As a diner, I've been sold on Open Table since it entered onto the scene a decade ago. When I make reservations, I almost always make them through Open Table. I love it. The website is so user-friendly, it makes the reservation process easy and convenient. I learn where I can eat in seconds. As Danny Meyer said in a New York Times article published last year about Open Table: "In the old days, the question was, ‘Where should we eat?’ Now it’s, ‘Where can we eat?'" Open Table also makes it easy to cancel and change reservations. Best of all, Open Table costs me, the diner, nothing. It even gives me rewards points for booking some restaurant's tables through their site. What's not to love?
As a restaurant employee, I've also been impressed by Open Table. It is an invaluable tool for the front of the house staff. Managers, hosts, and servers can store guests' special requests, likes and dislikes, anniversaries, and other tidbits. All in all, it's a really terrific internal marketing system.
Donning my new hat as a restaurant owner, I look at Open Table as a marketing tool. Contigo will gain access to all those hungry eyeballs looking for an available table — two million diners book their tables through Open Table nationwide every month. As the Slanted Door's Charles Phan said in that same New York Times article, "All restaurants have to do it, whether you like it or not. There’s no way around it. At this point, there’s no other technology or easy solution for making Web reservations.” As of today, 342 restaurants in San Francisco can be booked through Open Table. Can I really afford to keep Contigo off that list?
Open Table is expensive! All those wonderful features and advantages come with a hefty price tag.
Here are the numbers. The start up costs are $1,299 plus tax. That gets you hardware, installation, and training. My generous, smart, and very persistent sales rep (who also reads IPOS) has offered me a discount for being a new restaurant, so I'll pay about $1,080.
Once Contigo opens, we will also pay Open Table a user fee of $199 per month, about $2,400 per year.
The start up costs and monthly costs are the same no matter what size or how expensive your restaurant is. My small neighborhood restaurant pays the same amount as a multi-million dollar 250-seat restaurant downtown.
The most significant charge is this: Open Table charges the restaurant $1 per cover (per person in your party) when diners book through its website, 25¢ when they book through the restaurant's website. The rationale for the higher charge when diners discover available tables through the Open Table website is that Open Table wants to be compensated for assisting the restaurant's marketing.
One buck per person. Sounds insignificant, doesn't it? The problem for more value-focused restaurants like Contigo is that Open Table charges us the same as the more expensive, special occasion restaurants. When a diner pays $40 to eat at Contigo, that dollar equals about 2.5% of the cost of the meal. That's significant in an industry where the average profit margin is less than 5%. At a more expensive restaurant, on the other hand, that dollar may equal less than 1% of the check.
Let's assume I go with Open Table. As the owner of a neighborhood restaurant, I'd like to keep about a third of Contigo's seats available for walk-ins. Let's assume most of the other two thirds of the restaurant's guests book through Open Table. If successful, a 60-seat restaurant like Contigo could easily pay $1,000-1,500 a month to Open Table in cover charges. That's $12-18,000 per year on top of the $2,400 annual charges and $1,080 start up costs. When you add all that up, the real per cover charge rises to closer to $1.25.
Several prominent restaurants have resisted joining Open Table, including many of my favorites: Nopa, Delfina, Beretta, SPQR, Bar Bambino, Bar Jules, and Liberty Cafe. In the East Bay, Chez Panisse, Camino, and Dopo are not Open Table members. My neighborhood favorites, Firefly and Incanto, are also not part of Open Table.
All of these restaurants have one thing in common: they are extremely popular. They are either well-established, like Chez Panisse, Liberty, and Firefly, or they have benefited from lots of buzz through great reviews, free press, and word of mouth. They arguably can live without the marketing power of Open Table.
Let's take a closer look at these Open Table resisters. Many of these restaurants take reservations the old fashioned way: by telephone.
