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Here is the scenario I'm sure everyone is familiar with. I am debating on whether or not to buy a gift certificate at a discounted rate from a popular coupon site. Am I doing the math right on this? Here are the details for said coupon in question..

$25 gift certificate for $15 for a local restaurant. Stipulations for using coupon are $35 minimum purchase and 18% gratuity added before discount.

Let's say I spend the absolute minimum to be able to use the coupon..

  • Meal..............................$35.00
  • Gratuity (18%).............$6.30
  • Total before discount....$41.30
  • Minus discount............($25.00)
  • Plus cost of coupon.....$15.00
  • Adjusted toal...............$31.30
  • Net money saved.........$3.70

Now let's say I spend $60 at the restaurant...

  • Meal.............................$60.00
  • Gratuity (18%).............$10.80
  • Total before discount....$70.80
  • Minus discount............($25.00)
  • Plus cost of coupon......$15.00
  • Adjusted toal.................$60.80
  • Net money saved.......$(0.80)

I would have actually spent 80 more cents when using the coupon?

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    I usually wait until the coupons from Restaurant.com are on sale for $2 or $4 for a $25 off coupon. When it costs $10 or $15 for a $25 coupon full of conditions I don't get enough value vs. headache for the deal. – Alex B Jan 16 '12 at 18:39
  • Sometimes they're $1. ;) – mbhunter Jan 16 '12 at 19:39
  • Ah, I did not know they did deep discounts like that from time to time. – CheckRaise Jan 17 '12 at 15:54
  • is the difference ment to be 60.80 compared to 60 or to 70.80? I would say that you are saving $25 but it is costing you $15. Edit: just read the first answer, derp. – Darcys22 Jun 6 '13 at 10:57
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The coupon should save you $10 either way, assuming that you meet the criteria for using the coupon.

You're figuring out the discount based on the cost of the food alone. You should be including the tip in your calculations.

Yes, they're tacking on something that is otherwise optional, but that's because enough people forget that the server works just as hard regardless of whether there's a coupon involved or not. So, restaurants build the tip in to keep employee morale up, which in turn encourages them to keep a good level of service up.

I guess it gets down to how much you tip. If you typically don't tip -- which would be rather impolite -- then yes, you do lose money with a $60 meal. If you tip 18%, then you save exactly $10 ($70.80 - $10.00 = $60.80). If you normally tip 10-15% -- a customary range -- then it's somewhere in between.

Edit: Following littleadv's discussion on this question, I am assuming that the 18% goes directly to the waitstaff and is more or less expected. If it doesn't (in which case one might choose not to tip at all because it would just line the pockets of the restaurant owner) then you're absolutely correct in figuring out the value of the coupon by treating the 18% as a tax.

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  • But he did include the tips in his calculations. Why would you tip twice just because you use a coupon? – littleadv Jan 16 '12 at 18:18
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    @littleadv in example one the substraction should be the delta between $31.30 and $41.30 not between $31.30 and $35.00 – mhoran_psprep Jan 16 '12 at 18:38
  • @mhoran_psprep - why do you assume leaving $10 tip on a $35 meal as something a sane person would do? Generally, I disagree with the idea of tips entirely, it should be something you leave for outstanding service, not a default payment. I do leave tips, but almost never 18%. My default is ~10%, unless I was really impressed, and even that because of the social pressure, not because I want to. – littleadv Jan 16 '12 at 18:44
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    @littleadv Some states don't differentiate between tipped minimum wage and non-tipped minimum wage. The tip percentage is typically lower if the tipped minimum wage is the same as the non-tipped. However, in my state, restaurants aren't obligated to pay anything at all to employees if their tips alone are higher than the non-tipped federal minimum wage. They literally are working for tips at that point. How you tip is your business, but servers remember who tips well and who doesn't from their regular customers, and it will come back to you. – mbhunter Jan 16 '12 at 19:09
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    mbhunter - actually, in the state where I leave, the law treats mandatory service charges (like the gratuity charge in the coupon) and tips differently. Basically, by the California law, the 18% charge is not a tip at all, and the server might not get any of it, and most likely doesn't indeed get any of it. That's why the coupon explicitly requests tipping the server, and that's why tips shouldn't be part of the equation. – littleadv Jan 16 '12 at 19:13
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You're calculating it exactly right. I wrote about this one on my blog a while ago. Lesson learned is that nothing comes for free, and you can take the saying "there are no free meals" quite literally in this case.

edit

To address the comments about tips...

  1. I don't believe tips should be compulsory. Its my reward to the server for outstanding service. Not part of the cost of the meal. If its part of the server's salary - then I prefer not to dine in such a place (and at least in some places its illegal to consider tips as part of the salary).

  2. The coupon in question explicitly requests tipping the server. Thus, the tips with or without the coupon are still expected, and that's why I'm not taking them into the consideration.

  3. According to the laws of the State of California (where I live), mandatory charges, such as the 18% gratuity charge required by the coupon, are not tips, and don't have to be passed on to the employees. Thus, employees will still expect my tips on the bill, so I'm basically required to tip twice, when using the coupon.

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  • The calculation in the question assumes that the tip would be zero, if a coupon was not used. – mhoran_psprep Jan 16 '12 at 18:33
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    I disagree with the math in your article. You count the $9 tip as a cost that you wouldn't pay if you didn't use the coupon. If you normally leave $15%, then the extra tip you are being forced into is $1.50, not $9. – Alex B Jan 16 '12 at 18:37
  • @AlexB - see the edits re the tips. I still want to see under what assumptions you would at least break even. – littleadv Jan 16 '12 at 18:48
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    +1 - Because, as usual, your answer added value. No idea why someone -1'd you. (And yes, if google is a verb so is -1, and the past tense is -1'd) – JoeTaxpayer♦ Jan 17 '12 at 1:42
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    I will accept this as the answer. Gratuity is synonymous with a tip in my book. If a restaurant automatically adds gratuity I will assume (perhaps wrongfully) that gets put into the server's pockets. I will not add a tip when a gratuity is already added. – CheckRaise Jan 17 '12 at 16:06
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Very Interesting Math. Plain and Simple, it saves you $10.00. When 18% goes above $10 you loose the money, you save if it is (18% of the baae bill) is less than $10.

This raises few questions:

  1. You are forced to give out 18% tips. You may wish to keep it at 10-15%. You have no choice.

  2. All thing considered, better to avoid such coupons. They force you to spend money, they force you to spend in a particular way and they force you to give a tip, you may not be inclined to.

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  • As I mentioned in my response - the 18% gratitude is not tips and shouldn't be considered as such. Most likely the servers won't get any of this money. – littleadv Jan 17 '12 at 2:14

protected by John Bensin Jun 6 '13 at 13:03

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