OpenTable or Closed Restaurant?

If there is one thing that bothers an owner of a restaurant, it is a middle man in their cash flow. For those who do not understand how Opentable works for a restaurant, think about a cell phone plan that has a flat rate per month and a fee for every minute you use. It keeps all your data consolidated in a database and has a map of your restaurant so you can plan reservations accordingly. To be honest, the database management portion of Opentable is pretty friggin’ sweet, but wtf? Here comes Opentable to give me a shoulder tap and ask for its money. Imagine a large Italian gangster coming to your restaurant and saying “Psst, want protection in the neighborhood? Want customers to know you are here? It’s easy, we will supply you with everything, and you just have to give us your customer data, flat fee, and extra money per customer who uses us. Trust us, we’re on your side.” Not quite coercion, but smaller restaurants I have worked for have felt this pressure. You don’t have to use Opentable, but the fear of not being found by your customers without it is what they prey on.

In a blog by Mark Pastor, General Manager of Incanto, he explains that the restaurant refuses to use Opentable because of the cost. I like the way he breaks it down and it really touches on the center of the controversy on Opentables cost structure:

“Let me start by stating the obvious: the convenience and immediacy of booking a table online anytime day or night is beneficial to both diners and to restaurants… (but) OpenTable’s fees (comprised of startup fees, fixed monthly fees, and per-person reservation fees) translate to a cost of approximately $10.40 for each “incremental” 4-top booked through OpenTable.com. To put that in perspective, consider that the average profit margin, before taxes, for a U.S. restaurant is roughly 5%. This means that a table of 4 spending $200 on dinner would generate a $10 profit. In this example, all of that profit would then go to OpenTable fees for having delivered the reservation, leaving the restaurant with nothing other than the hope that that customer would come back (and hopefully book by telephone the next time).”

Well, looking at this example I am glad that Opentable has succeeded in the American Dream, but good luck to the restaurants. I think the term is S.O.L. So with everyone using their  I phones and computers to make a reservation, is this where dining is headed? If it is, that means Opentable will now be the conglomerate who basically owns the most important part of a restaurant’s business, their customers. Anyone who thinks that this is a false statement, think about casinos in Las Vegas and their player cards. To Vegas, customer information and spending habits are so important that they literally reward you for using it. The trick is that they own the system rather than a third party. The Vegas moguls have enough money to basically become their own software company to achieve this.

Going back to restaurants, I know I am happy not to have to talk to the frigid b**** of a hostess and be put on hold anymore if I choose, but when I do use Opentable, I book through the restaurants website rather than through Opentable itself. That way the restaurant only has to pay $.25 per customer as opposed to a dollar, alleviating some of the pain. Or, go the route of being completely spontaneous and just walk up to a restaurant that looks good, you know, the old fashioned way. The upside is that there is no cost to the restaurant and the hosts and hostesses are much nicer in person.

Related Articles:

http://incanto.biz/2010/10/22/is-opentable-worth-it/

http://insidescoopsf.sfgate.com/blog/2011/04/27/is-opentable-becoming-too-expensive-for-restaurants/