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Friday, September 9, 2011 / 1:30 PM

Franco Issues A Groupon? What's Up With That?

Why would one of the top local restaurants in town--one that Relish believes is playing at the top of its game--resort to a deep-discounting Groupon? Aren't Groupons (and their many clones) better suited to new restaurants needing exposure, or aging restaurants looking for a boost in sales, or restaurants so mired in red numbers that they'd do anything for even a taste of black ink, even for a one-month period? Successful restaurants don't do Groupons, do they?

When Groupon first entered the local market several years ago, Tom Schmidt, owner of Franco (named after his nephew), the French-leaning bistro in Soulard, signed onto the program. As Franco's star had been rising for several years, it sold 1600 in a day. Remember, this was a restaurant that was already doing well, that had a decent customer base, its costs under control, and decent cash flow, but, as Schmidt admitted, as with most restaurants, "plenty of availability on a Tuesday night."

He was able to both attract--and hold onto--new customers, which is essential for the model to sustain itself. Of the 1600 sold, 1400 were redeemed, and Schmidt deemed it an unqualified success. "Franco had never done much marketing or advertising, so we looked at the program through those eyes." he said, "and when we accounted for the increase in volume, the costs became bearable." 

Now, two years later, Franco is back on the Groupon train, but now the parameters have changed. Due to the abundance of similar programs (SLM's niche program is called Hello, GoodBuy), Groupon has sweetened the deal: the restaurateur can now put a lid on how many are sold, he can negotiate how much of the sale is returned to him, and he can tailor the redemption time to his needs. (Mike Shannon's issued a Groupon for a slow period in late winter, expiring just before the Cardinals' opening day, with the intention of getting people familiar with Shannon's for when they did attend a baseball game.)

In Schmidt's case, Groupon had been an effective way to both increase his check average and spur new business, and he was looking to do so again.

More interesting, though, is his perception of deep-discounting, one contrary to that of older restaurateurs who believe that restaurant coupons are the proverbial kiss of death. "I look at Groupon like I do Open Table," he said, referring to the national online reservation booking system. "It's something that everybody now uses, plus it's quantifiable...those offers get emailed to a targeted list, to people that should be my customer." It's a laser approach rather than shotgun approach, and to Schmidt, "it's just another cost of doing business."

This go-round, Franco's $40 for $20 Groupon is being offered for two days with no cap and a 6-month redemption period. At the time of this posting, 1400 had been sold and the Groupon clock was ticking with just over 10 hours to go. 

Should you take advantage of the deal, say hello to Tom...and go with the cassoulet. 
==
(Sidebar: Yesterday, Schmidt announced via Facebook and Twitter that he'd signed a lease for the Brandt's space at 6525 Delmar in the Loop. Look for Nico ("Franco's little brother," literally and figuratively) to open in December. Asked whether Groupon might also figure into its marketing plans, Schmidt called it straight: "Don't know...we'll have to see how those Tuesday nights go.")

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