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Restaurant.com / bad business

United States

They can't make money legitimately. They have sales where they give restaurant.com $25 gift certificates out for $1 or even free. They make the $1 (or extra site traffic). The restaurant (if it honors them correctly) has to give a $25 (or more) discount. Their "sell" to the restaurant is that there are terms to break even or make profit added to the certificate. So for a $25 Restaurant.com, it may state you need to spend at least $40 and the tip will be added before discount. That is to prevent $0 checks. If you spend the minimum of $40 your bill will be $22.20 (+tax) including tip (server gets $7.20 so restaurant gave $40 in food for $15. Believe me 90%+ of the time customers are right at the minimum. They sell you on getting "new" customers (most of which never return unless they have another discount, coupon, living social, groupon, etc.) or "cheap" regular customers buy them constantly. The only way this company could work legit is if they charged full price for the gift certificates and maybe took a 10% cut off the top for selling them and gave the rest to the restaurant. But then they wouldn't make enough. Instead its pretty much a scam. (Yes some people legitimately use these without knowing the real costs and you may get a scattering of customers that return but we gave out $5, 000+ in these a month for a year and since canceling we have finally had money to pay the bills, be prepared for a 75%+ food cost if you are a good legit restaurant like us and honored our end of the deal) and you can cancel them it just takes 15 months or so. Its just not a good business, probably legal but not moral. I just saw them giving $400 in certificates for $10 on some deal site and it was over 10, 000 sold so it just shows they know their certificates are worthless.
It can work as advertised if you are prepared for 75% food costs (and keep your quality up), have extra money, treat all customers the same, and also insist on very high "spends" (like $25 for min spend of $100) which they will discourage at first then use to try and keep you when you cancel (although try telling a cheap customer that they have to spend $100 to save $25, good luck.)
If you think this is going to help a struggling business it will only help the servers (at first) and you will think you are busier, but after a few weeks you see that you are screwed.

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