Young and Hungry

Get Your $450 Waffles at Back Alley Waffles

Three-month-old Shaw waffle shop, Back Alley Waffles, has gone out of business, and co-owner Craig Nelsen blames Groupon. The waffle shop posted the above notice on its website along with this:

Grouponistas, sorry, but I'd rather have my hand slammed in a car door than honor your Groupon coupons. You'll have to seek refunds from your new insect overlords. If you act quickly, you should get your money back by Christmas. 2015.

Here's our Groupon story:

Groupon promises to send you lots of new customers. The customers buy 50% off coupons (two waffles for the price of one, for example). They send the money to Groupon, which issues them a code. The customer brings the code into the shop. The shop gives the customer the two waffles, collects the code, and then "redeems", or verifies, the code with Groupon.

Does Groupon then electronically deposit the money that the customer paid them for the coupon into the business' bank account overnight like credit card companies do? No. After taking a big chunk of the money as its share, Groupon holds on to the business' share, using it while the business waits. And waits. And waits. And waits.

After about a month, Groupon issues the first of three payments to the business. By check. Then it has to "process" the check, which can take up to ten days. Then it snail mails the check. A month later, the process is repeated for your next installment. Then, a month later, the process is repeated again for your final installment.

Now, keep in mind, the bulk of the Groupon activity (i.e., the big surge in customers) occurs at the outset of the Groupon campaign. That means the business has to lay out all the money (in our case food and labor) up front to service this expensive campaign, but it takes roughly a month for Groupon to send the (deeply discounted) payment for the waffles those customers ate. And even then its only half or less of what is owed. The business has to wait for most of the remainder of its money until two months after laying out the cost of the food and labor. And for some of the money, it will be three months after honoring the customer's Groupon coupon in the shop before the business is paid for that customer.

That's the part that I didn't expect and the part that put our new business out of business.

Nelsen could not be reached for comment this morning. (We'll update when we hear from him.) But the artist, who has a studio upstairs, may not be joking about the $450 waffles. He explains on his website that the hefty price tag isn't just for breakfast:

Here's what you'll get:

  • a fluffy 7" Belgian waffle with fresh-churned butter and real maple syrup
  • a 4' x 4' mosaic similar to the one shown below [see here] (which was stolen—if you can believe it—by two black guys and a white guy at around 3 a.m. one Friday night/Saturday morning several months ago) of the subject matter of your choice*
  • the materials with which to make the mosaic (roughly $225 at Home Depot)
  • the unparalleled experience of creating your own piece of art

Act now, space is limited and, at $450—a 400% discount per square—this offer won't last!

Next waffling scheduled for July 28, and there are already only five spots left. To reserve a place, please contact Craig at 202 568 9448.

  • MrTokarev

    Of course it's much easier to just blame the "evil corporations" than to just accept responsibility for your own shitty business decisions.

    On the bright side, maybe a business with competent management can open in that location now.

  • jess

    I heard a similar story from a masseuse where group on or some other coupon website basically made the demand bloom but they were selling the massages at a 50% loss and then were not getting any repeat business.

    I think the pay for coupon model can work better as long as you count of most customers ordering more food than the coupon. With such a limited menu (waffles and smoothies) it would not lend itself to ordering lots of food.

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  • Jason

    I live 50 feet from Back Alley Waffles. My girlfriend and I gave that place a ton of chances and really wanted it to succeed, but the business was terrible. They were never open when they said they would be and it took them about twenty minutes to make the batter and prepare your waffle. It was clear they had no business experience, especially in food preparation. The art is cool and watching the dog pulling groceries to the store in his harness and cart were cute, but the poor service is likely what lead to the shop's demise.

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  • Charles

    I'm not going to repeat anything about anyone's poor business practices, not reading what they sign or their expectations with any kind of coupon deal designed to bring them new business, there's been enough of that here already.

    But for the people posting such as customeriswrong or oneofthem who regard Groupon as a bad company that brings in the wrong kind of customers and customers are now EXPECTING all places to have a Groupon or LivingSocial deal, it is ultimately up to the business whether or not to offer it, and know ahead of time if it is worth it for them. Customers are not to blame here, don't put us in the middle of it. Any problems associated with Groupon are between the business and Groupon, and the business made the conscious choice to use them.

