To join or not to join Open Table. That is one of the many decisions I'm currently facing as I open my restaurant, Contigo.
Pros
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?
Cons
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.
