restock, and move forward.”

Additionally, a number of customers have volunteered their time to help Food for All cut down on overhead while the store recovers. One customer with celiac disease has volunteered their services as financial adviser.

Groupon offer damages Mt. Airy market, but Internet helps bring it back [Philly.com]

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  1. areed67 says:

    News at 11: Business Owner Doesn’t Read Contract, other Groupon Experiences, Makes Uninformed Decision, Pays Price.

    Passive verbs don’t help the case – the Groupon rep may have tried to convince her to sign up, but they didn’t “sell her” as if it was out of her control. Did she buy the Best Buy extended warranty too?

  2. Bsamm09 says:

    Why offer a low interest loan? Try to get stock or units in the business. If it fails you are going to lose your money anyway, if it succeeds, you are an owner and not a creditor.

    • ChuckECheese says:

      You may be too prepubescent to recognize this, but sometimes businesses are seen more as community services than as cash cows. The patrons of a business like this appreciate the mere fact that such a business exists. There is very little profit to be made in this type of shop because the products sold are so expensive (as is distributor and wholesaler shipping to the retail outlet). The people who made loans don’t want to be “owners,” they want an important food resource to remain available to them.

      As a celiac myself, I know there are very few such stores available and prices are high. Speaking to the proprietor of one in the Phoenix area, he explains that he must pay UPS and USPS shipping rates on heavy items such as canned goods, grains and flours. The products are expensive and difficult to find (e.g. a box of gluten-free biscuit mix costs about $6 a lb).

      • Bsamm09 says:

        If they are so grateful that a store exists why not just place advance orders? Being a stock (or unit as I don’t know the structure of business) holder moves them down the line behind people who are creditors if the business fails.

        Since there is very little profit in it why saddle the owner with interest payments?

        • ChuckECheese says:

          Because people don’t want to be business part-owners or stockholders. Because they’re being good neighbors, not good business people. Your advance orders comment is irrelevant. It is likely many of these people were regulars before the Groupon fiasco nearly wiped the proprietor out. Had the owner not done the Groupon, the business would still be open and nothing would have changed for the regular customers. Also, there’s only so much xanthan gum and gluten free bread a person can eat.

          The people giving loans are trying to help an important business stay open, and that is all they want to do. No doubt there are many other legal requirements and obligations related to purchasing shares of a business, and probably nobody cared to bother with all that nonsense. Much easier to give a loan, charge a small amount of interest (we don’t know how much but it was acceptable to all parties involved), and get back to work.

          People go into business for all sorts of reasons; sometimes they aren’t knowledgeable about modern business scummery such as Groupon’s. I don’t think this means they are bad businesspeople; it means Groupon is scum.

  3. Bladerunner says:

    I have little to no sympathy for people who don’t understand basic math. “If I offer a coupon that I take a loss on to everybody on the internet, I might lose money” is not complicated.

    That said, it’s pretty cool that people are helping her out (and maybe the financial advisor can prevent such idiocy in the future).

    • ARP says:

      People do it assuming that people will come back, spend extra money, etc. and I’m sure the Groupon sales people talked up all those benefits. That being said, we’re far enough along in the “Groupon Era” that people should assume the worst. The Groupon person should have mentioned being able to cap the number of Groupons. No, there’s no legal obligation, but its exactly this type of situation that gives Groupon a bad reputation and creates low repeat customers.

      • Bladerunner says:

        Maybe that’s how it seems to you, but to me the cap is a perk, a better way of managing your deals, and a way to put a loss leader up that won’t bankrupt you. She didn’t think there was a limit she could put, yet she put up a 50% coupon anyway, when apparently her margin is less than 50%, thus she took a loss. That is dumb, and frankly, I’m tired of hearing about the “poor business owners” who didn’t realize how dumb that is. Would they have put a big sign outside their door saying “everything 50% off”? No? Then why do essentially the same thing on the internet?

        Now, if Groupon was telling them “there’s a cap on any of these to make sure you don’t get screwed” without telling them “there’s only a cap if you set it”, then that would be unethical, but the business owners aren’t being lied to or even misled about what they’re offering…they aren’t even aware the cap is an option, right?

