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

[Thaddius La Rue]

Great insight man. Can't wait to try out the new place. Pass by it every day hoping to get word on opening day. Our neighborhood really needs it badly.

[Fatemeh]

I know your rep, and she's probably going to hate me for this, but...

I'm with you - OpenTable just doesn't make sense for a restaurant like contigo. I think if you were more "downtown" oriented, it'd make more sense. If you were bigger, too.

I say keep things walk-in only to start: first, you'll get a chance to evaluate traffic before ponying up for a pricey system.

Also, patrons have a higher expectation of prompt seating and fast service when they make a reservation, so by NOT taking them, you'll be able to seat and serve people at your kitchen & floor's pace as you work out the kinks.

[Mopalia]

I doubt that I'd ever use something like Open Table to book a restaurant, and I can't see it fitting very well with your friendly, homey approach. But since I live in Mountain View and would be driving to SF specifically to visit Contigo for a special event, the thought of no reservations makes me unhappy. OTOH, we won't be regulars, so maybe that's not really important as part of the big picture for you.

Not long ago, a review I wrote on Yelp increased a business's trade so much that within 6 months she had expanded, and nowadays I can't even get in! So I'm guessing that your savvy readers will be hyping Contigo in enough forums so that you will rapidly become a presence and not need what seems to me to be a rip-off service. Ultimately, it's a matter of style, and since you're so ambivalent about it, I think you don't really feel it fits your style. Otherwise, you'd just do it.

[Anita / Married ...with Dinner]

I *really* hope you don't go the walk-ins only route.

We've had a hard time getting to the places you mention, because it's too much of a gamble to spend 20 minutes looking for parking only to discover that, sorry, the wait's an hour and we're just too hungry. With the exception of SPQR (where we've gone twice, right at opening), and Delfina Pizzeria (maybe once in the past year), we avoid walk-in-only places like the plague.

Another complication: In your neighborhood, there aren't a lot of good fall-back options if diners decide the wait's too long, nor places to hang out while waiting if they opt to stay.

I definitely understand your reluctance to avoid the costs of OT, but I also know how annoyed I get trying to make reservations at places that handle their own book. Nopa, for example, doesn't answer the phone until 2pm, right in the busiest part of my day. I'm always having to set an alarm to remind me to call them -- frustrating. It doesn't keep me from going, but that's only because I love everything they do. For places that I am less enamored of, it would be a deal killer. (Read as: Delfina)

[Alice]

Something the Japanese places do is allow you to put your name on the list with your cell phone number. They call you about 15 min before they expect your table to be ready - that way, you can choose to wander around if you wish to do so. If you don't show up within the 15 min time slot, you have to wait again. It makes the whole walk-in only process a whole lot less stressful, thinking that you have the option to do something besides huddle around the door for hours on end.

[just_a_reader]

there's no rush to join open table. you can decide to join later. as anne lammott says, bird by bird... :) take things at a time, try different solutions.
can you have someone answering the phone only between 12 and 5, for instance? you'd only take reservations during this time, after that only walk-ins. So the folks that really need reservation at least have the option to call within this time frame. I only go to walk-in only restaurants off the busy hours, if I'm in the mood. SF is too cold for standing in line outside :)

BTW, I know it's "trendy" the whole lower case thing, but that makes sense in the logo itself. When you write "Contigo" in your blog, why don't you use upper case C -- otherwise it just disappears in the text. I think it's a misconception of branding to think you need to write the name of your restaurant the way it will look in the logo... Besides, if we don't follow grammatical rules, how will great writers/artists later break them? :)
my 2 cents anyway... wishing you all the best!

[jenn]

I agree with the last commenter - you don't need to rush to join Open Table. You can wait to sync up the rhythm of your kitchen with the flow of diners -- and decide if you need to modulate it with something like Open Table.

I'm pretty shocked that they charge so much per cover - I'm going to stop using Open Table for reservations, now, actually.

Is your space over where Miss Millie's was? They had the besssssssssst mimosa menu.

Hope you have lots of good vegan/vegetarian options planned (I'm allergic to dairy, legumes and eggs and meat is just gross -- and yet, I'm a huge foodie, go figure).

