Could Groupon Sink Your Business?

Some businesses claim they've been burned by doing business with the social deal company.


Above all, businesses that sign up for these deals may want to take a hard look at their budgets.

"One very important driver of whether a daily deal works or not is what your business' cost structure is," he says. "If your margins are low, a daily deal can really hurt you if you don't think through how you should do the deal."

For this reason, he says, daily deals often create problems for restaurants.

"When you cover the cost of the food, the fixed costs, the cost of the labor, you just can't afford to do daily deals," says Dholakia, adding that retailers face similar difficulties.

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Meanwhile, salons and spas, as well as fitness establishments like yoga studios and gyms tend to benefit more from the deals, he says.

For his part, Nelsen won't have to do that margin math in the near future. If he gets back into the restaurant business, Groupon will not be a partner in it, he says: "Never, ever again."

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at