A Washington D.C. waffle joint that opened its doors just three months ago has announced it’s going out of business, which in itself isn’t news. Businesses in the food industry often don’t make it, after all. But in this case, the shop’s owner is blaming Groupon’s payment practices coupled with the sudden surge in demand for waffles as the reason for the restaurant’s early demise.
The restaurant’s site says it’s “closed indefinitely due to the bloodthirsty business practices of groupon” with a post reading:
Due to the shocking business practices of an obscenity known as “Groupon” — contemptible even by the nearly non-existent standards of the modern corporation — I can no longer afford to sell waffles for $8.00 and still pay, for example, my employees something north of a subsistence wage.
Therefore, starting now, waffles are $450.00 each
and are available by appointment only.
The trouble all started, adds the owner (via Washington City Paper) when Groupon promised to send his business lots of new customers. Which is great — but when the customers buy a code for say, 50% off coupons, the money goes to Groupon first, and the customer brings a code to the restaurant. A code is not money, and so, the owner says, one would think that Groupon would take the money the customer paid and send the business’ share immediately.
However, he says Groupon held on to the money so long, the restaurant wasn’t able to keep up with the out-of-pocket expenses it had to incur in order to meet the rush of waffle demand. He says he waited for a month to get the first of three payments mailed to him, and then wait another month, and so on. It took too long, he says, and now Grouponistas will just have to get refunds from their “new insect overlords” at Groupon.
He explains why his business went down:
Now, keep in mind, the bulk of the Groupon activity (i.e., the big surge in customers) occurs at the outset of the Groupon campaign. That means the business has to lay out all the money (in our case food and labor) up front to service this expensive campaign, but it takes roughly a month for Groupon to send the (deeply discounted) payment for the waffles those customers ate. And even then its only half or less of what is owed. The business has to wait for most of the remainder of its money until two months after laying out the cost of the food and labor. And for some of the money, it will be three months after honoring the customer’s Groupon coupon in the shop before the business is paid for that customer.
That’s the part that I didn’t expect and the part that put our new business out of business.
In response, Groupon says this whole thing isn’t its fault:
“According to our records, only 132 Groupons, or 18% have been redeemed since [the waffle restaurant] ran [its deal] two months ago, and [the owner] has received 2/3 of his share of the revenue to date,” wrote Julie Mossler, a Groupon spokeswoman, in an email to The Huffington Post. “We always hate to hear that a local business has decided to close,” she added, “but the math does not point to Groupon as the cause.”
Get Your $450 Waffles [Washington City Paper]
D.C. Restaurant, Blames Groupon’s ‘Shocking Business Practices’ For Its Demise [Huffington Post]