[Jennifer Jeffrey]

I'm going to weigh in on the side of using OT. Yes, it's expensive, but I venture to say that the benefits outweigh the costs.

So many people I know simply won't go to walk-in only places because they don't have the time in their evening to take a chance on getting seated. I'm often in that category myself.

Online reservations are easy, simple, and frankly in this always-wired-everywhere city, a large chunk of people would much rather click and reserve than pick up the phone.

I also think that OT is not just a useful application, but truly a valuable marketing tool, because it allows me as a user to search types of restaurants, neighborhoods and etc., and I often see the names of places I either haven't heard of or had dropped off my radar.

It's less expensive (and far less stressful) than hiring a telephone reservationist (which you could theoretically do for 18K, if part-time, but there is the hiring + management + other issues that arise, which are not trivial).

If you do decide to go with OT, definitely work with your rep to make sure that Contigo is listed on the front page of the SF OT for at least 3-4 weeks after you open, and is included in the newsletter and other marketing initiatives to make sure you get your $ worth.

Whatever you decide, I know you'll make a thoughtful choice that will reflect your core values - and it will be great.

[Tracy]

Whoa! That is some steep fees for OT, no way would I go with something like that for a new place of your size. Give it time to build on it's own and then if demand gets so great that you have that kind of disposable income, think about it again. I like the idea of the cell phone numbers, that gives your patrons plenty of time to comfortably walk around the neighborhood, perhaps browse at the little bookshop across the street...

[art]

I dine at restaurants all around the world and I don't think I've ever used open table.

It seems like a very good tool for large corporations but it doesn't seem like its benefits will outweigh its costs at a shop like yours.

I'd imagine, if you do have a reservation policy, that you may end up making many reservations personally. You may be making yourself an espresso in the morning, the phone rings and you end up meeting a very nice couple from Chicago who would like to come and visit your restaurant. You learn a little about your demographic, I get to speak with the chef, we're both happy and it didn't cost you anything.

If I were opening a restaurant in such a brutal market I would be looking to save money in areas just like this because no way in hell will I be cutting corners with things like product!

Keep in mind--you are already ahead of the game.

How many hits does your blog get?

How much do you pay for a domain?

Stick with your instincts.

One word of advice though for what it's worth. One way or the other come up with a reservation policy. Either you do take reservations or you don't take reservations. The only reason I say that it is because I've seen situations where a place that wavers on the policy will receive a call for a reservation and they don't write it down because they don't really need to reserve a table. Well, when that person calls again to adjust the number in their party or to cancel or even shows up and expects to be recognized when they say their name and realize there is no record of their reservation--that's obviously bad. Not saying that would ever happen with your place but all it takes is one staff member who isn't sure about the policy to take that call.

[Jack]

Seems best to go with OT when the need develops.

[Noe Valley, SF]

I agree with the posts above counseling holding off on OT until you need it. Also curious if more people would stop using OT if they knew the cost to the restaurant. There are so many other costs in SF that this just seems like a pile-on.

I like the idea of limited reservations (4 or more diners, only a few tables) to cover the people who are coming from elsewhere. We don't make reservations at any of the neighborhood restaurants anyway - we always walk in. Can't get in, go to the next one.

What kind of a scene do you want? Destination or neighborhood? Set the policy from that and run with it.

And keep OT wanting your business - not the other way around.

[Sean]

Interestingly, I just now tried to make an OpenTable reservation at Deep Sushi, which I've done many times before, and they were not listed. I called, made the reservation and learned that they opted out of the service. I can only infer that they were not getting sufficient return on the expense either.

Still, selfishly, I hope you'll do reservations. Even though I could walk the block back to my place for a cocktail if I have to wait for a table. :)

[Amy Sherman]

I think for a small restaurant it's just too much money, though I do hope you'll let people reserve by phone. I do notice some restaurants on Open Table don't offer "points" can you opt out of that and save money?

[Ken]

Agree with "Noe Valley". I dine out a couple of times a week and like to call in my reservations to form a relationship. For busy places like NOPA, they could probably absorb OT costs without a fuss. Yet, it's noteworthy that they figured out how to manage our expectations with staff, phones, and a plan. It's a personalized experience and it's a model that works ie. reserved tables and common seating for walk ins. The key is to empower a talented host/reservationist. They are keenly aware of the pacing and can determine a guest's options with assured confidence.

