Behind the Curtain: Open Table

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.

Alternatives

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.

Walk-ins only

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.

Summary

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.

Comments

[lisa hasen]

Dear SFoodie,
The restaurant does NOT pay for OpenTable dining checks. It is OpenTable's gift to those who book online. It is very similar to a frequent flier program. The restaurant deposits the dining checks like they would any other check. Hope that clarifies things.
-Lisa Hasen, OpenTable Acct Exec

[rhodeygirl]

i say wait and see how things go... you can always choose to add your restaurant to open table at a later date can't you? what's the rush?

[sardinelover]

I would not restrict to only walk-ins because it's frustrating for customers who spent 30 mins or more searching for parking to only find out that they have to wait another hour for a table. I avoid restaurants like this.

I think you've done some great research and as a small biz owner you've listed all the pros/cons that I would have listed. I think OpenTable is an excellent guest management system and an invaluable marketing channel however the cost is rather high for a small restaurant. It would be more attractive for small restaurants if OpenTable would have another pricing tier to make it attractive.

Don't get pressured into getting it just yet. Focus on opening your restaurant and working out your operational kinks and then perform an evaluation to determine whether you need something such as OpenTable.

[visitor]

in general, i dread going to no reservations restaurants. the wait at beretta, for example, is prohibitively long and i just will not go anymore. it ruins the experience.

however, i'm happy to drop by bar jules and bar bambino, for example, during off-hours where there is likely to be little, if any, wait.

i'm also go to firefly and nopa just as much as maverick or farmer brown, for example, so phone or open table is fine with me.

Also, why not just take reservations (by phone) on Fri and Sat nights?

[Livebooker]

I only have 1 thing to say. Livebookings! offers the same and much more than what opentable does.

First thing is, No Start up fee's!
It's free to join and you only pay for the actual covers booked. No Cure No Pay!

Excellent for smaller restaurant that needs the extra marketing exposure.

[sue]

Price seems to be an issue for the Open table reservation. The concept is great but I'd rather go to the restaurants website to look at their information to book a reservation. That way i can see what they have, where they are located and just see if there is anything new.

A friend of mine is using a POS system that has a reservation system built in. Never thought this would cross anybody's mind but it looks to be fully integrated to their own website and the POS system itself, so reservations made online is sent directly to the terminal. There is no monthly or per cover fee and its equiped with a customer history like OT. It looks like a new concept for POS systems to provide customer with more value. The system name is called Auphan Dining. www.auphandining.

[Restaurants in Spain for Groups]

Actually I have been involved with another online booking company over the years and I have also implimented our own booking consoles for various niches, i.e hotels, meeting spaces, restaurants.

Chargeing this high fee for the initial sign up is quite simply outrageous and a total rip off. I was even unhappy at competitors of opentable that charged a fee half this amount.

There is no reason to charge this fee whatsoever and indeed with our new projects any sign up fee is minimal to say the least. The whole idea behind these companies is to make a profit from the commissions, not from the sign up fees, unfortunately these companies want a slice of both pies.

In this day of web 2.0 etc then I think its a good idea for groups of restaurants (in this particular case) to join together. i.e find 20 restaurants in your own locale/town/city whatever and make your own system between you. It will probably take a cple of thousand dollars over at the freelance websites to build exactly the same thing that websites like toptable use.

Share this cost so thats like 100 bucks each. all have the system on each others websites, restaurants recommending other restaurants always works very well in that industry.

Drive the changes yourself, stop feeding greedy companies! And yes I mean greedy companies, if they provide a service and it works well for your clients then by all means we are delighted to pay, but over all they just take the piss.

Use this food for thought productively.

;-)

[Larissa]

I have just discontinued my opentable service. as a restaurant owner we had ongoing problems with the service, which opentable always blamed us for. Our service was not connected to their site thru Christmas and New Years, and yet they refused to give us a credit because they claimed that they sent a tech out (in January) and did not charge us for it. They have tried to blame us for everything, saying the lease and monthly fee includes equipment except for whatever it was that needed replacing. It is expensive, so I say no Thanks, I don't need that kind of headache. I am encouraging everyone to say no to opentable.

[I love restaurantdiary]

Have a look at -

http://www.restaurantdiary.com/HowItWorks/HowtoChoosearestaurantreservationsystem/tabid/153/language/en-GB/Default.aspx

Build your own brand, no commission, CRM, e-marketing with success, failure reporting.

[Jagadish]

My Company Pow! offers Coupons, and will eventually offer Reservation and Ordering. We will offer the complete package including Coupon poral, reporting,SMS, Reservation, and Ordering for a fraction of what OpenTable charges. Feel free to contact us at http://www.pow-now.com or call us at 408-743-4449. Please note we are still in beta and will launch in 2 weeks.

[SThom1016]

Go to http://www.thepowerofmyetus.com and check out our online reservation offering.

[Silvia]

This is year later but this just in Open table has agreed to acquire all assets belonging to GuestBridge Inc.

[Leslie]

I found this article and thought you might find it useful in making your comparison: http://reservationdc.wordpress.com/2009/07/19/yelp-vs-opentable-where-should-you-be-spending-your-marketing-dollars/

[Craig Watson]

If you're interested in another solution, you might check out Save My Table (www.savemytable.com). We're running their system for our front-of-house operations, and having great success, at a fraction of OpenTable's prices.

[Sarah]

Many restaurants in the US and around the world are moving away from Open Table because of the costs and choosing e-Restaurant software, a restaurant management system that does online bookings, customer management, SMS marketing - in fact nearly everything that Open Tables does but for a fraction of the cost. No set up cost, commission free and a free 30 day trial available. See www.simplehospitality.co for more details

[RT]

So did you join OpenTable or choose an alternative? Please advise.

[Brett]

For the first 9 months of business at Contigo, we only took walk in guests and accepted a limited number of reservations for parties of 6 and larger. After that, we started taking reservations by phone for all size parties for 6 months. Two months ago we signed up for Open Table.

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[Reservations call center]

Well then, better make a reservation.

Ben Cliff

[NFL Jerseys]

in general, i dread going to no reservations restaurants. the wait at beretta, for example, is prohibitively long and i just will not go anymore. it ruins the experience.