        • Eremis77 says:

          Probably because a small local business underestimates the number of people who would actually purchase a Groupon deal in their area. If the company was an internet mail-order business, I would totally agree that they should crunch the numbers first.

          I’m not saying the business owner is totally blameless, but it really seems like Groupon should mention the cap possibility up front as well.

          • Bladerunner says:

            Again, why? I mean, it would make it more likely they’ll offer a really good deal, but we’re being asked generally to have sympathy for people who didn’t do basic math, and act like that’s Groupon’s fault.

            We shouldn’t be going along with the business owner’s complaint; it is not, as far as I can see, really all that valid. The existence of the cap is, again, a bonus, something that they didn’t know about in advance when they said “yeah, this deal is a good idea”

        • sagodjur says:

          Regardless of the ethics, it’s in Groupon’s interests to tell business owners to set a cap because destroying businesses that use Groupon isn’t good PR for Groupon, even if you can argue that it’s the business owner’s fault. Just because this business owner didn’t hear of the other Groupon horror stories doesn’t mean that there aren’t ten other business owners who did and are avoiding Groupon enitrely, cap or no cap.

          • Sneeje says:

            Perhaps, but accountability in these situations does not fall entirely on Groupon. Whenever you voluntarily place yourself at risk, you must bear some of the accountability, because you certainly bear the consequences.

            You can’t walk into a crosswalk without looking, get clobbered by a car, and then act the victim. Does the driver bear responsibility/accountability? Sure. Did you do something foolish that may affect the quality of the rest of your life? Absolutely.

            It amazes me how many people are completely blind to this. I guess if folks want to go through life that way, living the life of a victim, that’s their call. Sounds sad and pathetic to me.

            Good for those that are helping the business though–would that we could all make such grave mistakes and have that kind of safety net.

            • ChuckECheese says:

              To me, ultimately accountability is on Groupon, to make only honest deals with all risks and costs disclosed up-front. For a business to solicit business from another without telling them the pitfalls up-front (so that it can benefit from them) is nothing short of predatory.

              • Bladerunner says:

                They DID, though. They said “You’ll be offering a coupon that’s $30 for $15.” There was no misleading, no lack of information except an extra perk that exists but doesn’t matter in this story.

                • Sneeje says:

                  That’s the thing, there is some validity to the negative feelings against Groupon here. They certainly aren’t working hard to prevent these types of problems and give people all the rope they need to hang themselves. Then they act surprised when it all goes wrong.

                  But I just find it sad that people can live their lives operating on the assumption that when they make decisions that place them at risk and something bad happens that it must have been someone else’s fault.

                  • ChuckECheese says:

                    But I just find it sad that people can be okay with the idea that people can misguide, manipulate and perhaps outright lie to people causing them to make bad decisions, and because you are able to armchair quarterback a couple reasons why the victim “should have known,” then all the responsibility is on the victim. Rape victims understand your point of view though, because they hear it all the time.

                    • Bladerunner says:

                      Wow, you’re a terrible human being.

                      You just compared people who don’t realize that if they give money away at less than face value it might lose them money to rape victims. Pretty sure they get that all the time too, the invalid comparisons that belittle their experiences.

                    • Sneeje says:

                      I’m disappointed that you really didn’t try to understand what I was saying. My point of view, “as you put it” does not include allowing companies to act in a predatory manner. I personally despise Groupon. What I think you missed was my point that trying to assign blame to only one party in this case makes NO sense.

                      Why oh why do you not believe the business owner has no accountability here? What if it wasn’t groupon? What if it was Nigerian scammer? Don’t we all believe that each person has a responsibility to protect themselves from terrible financial decisions? What if some guy walks off the street and says he has a bridge to sell?

                      BTW, make sure to also throw in something about Jews and Nazis next time and not just rape victims, it will make your point that much better.

