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home | Restaurant Trends | Restaurants scale ba . . .
 

Restaurants scale back on deals. (July 2010)

Many restaurants have offered a slew of deals, discounts and coupons over the past two years to entice recession-ridden consumers to visit. But with signs of a recovering economy, they may need to start weaning their customers off what's become somewhat of an expectation.

According to recent foodservice market research conducted by the NPD Group, restaurant operators will likely move consumers away from steep discounting and instead offer deals in the form of combo meals and other value-added menu items. These types of deals provide operators with the opportunity to build up check sizes, NPD said. At the same time, operators are offering more innovative menu items at higher prices to offset revenue busting discounts while also appealing to customers' appetites for something new.

"Restaurant traffic has been slipping since January 2009, and the decline in visits would have been worse had it not been for dealing," said Bonnie Riggs, NPD's restaurant industry analyst and author of the study. "Visits using a deal now represent about a quarter of restaurant traffic."

With restaurant traffic still down, deals continue to be an effective way to draw in both existing and new customers, but less so than last year, according to NPD. Instead, some restaurants have opted to look into third-party deal service and couponing companies such as online-based Groupon and direct mailing programs targeting neighborhood residents.

Chicago-based Groupon has seen rapid growth in its two years of existence to at least $100 million in sales; however, skeptics say sales tax and other accounting issues can potentially pose problems for operators. The deal service works by partnering with restaurants to offer consumers deals, but interested patrons only get the deal when a certain number of individuals sign up. Competitor YouSwoop.com, also based out of Chicago, offers deals to consumers individually. Both claim to help restaurants bring in traffic, particularly during slow periods, for no money down. The deal companies take a cut of what's sold the day of the deal.

A slew of other competitors have popped up to challenge Groupon, both in Chicago and nationwide. Dealradar, for one, offers an overarching service by alerting consumers to various other deal company offerings, including Groupon. And Groupon has stated in published reports its plans to buy out competitors as they grow.


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