OpenTable: The Value and Cost of Online Reservations

• Pastore needs a basic education in the difference between contribution margin and net profit margin. Sure, a restaurant might make only 10% net profit, but that's because a significant part of the restaurant's operations are fixed (sunk) costs that it incurs regardless of occupancy. The number one goal of a restaurant owner is to maintain high occupancy. The incremental profit of a reservation is the bill less the cost of food, which is closer to 30% than 90%. I am not surprised I have not heard of Mr. Pastore or his restaurants if he can't follow a simple analysis such as this. Bob

• Groupon and the others are different. They're one-time marketing efforts, much like how Chipotle gives out free burritos, Krispy Kreme gives out free donuts or Chik-fil-a gives out free sandwiches when they open a store. Plus alcohol is usually excluded. Do they "cost"? Yes, absolutely, but they're probably more targeted and more cost-effective than the coupons you find in the Sunday papers or in the mailers in your mailbox . . .

• I/we don't eat at "high-end" places very frequently that require reservations. I only use Open Table because it's easy and there is no other online option for most restaurants. I'm also not using Open Table as a search engine - I only end up on their site because the local restaurant site sends me there for online requests. I do prefer to do an online request, when I can, since I don't like the hassles of using the phone for most places - backgound noise, put on hold, transferred, not answered when not open, busy signal when they're open, etc, etc. Clue to owners - ditch Open Table if it costs too much and invest in your own local systen! Bigger picture, I'm starting to get irritated by the growing number of loyalty programs out there. I don't want to carry a dozen cards and I don't want to remember which establishment is in which program! The latest offender is the Bread Company/Panera, who's now pushing their own loyalty card. St. Louis Originals is OK, but I get the most use and the most reward out of, surprsingly, the Best Buy program. I like it because it covers more of the fast casual places I frequent and it's idiot proof - they track you through your credit card numbers, not a separate card (I know, I know, privacy - guess what? that's long gone.) And the rewards come quicker since morethan few locations participate.

• You should do a similar post on Groupon and the numerous copycats that are destroying cash flow for small businesses. I am sure open table is a rip off, but giving away free food and drinks to bargain hunters is the real threat to our restaurants.

• I'm no restaurant business expert, but I don't get Pastore's arguments at all. The customer will have gone to OpenTable specifically to be able to eat at Incanto--most of the time I use OpenTable, I know where I am trying to get in, and I'm thrilled to see my favorites have joined. Second, the restaurant knows very well who came to eat there, and can contact that person directly if they want, so OpenTable has not taken away the customer relationship. But I think it's very rare that I get any direct contact from the places I eat. Third, sometimes I will in fact select a restaurant based on info I learned at OpenTable when I went to make the reservation, especially, e.g., if my choice were full on the night I wanted to eat. So Incanto could actually get more business it never would have seen because of my using OpenTable. My loyalty to OpenTable is only derivative of my loyalty to eating at the restaurants of my choice. I think Pastore misses the point, misses the advantages, and must enjoy bucking trends (as in offal). He should get with the program.

TotalComments: 5