I wouldn't blame Groupon if my business was so fragile that a single Groupon campaign (that I setup!) could kill it. Little restaurants like this go out of business every single day. They probably turned to Groupon hoping it would save them and instead it hastened their demise. It feels better to blame someone than take personal responsibility for a failure.
There is this thing that small businesses rely on. It's called "cash flow". You may have read about it. If Groupon waits for several months to issue a cheque (who the hell pays with cheques?) and then you have to wait for 10 days for the cheque to clear, then you have a cash flow problem.
Groupon knows this. Your cash flow problem is their business. Hope this helps clarify the issue somewhat.
Presumably money in the bank = interest. Groupon, it seems, wants to also be a bank. Shouldn't the restaurant owner collect interest as well perhaps. In reality though, can't all this be spelled out in the contract, that would have made it un-ambiguous.
> Our current merchant partner arrangements are structured as either a redemption payment model or a fixed payment model defined as follows:
> Redemption payment model - Under our redemption merchant partner payment model, we collect payments at the time our customers purchase Groupons and make payments to most of our merchant partners at a subsequent date. We utilize this model in most of our international operations as it conforms with the local market practice. Using this payment model, merchant partners are not paid until the customer redeems the Groupon that has been purchased. If a customer does not redeem the Groupon under this payment model, we retain all of the gross billings for the Groupon purchase. The redemption model generally improves our overall cash flow because we do not pay our merchant partners until the customer redeems the Groupon.
> Fixed payment model - Under our fixed merchant partner payment model, we pay our merchant partners in installments over a period of generally sixty days
No one really makes much money on interest anymore. Currently interest rates for short term cash holdings are very, very low everywhere you could park money. It's more about cashflow for Groupon versus actually making money on the float.
"and will arrange for payment of for any Now Aggregate Net Amounts due in such form and on such a schedule as will be communicated at the time the DR is established."
Also, the waffle guy could have easily searched Google to learn what this means for him. But we already know that he wasn't nearly conscientious enough to do that.
If something is truly important to a person, they'll study it. For business people, this means studying business contracts before they agree to them. For scientists, this means paying attention to their experiments, keeping their eyes on their instruments, and keeping up with theoretical advances.
To be successful at anything, you have to sweat the details.
That's my point. It doesn't say how they are going to get paid. While it certainly is an example of caveat emptor (or should that be caveat vendItor? The lines blur...), misleading someone via omission is in my opinion just as bad as not telling the truth, if you have an impression via the sales process that payment would be prompt.
Before you object, consider the reaction of the waffle shop owner if he had been told that it would take 3 months to pay for his services, but he still had to outlay capital to provide that service. Does it seem likely he would have gone ahead with the Groupon campaign? One cannot say with absolutely certainty, but I think it likely he would not have proceeded!
True. And I think the way Groupon handles this is unjustifiable. I still think that you should be able to work "out of pockets" for at least 3 months. If you can't do that, why start a business? Seems very risky...
There's gotta be a business here to lend immediately successful groupon victims money at a high rate before they go bankrupt for cash-flow issues.
I know it often "seems too good to be true" if a business tells you that it just needs a little working capital - but in this case they even have the collateral of the groupon money that will be coming in, which they can send proof of.
cash flow problems are situations where potentially an annual 200% interest rate is something a business would jump on: in two months that's only 33% interest rate with the alternative of losing everything due to their "great" campaign, and in this case they already have the money in accounts receivable from groupon.
a good article push with "how to survive a successful groupon campaign" that promotes the service ought to get some traffic.
on 'our' side, I need to point out that the high interest rate is not fleecing - really - as there is incredibly high immediate risk here, which is why the businesses can't simply get a bank loan. The point is that these are all-or-nothing situations that depend on cash-flow, and businesses have demonstrably nothing they can do. This market is not being served - there are no 200% interest rate loans for businesses that desperately need working capital at pretty much any cost.
so, the niche here is that a bank wouldn't look at the collateral of imminent groupon checks, but we can, since we understand the extent of the problem.
I doubt very much that Groupon has that kind of moolah to be throwing around :) Let's just leave it at that.
(In my original comment, I considered including that the biggest risk to the business plan is Groupon, and that therefore the business plan should include hedging or insuring against non-payment for groupon reasons. But thought that was too mean-spirited and negative; I hope groupon does well sustainably and indefinitely - by helping small businesses, not at their expense.)
As another commenter mentioned, it sounds like the waffle maker is more pissed about the slow payment than anything else.
But yeah, that's the thing. when you are a nobody dealing with a big company? net-30 means they start thinking about paying you in 30 days. This is not at all clear to someone without that experience... and if that one big company is how you pay the rent? well, you have trouble. (that's another thing I love about having a lot of small customers rather than one big one. I can be easy about people being late. When I was a contractor, after the 30 days in the 'net 30' were up, I'd just stay home until they fedex'd me a check. I felt all weird, because the customer was paying the middleman, it was the middleman that was sitting on the money for 45 days.)
Note, I don't think this is because they are trying to save pennies in interest. They sit on the payments because as long as they owe me money, they have vast power in any sort of dispute.
Really, both small companies and big companies need to realize this; Groupon needs to understand that they are dealing with people that haven't had to wait on corporate payment schedules before, people that often don't have access to short-term credit. Groupon needs to understand that these people are used to the situation where 'net 30' means 'you will get your money, at the very latest, in 30 days' - and Groupon needs to act accordingly, if they want to play in that market.
Of course, business owners also need to learn that when you deal with a large corporation, the contracts they write are worth nothing; if standard procedure is to mail 'net 30' checks 45 days after getting the invoice, they are going to mail 'net 30' checks 45 days after getting the invoice, and there is nothing you can do about it. If you deal with large companies, you need to keep more operating expenses as available cash/credit than when you are dealing with small companies, and really, you need to have a lot of patience and toleration.
(Of course, this is part of why you charge large companies more than you charge small companies. At the same price? it's simply not worth it to deal with the bullshit.)