                    • Bladerunner says:

                      I think I’m starting to believe in a further Godwin’s corollary; once a supposed “victim” has been equated to a rape victim, you know no further constructive debate regarding whether that is in fact a victim can occur.

                • ChuckECheese says:

                  If Groupon didn’t explain to the business owner there would be an unlimited number of tickets sold, and explain that this could render her business insolvent – and Groupon knows this because it is more experienced in how Groupons work than is the sole proprietor of a shop who may have had no previous knowledge of them or how they work – then I believe Groupon withheld material information that might have changed the business owner’s decision had she known it beforehand. Even if this sort of thing isn’t illegal, it’s scammy and unethical, which is why so many people are offended by Groupon’s behavior.

                  You also seem to be leaning too far into the “perfect knowledge” argument, where you assume that if somebody doesn’t know every detail and possible outcome of their decision(s), they are responsible for what happens to them, even if somebody else deliberately withheld information and allowed them to be misled. Sure, this owner could have been more sophisticated and that might have prevented her from nearly losing her business, but it would have been far better had Groupon been responsible and told her up front what the costs and risks are.

                  • Bladerunner says:

                    “If Groupon didn’t explain to the business owner there would be an unlimited number of tickets sold, and explain that this could render her business insolvent”

                    It’s freely available on the internet. That’s the entire premise of Groupon. Your point is that they should have explained to this lady how the internet worked?

                    • RandomHookup says:

                      Lots of stuff is on the internet, but that doesn’t mean it’s valuable, useful or true. A business like Groupon keeps getting its reputation smeared because it’s not helping the businesses be successful. As a company that trades publicly and that has been taking a lot of hits to its stock price, they have a responsibility to their stockholders to stay out of the papers for letting businesses do stupid things.

                    • Bladerunner says:

                      That is true. But it is not how these articles are portrayed; Groupon is described as “predatory”, people who use Groupon have in these comments been compared to rape victims. There is simply no excuse for that.

                  • mehitabel says:

                    >Even if this sort of thing isn’t illegal, it’s scammy and unethical, which is why so many people are offended by Groupon’s behavior.

                    This.

              • Sneeje says:

                How do you feel about:
                a) someone that points a toy gun at a police officer and gets shot?
                b) someone that walks through a crime-ridden part of town at 2am in the morning alone and gets mugged?
                c) Fiddles with their radio while driving through a parking lot and hits someone pulling out?

                In a), you would likely blame the toy gun wielder, but many would say the officer should know the difference before using deadly force–so the toy gun users fault.
                In b), you would likely blame the mugger, yet the person made a conscious choice to walk through a dangerous neighborhood.
                In c), you would likely blame the radio fiddler, yet the law says the person pulling out is at fault.

                The point is that in each case the blame ends up in a difference place, yet the thing all of these have in common is that in each case, the person (or one of) that gets impacted is the one that made a conscious decision to put themselves at risk.

                You want to live life thinking you have no role in preventing yourself from being a victim? Go for it.

    • balderdashed says:

      No sympathy here, either. Actually, this business owner’s apparent math skills bring to mind a famous episode of “I Love Lucy,” in which Lucy and Ethel start a salad dressing business. Although she’s losing two cents on every bottle she sells, Lucy is confident she can “make it up in volume.”

    • GadgetsAlwaysFit says:

      Or the owner foolishly thought better of the general public and never thought that people who really have no interest or need for special dietary food would come in and score whatever they could just because it was on sale. In those types of stores you have more opportunity to encounter people with medical conditions that can be severe so your view may be skewed because you have seen their torment day in and day out. You think you are possibly bringing in more long-term customers once they realize that you provide food choices they cannot get elsewhere. So it was the owner’s fault for still having faith in their fellow man. At least now they know. On the upside, I would have loved to seen the looks on the faces of some of the buyers after they got their first taste of bread made from rice flour.

      • Bladerunner says:

        Oh, stop. “Thought better of the general public”?

        Now we expect Consumers to make guesses about whether a business has made a good business decision?

        It is not the customer’s fault for taking advantage of an offer freely made by the business.

