I couldn't tell from this site if the owner is under the impression that he was never informed it would take that long to get the money, or if he signed the contract knowing full well what the reimbursement policy was and just thinks it's unfair now that he's had to live it.
Also, I'm a little confused about the economics involved. Most of the overhead in this kind of restaurant is in the facility and labor. The raw ingredients of even the most gourmet waffle should pale in comparison. And your facility and labor costs should hold about steady unless you're doing an insane amount of additional business from Groupon. And his base price was $8. $8 for a waffle. I'm no cook, but it seems like there should have been a very healthy profit margin in there.
I don't own a restaurant or know much about the economics of keeping one open, but this seems like an odd situation to me.
$8 for two. $4. Groupon takes half. $2. Paid over three months. 66c. More of the money will trickle in later, but 66c (and still a month later) is not a very healthy profit margin.
Closing business for a day: labor cost = 0. That means less burn. He must be bleeding for cash given the timing (3 months). At this point, business owner has to amortize the labor cost across fewer waffles.
Agree 100%. Also, based on his menu, he made another critical error in using promotions like Groupon: no room to upsell. He's charging $8 for waffles (which may not even be that high in his DC neighborhood), but undercharging for coffee and doesn't appear to have any further upsells.
As an example, mimosas go great with waffles and can run up a tab quite quickly. Alcohol is usually excluded from such promotions, so this is an opportunity to reclaim immediate margin.
Edit: Yes, getting a liquor license costs time and money. So does running a successful restaurant. I was pointing out that running such a promotion requires preparation. He could also make his margin selling waffle toppings, sausage, and grits. Any way the merchant can get the average ticket well above the Groupon's cap is a way to stay in the black; liquor is just one way to do that. If a restauranteur isn't ready for scale, Groupon is not going to work.
And a medium drip at Starbucks is over $2 everywhere in Atlanta (where I live). I'd be surprised if prices are lower in higher-priced D.C.
Selling mimosas requires a liquor license, which isn't easy to get. It's unlikely that a hole-in-the wall waffle joint would have one.
Since when is $2 undercharging for a coffee? Even starbuck's doesn't charge that much.
The guy should have made a mistake, but arguably the Groupon model needs to work for little businesses like this if they're going to take over the world.
Maybe, offer a basic cup of joe for $1 and a fancy organic, gourmet, free-trade coffee for $3.50 in a nice coffee press. It really depends on the part of town and the typical type of clients.
I think you're significantly underestimating the price of the ingredients. There are some good sites how to start a restaurant, and what margins to expect, how to calculate cost, etc.
Also, I'm a little confused about the economics involved. Most of the overhead in this kind of restaurant is in the facility and labor. The raw ingredients of even the most gourmet waffle should pale in comparison. And your facility and labor costs should hold about steady unless you're doing an insane amount of additional business from Groupon. And his base price was $8. $8 for a waffle. I'm no cook, but it seems like there should have been a very healthy profit margin in there.
I don't own a restaurant or know much about the economics of keeping one open, but this seems like an odd situation to me.