Open Table and the cost of making reservations

How much does booking online cost restaurants? You'd be surprised.

The owners of Meritage in downtown St. Paul have used Open Table since the restaurant opened in late 2007, but they don't necessarily like it. "Open Table sucks," says chef Russell Klein, who owns Meritage with his wife, Desta. "It's expensive. It's cumbersome to use. It's one more thing like credit card processing that has hands in pockets of restaurant owners," he says. "They're a multibillion-dollar corporation, and they don't give a damn about me and my business." (Klein's David vs. Goliath analogy is bolstered by the fact that the average restaurant typically posts profits of roughly 5 percent of revenues, compared to Open Table's net income of $14.1 million last year on $99 million in revenue, a profit of about 14 percent.) The Kleins estimate that their annual Open Table bill is roughly $15,000 to $18,000. "That's half a decent salary," Russell notes. "Everyone pays a little more for Open Table whether they make reservations that way or not."

Desta, who manages the front of the house, says she hasn't found that Open Table has saved her staff much time. Because they've been unable to tailor the system as closely to Meritage's specific needs as they'd like, her staff ends up micromanaging the software. "It's a tool we have to take care of," she says. She also prefers a hands-on approach to customer relationships and doesn't like ceding that control to an automated system. "We like to personalize our reservations," Desta says, in being able to find out more information about what type of an event the diner is expecting, their seating preferences, and time constraints—as well as expressing enthusiasm for the diner's impending visit. "Nuance is what you lose if you give over that responsibility," she says.

But the Kleins' main resentment is that their restaurant stays fairly busy with regular customers and doesn't rely on Open Table to get butts in seats. "I don't believe I get a lot of customers through Open Table, but I know other small independent chef operators who do believe they get customers and do try to drive business that way," Russell says. While Open Table can provide the restaurant advertising and promotional opportunities, Desta says she would prefer to handle those activities internally. "I don't want to pay Open Table to do my marketing," she says. "I want to be in control of how my brand is distributed, but that's how they justify their cost."

Lars Leetaru www.leetaru.com

Location Info

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Tilia

2726 W. 43rd St.
Minneapolis, MN 55410

Category: Restaurant > American

Region: Southwest Minneapolis

Other restaurants whose businesses operate under different circumstances have found those same services worthwhile. Eateries in tucked-away locations without much walk-by traffic, for example, can draw new customers who discovered them by a simple location-based search on Open Table.

For example, due to its proximity to the Guthrie Theater, Sanctuary tends to fill its seats quickly on show nights. But the restaurant has seen a benefit from using Open Table to recruit off-hour diners as well as hotel guests who might be unfamiliar with Sanctuary but are attracted by its recommendations from other Open Table diners. "If you're not hooked up to that segment of the internet," Michael Kutscheid explains, "you miss that avenue and that base."

A discounted meal typically won't hurt the restaurant as much as letting the table sit empty—there's a zero percent chance that a nonexistent guest will, say, order a round of rare single malt scotch. As with airlines—which are embroiled in their own struggles with internet middlemen—a significant chunk of a restaurant's costs, such as rent, are fixed. And Open Table provides additional customer-relations benefits, such as tracking customers and their dining habits, as well as reducing no-shows (diners receive an email confirmation and are blacklisted if they miss a reservation without canceling four times within a year).

Even though he considers himself an Open Table fan, Kutscheid says the system isn't perfect. Because large parties present an extra challenge to restaurant staff, Sanctuary and many other eateries don't allow them to book online. Selecting a party of seven or more on Santucary's Open Table page returns a boilerplate message giving the impression that tables are unavailable, when in fact they may not be. Kutscheid says he'd love the site to suggest that diners making such requests be told to call the restaurants, but he's doubtful that Open Table would make such a change. "They will never do that command because it takes money out of their pocket when they call me and the reservation will be free."

Since Open Table benefits from booking diners at any restaurant, its incentive is different from that of its restaurant customers, who only benefit if diners book at their eatery. As more and more restaurants sign up for Open Table, some could end up losing customers who were planning to patronize their business but changed their minds after searching Open Table and being lured by another restaurant. Still, some restaurateurs who resent Open Table's excessive fees won't forgo the service for fear of losing access to customers who insist on booking online, a group that tends to be frequent diners.

More competition in online reservations would provide more options for restaurant owners and diners. The dining website Urban Spoon recently launched a competing service, called RezBook, an iPad application touted as being simpler and less expensive (the cost of an iPad, plus a $99 monthly fee)—though the company will start charging per-cover fees, just like Open Table, in 2012. After looking into using RezBook and other systems, the Kleins instead decided to pursue development of their own proprietary online booking software.

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