Wafflegate: D.C. breakfast joint's saga goes viral
Crain's Chicago Business, July 25, 2012http://www.chicagobusiness.com/article/20120725/BLOGS08/120729848/wafflegate-d-c-breakfast-joints-saga-goes-viral
It isn't exactly a new thing: Almost since the very start of the Chicago-based daily deal phenomenon Groupon, we've heard small-business owners grumble that offering a Groupon didn't exactly work out for them. The beefs usually run along these lines: The Groupon we offered at our café/cupcake bakery/nail salon/dog-walking service sparked an explosion of orders that cost too much to fulfill, generated long lines and honked off our existing customers.
So we were surprised
And how!when the latest "Groupon destroyed my business" gripe caught so much attention. The Internet is fairly abuzz this week with stories running from Slate to the Huffington Post to Gawker recapping a Washington, D.C., restaurant owner's contention that "the bloodthirsty business practices of Groupon" forced him to shut his doors.
Perhaps Back Alley Waffles founder Craig Nelsen's tale of woe is getting so much traction because he's not so much complaining about an uncontrollable influx of new business; he's claiming that Groupon didn't pay him the money he says was owed to him in a timely manner. In a blog post, Mr. Nelsen put it this way:
"Due to the shocking business practices of an obscenity known as 'Groupon' — contemptible even by the nearly non-existent standards of the modern corporation — I can no longer afford to sell waffles for $8.00 and still pay, for example, my employees something north of a subsistence wage."
Cue the flurry of coverage, from the Washington Post to CNBC.com to the Daily Mail.
In the midst of the media blitz, Business Insider does the best job of walking readers through the numbers behind the flap and presenting Groupon's side of the story – thusly:
[Actually Business Insider is one of the least accurate accounts.]
The original offer was for $8, for waffles for parties of two or four. More than 660 were bought, according to Groupon. That would have generated ~$5,280 in cash from Groupon customers.
Business Insider goes on to quote Groupon's representative directly:
According to our records, only 132 Groupons, or 18% sold, have been redeemed since Back Alley ran two months ago,
Groupon collected over $7,000 from our (allegedly) future customers in mid-April. They pocketed their half, and gave out codes for half-price waffles redeemable at back alley waffles. Then, while we laid out the money to honor the coupons, Groupon pocketed our half of the money, which they held onto for a month. then they sent us a check. but only for a third of our money. the rest of the money would be spread out over two more payments—one one month later, and the other two months later.and Mr. Nelsen has received 2/3 of his share of the revenue to date.
Ms. Mossberg continues to cite the figure two thirds as the amount Groupon has paid us to date knowing full well that we had already been shut down more than a week by the time the check for the second third arrived. Since she continues to cite this two third figure while knowing that one third is the accurate and meaningful figure, I can only assume that Groupon is as willing to mislead the public as it is its merchants.We always hate to hear that a local business has decided to close, but the math does not point to Groupon as the cause.
We're sure this isn't the last time we'll see a small-business owner complain about a Groupon deal gone awry, and we stand by our previously stated reservations regarding Groupon's management and concerns about its long-term growth trajectory. But when you look at the math in this particular case, you have to wonder: If missing out on a few thousand dollars of anticipated income can compel you to deep-six your business, is Groupon really the culprit?
A few thousand dollars may not be much to Ms Dwyer, but for us it was make or break.
— Ann Dwyer
Ms. Dwyer should at least have called me for my side of the story. I understand that Crain's is a publication for the business community, but I think it is not "pro-business" to be so blindly uncritical of any claim so long as it comes from a major corporation. The business press would be of greater service to the "business community"—whatever that is—if it were less fawning.