        • madmallard says:

          no kidding. money has no morals, people give it morality, and when you basically slash %50 without scrutiny, the result should be equally predictable.

  4. sirwired says:

    Okay, lets say the Groupon rep “forgot” to mention putting on a cap. As a business owner running a low-margain business like a grocery store should have been able to do the math, see how expensive this promotion would be, and turn them down.

    • MMD says:

      Or she could have been more proactive about inquiring about a cap.
      I don’t think she deserves to be destroyed for this mistake…I really hope she learns from it!

    • homehome says:

      what’s funny is for some reason ppl don’t think self-responsibility doesn’t apply to consumers as well.

    • jesusofcool says:

      While I agree with that, as someone who has worked for an organization that worked with Groupon in the past, I’m glad their terrible business practices are being publicized. Groupon isn’t bad for buyers and for some businesses it can make sense. But Groupon has no interest or obligation to business owners, particularly small business owners. The service provided by their reps is absolutely terrible. I’ve heard many owners complain about the limited information they received and the complete unreliability of their rep. Owners are completely taken for granted. Personally, I would never invest in Groupon and I think they’re in big trouble. Eventually the number of business owners willing to work with them is going to dry up, especially as word spreads.

  5. ghostfire says:

    Being the best baker/candymaker/illustrator/musician/etc doesn’t make you the best businessman. I’m glad people recognized the quality of what she produced, and helped make this a mistake that she can recover from.

  6. ninjustin says:

    News Flash: PEOPLE BUY GROUPONS BECAUSE THEY ARE CHEAP!

  7. John says:

    Groupon is my “local business deathwatch.” I see restaurant “X” is offering a Groupon, I expect the “for rent” sign on the former location of restaurant “X” within 30-60 days. So sad.

    • DrMcFacekick says:

      Yeah, I saw one yesterday for half off a state safety inspection/emissions check and mentally ticked that place off as somewhere viable to go for car maintenance.

      • ajaxd says:

        State inspections (emission checks, whatever) are a huge money maker. “You gotta have a bearing(brakes, struts, etc…) replaced or fail inspection” – most people don’t have a clue if the item is actually in bad condition and will agree to a replacement. That $20 discount on inspection might lead to $300 (sky is the limit) labor charge.

        • shepd says:

          *this* is why many places mandate that a repeat inspection is available for a nominal cost, within a certain amount of time. Take the vehicle to be inspected at shop A, and get the work done at shop B.

          Chances are really, really high that when you bring it back to shop A to get it re-inspected, they’ll know you are not a walking wallet and they’ll just want rid of you, which means giving you a pass (assuming the work was actually done).

    • Kahlidan says:

      A local auto shop recently offered a Groupon for an oil change, and I ended up needing some other work in addition (water pump was out). They did good work at a fair price, but went under soon afterwards. It seems like many places that offer Groupons (or one of the many clones) and restaurant.com certs are sounding the death knell.

    • Portlandia says:

      I feel the same way about restaurant.com places. A good 90% of the restaurants on there are places I would never go or have mediocre yelp/google reviews on their food and service.

      Their are one or two that are pretty good (for which I buy certificates for regularly) but are generally over priced or what I would call “good enough” when you factor in the discount. None of the ones I’ve tried is a place I would ever go again when paying fall price.

  8. DrMcFacekick says:

    So here’s what I don’t get- all of the articles making Groupon out to be the bad guy never go into the thoughts of the Small Business Owner (SBO) at the time when they were looking into running a Groupon. I feel like anyone with two brain cells to rub together would sit down with their books and crunch some numbers before signing up with Groupon, weighing the positives and the negatives and then making a decision based off of that instead of just going “Oh yeah Groupon, sign me up!” I have a very hard time feeling like a small business got “ripped off” by the “Groupon Monster” when it would have taken twenty minutes with a calculator to figure out if it was a good idea or not.

    • chiieddy says:

      Also, Groupon money shouldn’t come out of the operating budget. It should be considered a marketing budget. The loss is something calculated into marketing the business, much like direct mail coupons or anything else you do to bring attention to the business. If you don’t have $100,000 for marketing, then don’t sell $200,000 of 50% off coupons.