OT is indispensable for remembering your customers and their preferences. Why not leverage a more powerful and flexible database program for that. For marketing, I like opt-in email and using your website as a promotion tool. Best of all is a chef's presence in the culinary scene.

[Ivan Collins]

There are other options. At Reservation Genie, we sell online reservation software that costs a lot less ($39 per month). Our variable costs for affiliate site and concierge reservations are higher at $2 per person, but that's because we pay those partners almost 10 times more than OT does ($1 per person vs. $0.40 cents per reservation at OT). The bulk of your reservations will come from your site and we don’t CHARGE AT ALL FOR RESERVATIONS FROM YOUR SITE or from our site (meaning repeat users that login from our homepage and book directly from our site). However, we don’t have seating management tools like OT and Guest Bridge…as we feel you can handle that yourself and it minimizes the learning curve for new hostesses and managers.

We have a strong presence in Austin, working with more affiliate sites and considerably more concierges than Open Table (concierges book through a private site called Big Concierge, www.bigconcierge.com). In cities where we don’t have a strong presence…it’s probably going to be just $39 per month. Plus we give you two months free to try the service and don’t have long term contracts. A few other features include a perks tool to drive traffic to off peak hours, multiple notification options (many of our restaurants run it all through their text message), concierge promotion tools, ROI measurement on local sites, and email marketing lists.

This is a link to our hostess demo is you want to take a peep.
http://www.reservationgenie.com/demos/video-demo-managing-reservations.htm

If you’re interested in giving it a try, feel free to get in touch.

Cheers,
Ivan
Reservation Genie

[Diane]

I use Open Table all the time, but honestly what is of more use to me is the restaurant's website (hint - slow loading but beautiful intro pages, especially with sounds make me close the link before I've even looked at the info).

I'm a (very) small business owner and here's my take. I think you need to put your business owner/bean counter hat on. Can you afford this as an operating cost? I would say until you've run in the black for a while and shown you can do it, the answer is no. After that, it may make sense - AFTER you have a stretch of profitability. AFTER you've built up a nice emergency fund for yourself. AFTER you've funded your retirement plan. But not a commitment out of the gate when some months you may need that extra $.

[Ken H]

Really interesting post - thanks for the inside peek! My two cents... I have never used Open Table to search/select for a restaurant. I only use it to make a reservation for a place I have already decided I want to try. So, if I wanted to go to Contigo, there is no way that lack of Open Table-ness would keep me from making a reservation. That said... there have been times when I have tried to put together a group dinner & was choosing between restaurants. In that situation, I can say that I picked the restaurant that was on Open Table... especially if it was outside of callable hours. If it were me, I'd probably go it alone or with one of these other services first - you can always get on the train later.

[catherine ross]

OT seems too expensive and I agree, there's no rush. I use OT, but would be just as happy to use a restaurant's own website to make a res.

don't be a walk-in only, though, please.

[Pete]

DO NOT USE OPEN TABLE.

As a small restaurant owner, I can say that it really hits you in the pocket book at the end of every month when you see a thousand or so bucks go out the door in their booking fees.

Open table is great, but only if you a running A) a very upscale, high ticket menu, or B) you have a very large seating capacity.

It took me just a few months to realize how much money Open table was costing my business. We do the same business now as we did with open table, and thats an extra thousand or so dollars that goes to my employess and I.

[Dan]

I use OpenTable all the time-- usually to make reservations after I've decided on a restaurant, but also for choosing a restaurant for same-day or day-before reservations, because it lets me know which restaurants still have tables available. I've used OpenTable since its inception and think it is great. But it seems quite expensive for a small neighborhood restaurant, and I agree with other posters about considering alternatives.

I'll eat at Front Porch and Emmy's, two restaurants near my home that only take walk-ins, but I know that there are good alternatives with seats available at other nearby restaurants, so it's no big deal if we can't get in. I'm less likely to make plans without reservations at other restaurants. It would be great if there were some system to make reservations, even leaving a voice message or sending an email, as at some restaurants. It is hard to make plans with friends around dinner with the uncertainty of whether and when one can get in.