    I remember once using a Groupon at a restaurant I wanted to try. Food was good, I might have even gone back and paid full price for it if the owner or manager didn't feel the need to inform me that he was losing money on the Groupon I was using and what a bad deal it was for the restaurant. I never went back - the owner chose to use Groupon and it was a gamble that apparently didn't pay off for him - NOT MY PROBLEM!

  • Valerie

    Well, it's clear that he was in over his head and is really whiny. But on the flip side, his art is amazing.

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  • Kiwigirl

    As a pretty new, small business owner, I have been considering offering a Groupon or Living Social as a means of bringing new customers to my business. I have spent many hours reading what other business owners have thought of their "Daily Deal" experience and have decided not to proceed with running a deal. I notice many people are saying the Back Alley Waffle owner is not the best business owner, not so smart, etc. Groupon and Living Social really make their deals sound like they can help a small business owner succeed. There are certain businesses where Groupon/Living Social can be a help but not for my services business (like mine) or restaurants. I provide services to expectant moms so have little change of getting repeat business. I looked at the daily deal sites as a way to increase traffic and hopefully have clients tell their expectant friends about us. Here is my question, why is it that Groupon and Living Social do not ask a business for basic financial information before allowing a biz to run a deal? Many owners, on the brink of bankruptcy, look to these sites to bring in a quick buck and help the bottom line - then when they are overwhelmed with customers seeking to redeem the deals, they end up closing. It seems irresponsible on the part of Groupon and Living Social that they don't ask a business if they are struggling financially, have funds to operate throughout the deal redemption and at least request some type of proof the company will be around after the deal runs. I am running with a thin marginn and didn't want to risk not being able to provide the services when people call to redeem their coupons and I don't want to take that type of financial hit from people who are unlikely to return.

  • David

    Ok,
    So everyone thinks that these people are dumb- asses in the first place for buying into Groupons/Livingsocials "amazing offer" and not taking the time to set up a great plan that will have them profiting from it.

    First of all lets Start here:
    Say a business sells 500 living socials at $50 each, when the original price was $100 per service. OK... already have they now knocked their prices down to HALF OFF, but Groupon/Livingsocial still has to take another 50% of that. And for a small business just starting out, you cant fucking afford to make $25 for a service that normally costed $100. (which yes!!!! should have been thought about initially). But when people say, "its just like normal advertising," they are wrong. 500 coupons @ $50 means that (after Groupon/Livingsocial takes their half) you lost out on $25,000 to advertise to only 500 people, and that doesn't include the initial half off.
    And while yes, some services are needed or desired more than others, if Groupon/Livingsocial always has deals running, than how can you expect that businesses will have repeat business because The same people who bought the damn deal in the first place bought it for a reason, and next month or next year they will buy someone else's deal... why?... to save money.

    Next point:

    Not every single business is out out to be a million dollar corporation. Small businesses are and stay small businesses for a reason. So when people say "if they cant afford a $250,000 or more hit then they were bound to fail," Once again, these are small businesses that do not generate enough money to take large hits like that. And lets all cut the shit about Living Social being little Angels, yet still agreeing that these businesses should think before they act. Anyone here who has ever done sales before knows the games and scams that are played in order to make those sales. Not all people are cut out to run a business and the ones who are, would definitely invest their advertising money somewhere else.

    AND BOTH SIDES OF THIS COULD GO ON AND ON...

    But here is what it boils down to. If you are a small, small business, then Advertise on your own and do not depend on companies such as living social/groupon to advertise for you.

  • ramona

    I have a small service business as well and danced around with the idea these sites (groupons, living social) but decided against for the reasona that the waffle house failed. I couldn't stay afloat with 25% of my services and then waiting to be paid months after there servuce was completed. The math didn't add up for me. Although I am a frequent shopper on these sites, I wouldn't advertise my small business on them.. the owner should have researçhed and used common senae.

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