      • stevenpdx says:

        Exactly. A Groupon should be considered an advertising expense. If the advertising budget doesn’t allow the cost of a Groupon promotion, then the business can’t afford to use the Groupon service.

  9. ScarletAnn says:

    A business has got to think about a lot a factors before signing on to a Groupon, coupon, rebate or whatever. There isn’t much margin on groceries, even on specificity items like she sells, so every Groupon sale is a big loss.

    I used to eat at this great little hamburger joint that always ran coupons for 2 for 1 burgers with purchase of any drink. The owner said he would loose money on the burgers but broke about even with the drink. If they bought anything else or became a regular then the coupns wee worth it.

  10. Murph1908 says:

    There was a story on the news last night about a mom and pop hardware store, open since before the civil war, that was in danger of being closed. One loyal customer emailed 40 people, asking them to spend $20 in the place on a certain day. That email spread, and 500+ people bought stuff that day, saving the store (for now).

  11. Awesome McAwesomeness says:

    I watch groupon simply so I can avoid certain places. If a favorite mom and pop place or nail salon offers one, I simply don’t go for several months b/c I know the place will be swarmed with Groupon cheapos. I was about to reinstate my membership for Bikram yoga until they offered a Groupon. I would have been pissed to pay all that cash only to have the classes overstuffed (which can be dangerous b/c it makes the hot studio too hot.)

    • FrugalFreak says:

      and how will the cheapos affect you? will it dilute your “rich” feeling?

      • caradrake says:

        More people visiting a business in a short span of time means:

        *Less attention from employees. If a waitress has to do 8 tables when she usually only has 4 filled at once, that means there is less time spent at each table, the cooks might be overworked/rushed, etc.

        *Less chance of an item being in stock. If the groupon is for 50% off cupcakes like this story, the store might run out of cupcakes, or quality might suffer if they’re rushing to fill the shelves.

        *More crowding. Like Sisterfunkhaus said, classes might become full or overbooked. Having gone to a yoga class in a small studio, I’ve experienced classes where there were only six participants, and we could each move freely, change positioning of mats, etc. That same class was unbearable with 12 people, we basically never moved across the room, positions requiring a wall support were harder due to lack of wall space, etc.

        There is an IHOP near me that is never busy. I don’t know how they stay in business. The busiest time we’ve gone, was the Free Pancake Day – and even then, there was immediate seating and less than half of the tables were gone. The waiters/waitresses know us and our kids, they seat us, bring out drinks and food promptly, and stop to chat with us throughout the meal. At a usual trip to the IHOP, there are usually only two or three other tables filled. The personal attention is awesome (and the food seems a little better than average for IHOPs, too). If this place became packed overnight, our experience would change.

        It’s not a matter of saying that Groupon users are cheapos, or that non-Groupon users don’t want to congregate with them for fear of being sullied. It is a desire to have that personal attention, know that when you go to a business, you’ll get prompt, friendly service, what you want to buy is in stock, that overall it will be a pleasant experience.

    • Outrun1986 says:

      This is why I don’t purchase groupon’s. Most of them are for businesses I have never heard of and never even knew they existed. Also, they are for services or products I really don’t need so therefore no need to purchase a groupon. I find it hard to believe that a business will improve with groupon, these people buy the groupon, get the product or service and they never come back.

  12. dark_inchworm says:

    Those of us with celiac disease make excellent financial advisers, it so happens.

  13. Liam Kinkaid says:

    “One customer with celiac disease has volunteered their services as financial adviser.”

    Why is an ailment important to the story?

    • RickinStHelen says:

      Because people with celiac disease are the target demo for the store.

      • Liam Kinkaid says:

        I agree with you, but because those with allergies are the target demo, it makes sense that the regular customers that are helping out would have the allergies. It just seems strange to see the article end so abruptly with that statement.

        Now, if it was a customer with IBS cleaning out the restrooms, that would make some sense. And I’d chuckle.