[txacoli]

$1300 bucks up front....plus $200 a month, plus a cut of the per head?

No way, Jose.

In our experience, Open Table people are a pain in the ass....wanting butter when we serve EVOO, etc.

Way too much money. Wrong direction for a YIMBY restaurant.

Viva achoas!

Mike

[Lisa Hasen]

As the OpenTable rep Brett referred to, I am both flattered at his kind words and truly impressed by his thoughtfulness on this subject.

Many of the posts on this topic discuss expenses. My post discusses operations and revenue. (Please forgive the lengthiness – but there was a lot I wished to convey).

+returning phone calls and emails: Restaurateurs (and diners) save boatloads of time and labor ($$) via self-service reservations. Having to return calls (taking hours per week or even per day) or hire someone to answer the phone costs big money. This is especially relevant in smaller restaurants, where the owner may also be the chef, host, buyer, bookkeeper, manager, plumber, etc. With OpenTable, the internet is open 24x7 – voila, a full-time reservationist!

+communicating with customers: Restaurants reap huge benefits from the guest database (which btw they own, exclusively). The database automatically gets created from reservations, including info about diner preferences and special requests. Restaurants use this info not only to provide better service (welcome back, Lisa!) but also to reach out to their customers to inform/invite/confirm/thank/promote. Why should such important tools be available only to big restaurants? With OpenTable, smaller places can get on the radar just as well.

+balancing walk-ins vs. reservations: OpenTable restaurants have 100% control over how much of their reservations book is left open for walk-ins vs. available for reservations – thus they control that buck per head. OpenTable Restaurants can accommodate both walk-ins and reservations – they have their cake and eat it too.

+mitigating no-shows: The smaller the restaurant, the more precious the real estate. Even a single no-show can spell disaster for the balance sheet. Think about it – a 40 seat restaurant with a single 4-top that no-shows represents 10% of the revenue for that timeframe. In a 200 seat restaurant, that’s only 2%. OpenTable provides tools which restaurants use to greatly reduce the dreaded no-show.

+promoting small/cool/funky/neighborhood restaurants: OpenTable restaurants span the gamut in size and style – from Farmerbrown, Camino, Poesia, La Ciccia, L’Ardoise, RNM, Blue Plate and Spork, to Epic, French Laundry, Perbacco, Spruce, Betelnut, et al. Restaurants of every size need an internet presence. Smaller places may have fewer resources, capital and time to accomplish this. OpenTable solves this quandary – and gives them equal footing.

So…yes, restaurants pay $1 for guests who book via OpenTable and actually show up for their reservation. Then, restaurants are rewarded with incremental business - we all discover new places via OpenTable. This fact, coupled with the cost savings and revenue upside, make my job of selling OpenTable a very rewarding one. (That, and meeting/sometimes stalking wonderful people such as Brett who go out on a limb to make San Francisco a truly unique and amazing restaurant town).
-Lisa Hasen, Account Exec, OpenTable

[Mainframeguy]

Nice blog, makes me curious if fish is a focus at your restaurant? Or maybe it's mediterranean? I always think sardines have to be barbecued to be at their best (in this country they get a bad rep for coming out of a tin and being spread on toast!).
But to the point - I'm in the UK and thought it may be useful feedback that I checked out OpenTable from a local POV since I had not heard of it and am a sucker for new sites. The selection of restaurants and most popular bookings was immediately shown to be the "high end/high ticket" kind. The more exclusive sort where the customers do not really worry about price.
Not sure if that is your sort of establishment nor if this holds true in the SF area also, but thought the feedback might be handy.
I'd be more inclined to spend a lot less inviting local internet restaurant reviewers. I once dated a person who did this, she works here:-
http://www.restaurantsomh.com/index.htm
I am sure you know what I mean, so good luck with it!

[SFoodie]

I was curious who pays for the dining rewards that Open Table hands out to customers who frequently use the website? If a diner redeems $100 Open Table coupon at your restaurant does Open Table reimburse the restaurant?