In addition to accepting phone reservations, the always innovative Incanto offers online reservations through GuestBridge, a software-based online reservation system that does not charge per person fees, yet allows restaurants to store guest information in a manner similar to Open Table. I don't have the numbers for the GuestBridge software-based system yet, but I understand the startup costs are lower. They also offer a cheaper online-based system, Guestbridge Express, that costs just $69 per month.
[ Sept. 18 update: GuestBridge Reserve is GuestBridge's product most comparable to Open Table. Restaurants can either purchase the software outright for $5,056 or pay $1,300 to set up plus $228 per month. Hardware, such as a touch screen, needs to be purchased separately. Key differences from Open Table are that you own all your guests' email information and that there are no per cover charges. On the other hand, your restaurant does not get the marketing exposure of Open Table].
Some prominent restaurants that aren't part of Open Table — SPQR, Bar Jules, Liberty, and Dopo — only take walk-ins. Beretta only accepts reservations for parties of 6 or more. Some restaurants, like Nopa, Spork, and Laïola, started out not taking reservations, then began accepting them to adjust to demand. The latter two are now members of Open Table.
As the owner of a small neighborhood restaurant, the idea of only taking walk-ins strongly appeals to me. The Spanish tapas restaurants that inspired Contigo don't take reservations. A no-reservations policy reflects the concept and the neighborhood-serving vibe I'm striving to create. Plus, if Contigo doesn't accept reservations, we never have to deal with no-shows. The obvious cost savings can't be denied. Those savings would help keep me keep Contigo's prices lower and more competitive.
I find the example of SPQR especially interesting. The restaurant is owned by the same folks who own A16, which is a member of Open Table. As reported on Michael Bauer's blog earlier this year, one of the owners, Shelley Lingdren, said "I'm a big fan of reservations, to know who's coming in and to have more control, but at SPQR it was more of a space issue."
Bauer writes: "It seems the dining room is so small, there's no room for a host stand or a telephone, making it impossible to answer the phone on the floor. Lindgren takes reservations at A16 and she's had to hire additional people; there's always three people on the reservation team. At SPRQ, there's not only no room for that extra staff, but the style of the restaurant is also more casual and the prices are lower."
I've heard that some people avoid SPQR because they envision lengthy waits that sometimes stretch to two hours. If I thought Contigo's guests would have to endure such waits, I wouldn't even consider a no reservations policy. But let's get real here. I don't think that multi-hour waits are a possibility at my restaurant. For one, my restaurant doesn't have the name recognition or hype that SPQR had when it first opened. In addition, Contigo is not located as centrally as Fillmore Street or Valencia Street. While I'm very happy with my restaurant's location in the heart of Noe Valley on Castro and 24th, I am also cognizant that the location is much further to the south than most other restaurants in San Francisco. In some ways, Contigo's neighborhood location is more comparable to that of Bar Jules, where I've found the waits to be quite acceptable.
In my mind, the question of whether or not to sign up for Open Table boils down to whether or not I feel Contigo needs to take advantage of Open Table's substantial marketing power. How strongly do I need Open Table to attract diners? Is access to Open Table's pool of customers worth the $14-20,000 per year it will cost me? Will Open Table attract a significant number of additional guests that would otherwise have chosen to dine elsewhere?
Now, hopefully, you see my dilemma. It's one every new restaurateur faces, especially in cities like San Francisco and New York where Open Table is really popular.
I'd love to hear your thoughts!
This is the first part in my new "Behind the Curtain" column of my blog. In these blog posts I hope to reveal some of the decisions I am facing as a restaurateur opening and eventually operating a new restaurant. I assume other restaurant owners have faced some of the same dilemmas that I am facing. My intent is neither to complain nor to seek readers' sympathy. My intent is solely to be open about my decision-making process. I want to share my experiences with my readers, both those of you who work in the industry and those of you who enjoy restaurants' hospitality. I want my readers to know what goes on behind the scenes in the restaurant world. I also hope to spark a dialog. So, please, leave a comment. I'd love to hear your opinion.