  14. AldisCabango says:

    So far, all the groupon coupons I have purchased, only one of them were for a place I would go back to. That coupon was for a place I where I am already a semi-regular customer.

  15. brandihendrix says:

    Don’t forget that Groupon takes 50% of the purchase price. So for every Groupon purchased for $15 she’s only recieving $7.50, and she was giving out $30 with of merchandise for that. Her profit margins might have been able to withstand a 50% decrease, but this is a 75% decrease…much harder to recover from.

    On one hand I think it’s an issue of the owner not thinking it through, and she should have known. On the other hand I can only imagine how desperate some business owners must be in these trying times to get new customers.

  16. RandomHookup says:

    I actually saw a good use of a Groupon yesterday. There’s a big women’s soccer tournament in Vancouver to determine which teams go to the Olympics. Turnout hasn’t been great, so they just offered a Groupon on the seats for about 1/2 price. They sold out of the deal (but not the stadium) meaning they have added at least 2k more people attending and didn’t cannibalize much from those already interested in buying a last minute ticket.

    Any business where your inventory expires and you haven’t been able to sell it is a perfect target for a Groupon. Getting 25% on the seat (plus any concessions profit) is better than C$0 as long as you aren’t taking away folks who would be willing to pay full price on another occasion.

    • chiieddy says:

      The New England Revolution has a Groupon day each year. We bought one 2 years ago and now we’re season ticket holders.

  17. whiterussian says:

    All a business owner has to do is google “groupon bad experiance” or something like that and they will see all the horror stories. If they still want to do a groupon they can learn from other peoples stupid mistakes and set it up correctly. Of course the salesperson isn’t going to give then the whole story. They just want to sell groupons and bring home commission. They don’t care about the business since most companies don’t do multiple groupons that often so who cares if the business goes under. Reading the fine print and doing your research is basic negotiation skills.

  18. SteveZim1017 says:

    she didn’t loose $10,000. she spent $10,000 on marketing, whether that was the best choice for her business or not should have been up to her to decide beforehand. As a business owner you measure best case vs worst case and budget accordingly.

    This blaming groupon for businessowner shortsightedness is getting really old.

    • bendee says:

      Not only that, but she needed $50,000 to get the store running again – that’s much more than the $10,000 through lost revenue from the Groupon.

      Note that the 10k is lost revenue, NOT lost cost of goods sold.

    • Round-Eye §ñ‰∫∫„ÅØ„Ç≥„É≥„Çπ„Éû„É™„ÉÉ„Çπ„Éà„ÅåÂ•Ω„Åç„Åß„Åô„ÄÇ says:

      Well, she didn’t loose it, either, as the $10,000 was never tight. ;o)

  19. RandomHookup says:

    Next up…small local business charged with violating wage & hour laws for using volunteer employees.

  20. El_Fez says:

    One customer with celiac disease has volunteered their services as financial adviser.

    Their first edict? No more Groupon.

  21. AllanG54 says:

    This is also why “Entertainment” books have shrunk over the years. I too go only for the discounts and many of the stores I don’t go to again, especially if they’re out of the way for me.

  22. u1itn0w2day says:

    A company associated with Starbucks no matter how remotely and people are wondering why groupon is a losing proposition?

  23. badgertale says:

    Americans at their best!

  24. pamelad says:

    If a small business owner has an excellent but somewhat lesser-known product, Groupon can be a great way to market it to new and potentially loyal customers. The keys:

    1) Know a few Groupon basics. For example, limiting the number of Groupons sold can be a part of the deal with Groupon.
    2) Learn some very basic accounting skills.
    3) Have a great product. A well-placed and targeted Groupon should attract new customers who will like your product/restaurant/whatever enough to return and pay full price in the future.

  25. Major Tom Coming Home says:

    How could a small business owner not understand that if you sell product at less than your cost, people will take advantage of you and you will lose money? If $15 for $30 was less than their cost, why not go with $20 for $30 or $30 for $40? If groupon wasn’t willing to run a promotion they could at least make a small profit from, they should have just said no!